Concerns over a N24 billion power debts between the Nigerian Electricity Regulatory Commission (NERC) and eight distribution companies (Discos) has heightened the push for quick implementation of the power tariff hike to begin in less from January 2020.
The vigorous pursuit of tariff hike, it was gathered, was occasioned by pressure from investors who saw the threat to withdraw operating licences of Discos by NERC as “overbearing and a misplacement of priority.”
The affected Discos are Abuja, Benin, Enugu, Ikeja, Kaduna, Kano, Port Harcourt and Yola.
The Discos, according to the NERC, breached the terms and conditions of their respective distribution licences based on the provisions of Electric Power Sector Reform Act and the 2016 – 2018 Minor Review of Multi Year Tariff Order and Minimum Remittance Order for the Year.
“The cancellation notice remains extant and the eight Discos are still required to show cause in writing within 60 days from the date of receipt thereof as to why their licences should not be cancelled in accordance with section 74 of EPSRA,” the commission stated.
It noted that the eight recipients of the cancellation notice, who filed petitions against the Minor Review and Minimum Remittance Order, had acknowledged that their petitions did not constitute their written response to the cancellation notice.
Like the NERC, the Nigerian Bulk Electricity Trader (NBET) has been at daggers drawn with the Discos over alleged unsettled invoices to gas suppliers.
Recently, the NBET said it was directed to take over the payment of Discos’ gas invoices to supplier following allegations of huge indebtedness.
The commission noted the failure of the DisCos to comply with expected minimum remittance thresholds in the Order exposes NESI to systemic risk that threatens the sustainability of other parts of the value chain; and the ability to improve service delivery to consumers.
The commission, according to checks, posited that the Discos failed to provide the minimum financial ‘securitisation’ of their payment obligation to NBET i.e. “an adequate and unencumbered letter of credit covering three months based on their minimum payment obligations to NBET and MO.”
Consequently, the commission ordered them to show cause in writing within 60 days from the date of receipt of the notice why their operational licences should not be revoked in accordance with section 74 of EPSRA.
The NERC added that it considered their actions as “manifest and flagrant breaches” of EPSRA, terms and conditions of their respective distribution licences and the Order.
Meanwhile, the commission has proposed an intermediate review in end-user tariffs effective January 1, 2020, with full cost-reflective levels to be achieved by July 2020.
On other demands from the Discos, the commission said it expected the eight power firms to address the issue of “optimal utilisation of resources” and “efficient operation” imposed by sections 32 and 76 of EPSRA, respectively, in their written responses to the cancellation notice.
The commission also stated that it expected the eight Discos to address the principles of “prudence” and “used and useful” as further justification of optimal utilisation of resources for efficient operations in the areas of general procurement practices, related party transactions, and directors’ fees and expenses.
Others include technical partners from takeover to date, material and contingent liabilities, utilisation of intervention, fund received from the Federal Government, efforts to date to address customer complaints and improvement of overall willingness to pay for services.