Discos Call for Review of Minimum Remittance Order

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Electricity distribution companies (DisCos) in Nigeria have called on the Nigerian Electricity Regulatory Commission (NERC) to review the current minimum remittance order to sustain the gains of power sector reforms.

The Managing director of Abuja Electricity Distribution Company (AEDC), Ernest Mupwaya, who spoke on behalf of other DisCos during a public hearing by the House of Representatives Committee on Power last weekend, said the overall Aggregate Technical, Collection and Commercial (ATC& C) losses moving average (m.a.) keeps decreasing, and has reached a new record of 43.3%, whereas six Discos have losses below 50%.

“However, contrary to the tendency of the other DisCos, Yola DisCo deteriorated or increased its Aggregate Technical, Collection and Commercial (ATC&C) losses trajectory, with a loss level of 67.6% by the end of September 2019. In effect, for the last three years the private Discos were able to reduce their ATC&C losses by almost 10 points; however, Yola DISCO increased it by 12 points.

“Perpetuating the ‘squeezing’ regulations of the minimum remittance and capping of estimated billing will extend the challenges of YEDC to the rest of the Discos and it will cost as twice (in time and money) to get back to where DisCos are today,” Mupwaya stated.

The leaders of the distribution companies said these are among the issues that should be resolved before the implementation of a service-reflective tariff can yield the desired effects in the Nigerian Electricity Supply Industry (NESI).

They also argued that considering the fact that remittance levels are already low, capping of estimated bills will exacerbate liquidity situation. “Capping of estimated bills when the metering level is at 40% is suicidal for the entire sector.

“Instead, we recommend that implementation of the new service-reflective tariff order that was scheduled to go into existence by July 1st, 2020, should have a one-year transition period, from its effective date. During this period the minimum remittance thresholds would be graduated every quarter,” the Discos’ spokesperson said.

Other suggestions by the Discos include the creation of specialised electricity courts and fast-tracking of court processes for energy theft and related offences such as vandalism, alignment of MYTO ATC&C losses with Discos’ reality, re-introduction of fixed charge to align with the capacity charge as presently.

“Nigeria is the only country without fixed charge as well as proper risk alignment along the value chain,” he said. The Discos further advocated for credit-free balance sheets to make them credit-worthy.

“Historical tariff shortfalls and MDA debts as at December 2019 (N1.7 trillion as noted by government and N2.3 trillion as recalculated by Discos), should be taken off Disco books. The practical impact of the shortfall is that Discos have a negative balance sheet of -N80 billion to -N250 billion. The clean-up of the DisCos’ balance sheet is necessary to make them creditworthy.

“Also, NBET and MO should be mandated to assume the tariff shortfall and MDA debt and then issue credit notes to Discos and, henceforth, the liability should not be associated with the Discos,” he said.

Chibisi Ohakah, Abuja

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