Discos Illegally Retain Electricity Market Funds, NERC Insists

The Nigerian Electricity Regulatory Commission (NERC) has said that the revenues being withheld by most of the 11 electricity distribution companies (Discos) are more than the limit approved for them.

The commission revealed that while the Discos tariffs have increased their revenue collections, their remittances to the Nigerian Bulk Electricity Trading Plc (NBET) have rather dipped, and averaged just about 30 per cent in the whole of 2016.

Speaking to THISDAY in Abuja,

the acting Chairman of NERC, Dr. Anthony Akah also stated that very few of the Discos have committed sizeable investments to upgrade their respective distribution networks.
He insisted that the generation companies (Gencos) have rather done better than the Discos in upgrading their generation capacities since taking over from the government in 2013.

According to him, the development has contributed to the sector’s financial challenges. He noted that this was impacting on the operations of others in the value chain.

“By contract which the MYTO (Multi Year Tariff Order) represents, we are bound as a regulator to give the sector a tariff and undertake minor reviews as well, but there are some factors we are concerned about.

“One of them is that the distribution companies went to court to get a restraining order that has inhibited the checks and balances process we put in the market to ensure high level of operational discipline, high level of revenue remittances and also give confidence to all the players in the value chain.

“Presently, you cannot escrow the accounts of these distribution companies if they fail to remit monies they collected, and a review of their remittance level is very poor and does not align with their high level collections. As far as we are concerned, the distribution companies are retaining far more than they should to the detriment of the transmission companies and generating companies,” said Akah.

He said on its impact to the market: “This is grossly unacceptable to the regulator and we believe that the court order which we are challenging may have contributed to this, but we are coming out with regulatory actions to instil discipline and protect other players in the market especially the generation companies to make sure they have some level of comfort and confidence to earn from the power they generate and be able to pay their bills.”

In June 2016, through suit Number FHC/ABJ/CS/387/2016 and FHC/ABJ/CS/386/2016 of two Abuja Federal High Courts (FHCs), eight Discos got restraining orders to stop the NERC from implementing its directive for the Central Bank of Nigeria (CBN) to escrow the accounts of Discos who cannot meet their monthly payment obligations to the NBET.
NERC and other connected persons were also restrained from compelling the Discos from entering into Promissory Note arrangement with NBET, as well as from calling on their Letters of Credit (LC) with NBET through certain commercial banks, pending the hearing and determination of the Motion on Notice.

The Discos alleged then that despite the cash flow problems they faced as a result of allegations of NERC’s bad management of the power sector, the regulatory agency had vide a directive with reference No. NERC/MC &R/16/098 of March 30, 2016, directed the CBN to escrow the accounts of Discos who cannot meet their monthly payment obligations under the vesting contracts and who are yet to place their LC with NBET in accordance with the escrow directive.

 by Chineme Okafor in Abuja