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Electricity tariff hike, another betrayal of trust— TUC

By Ediri Ejoh

The liquidity situation in Nigeria’s power sector has worsened, as the indebtedness of the distribution companies, DisCos, to Nigerian Bulk Electricity Trading, NBET, Plc., has increased to N396.86 billion, indicating an increase of seven per cent, compared to N368.83 billion recorded in the corresponding period of 2019.



This debt profile accrued by the inability of the 11 power distribution companies in the country to remit a total of N396.86 billion to the NBET for the electricity sold to them from January to September 2020.

The government-owned NBET buys electricity in bulk from generation companies, through power purchase agreements, and sells through vesting contracts to the DisCos, which then supply it to the consumers.

The NBET data compiled by Vanguard Energy show that the bulk electricity trader sent an invoice value of N538.25 billion in the 9-month, but only paid N121.3 billion, which left a balance of unremitted N416.9 billion.

This is, however, against N146.8 billion recorded during the corresponding period, which had an invoice value of N516.44 billion in 2019.

Accordingly, in the first quarter of 2020, total invoice of N156.7 billion was issued to the DisCos, the sum of N54.2 billion of the total invoice was settled, representing 32.53 per cent to N102.5 billion unremittance performance.

This is against the corresponding quarter in 2019, which had N161.26 billion invoice issued, while N33.6 billion was paid, leaving DISCOs with an unpaid NBET Invoice that rose by 5 per cent to N123 billion.

In the second quarter of 2020, as against the corresponding year of 2019, average invoice was N192.4 billion, as against N180.08 billion, while N36.42 billion, as against N55.10 billion invoice was paid, thereby accruing unpaid invoice of N156.01 billion, as against N124.98 billion recorded in 2019.

Also, in the third quarter of 2020, as against the corresponding year of 2019, average invoice issued rose to N189.05 billion, as against N179.66 billion, while N50.67 billion, as against N58.81 billion invoice was paid, thereby accruing unpaid invoice of N138.38 billion, as against N120.85 billion recorded in 2019.

But in the fourth quarter of 2019, average invoice issued rose to N193.66 billion, while N74.20 billion invoice was paid, thereby accruing unpaid invoice of N119.46 billion.

Revenue collected

However, Vanguard Energy gathered that the total revenue collected by 11 DisCos from customers in the first quarter of 2020 stood at N114.29 billion out of the total bill of N186.82 billion.

The overall collection efficiency for all DisCos decreased to 61.18 per cent in the first quarter of 2020, representing 8.26 percentage points decrease from the 69.44 per cent collection efficiency recorded in 2019/fourth quarter, Q4, it stated.

Also, the commission revealed that the total revenue collected from customers in the third quarter of 2019 stood at N117.74 billion out of the total billing of N170.28 billion.

It said despite the increase in the billing efficiency recorded in 2019/Q3 relative to the preceding quarter, the total revenue collected as a ratio of the total billing by DisCos (i.e., collection efficiency) in 2019/Q3 slightly decreased when compared to 2019/Q2

The Nigerian Electricity Regulatory Commission, NERC, explained that: “The collection efficiency implies that for every N10 worth of energy billed to customers by DisCos in the third quarter, N3.10 remained unrecovered from customers as and when due.

Further to its decline from the preceding quarter, the collection efficiency by the DisCos is low and has continued to adversely impact the financial liquidity of the industry which, in turn, has led to low investment in NESI.”

Reactions

While attributing the payment to liquidity, the DisCos have implored the National Assembly to intervene in the current liquidity crisis in the power sector, saying they will need N8.7 billion to comply with the remittance order set by the NERC.

Sunday Oduntan, ANED’s Executive Director, Research and Advocacy, in a breakdown of the required amount, said the DisCos would require N725 million monthly to meet the threshold of 35 per cent remittance level set by NERC in the meantime.

“To meet the new remittance expectations, DisCos will have to finance an average gap of N725 million per month (about N8.7 billion per year), until increased collections bridge the gap,” the DisCos noted.

Explaining the implication of injecting ?725 million monthly to NERC’s expected remittance order, ANED told the committee that the amount represents DisCos average monthly salaries.

“Compliance with NERC order would impair this critical obligation to DisCos staff, which will create labour unrest and reduce overall performance,” the statement said.

It also explained the major causes of the liquidity crisis in the power sector. It said the average technical commercial and collection losses have remained high, due to lack of liquidity, unattractive investment terrain and customer apathy to pay bills.

Meanwhile, KPMG professionals have called for a holistic understudy of the power sector, saying: “DisCos report significant revenues, though they are mostly unprofitable. The DisCo is the collecting agency for the entire sector and, therefore, consolidates the sector’s revenue in its books. Furthermore, in 2019, the DisCos were beneficiaries of tariff shortfall ‘payments’ for 2015 to 2019 from government. These receipts would also have increased their gross revenue for the year.

“Based on the new rule, the DisCos may be liable to significant MT for that year and going forward.”

The sector continues to struggle with liquidity and it will be unfair to use cash that may be better applied towards infrastructure development for payment of taxes, especially by companies with significant losses carried forward from years of unprofitability. It is, therefore, important that the industry and government come together to address this challenge as quickly as possible.

“The power sector is in dire need of implementation strategies that will bring it out of the current debt crisis and address its various challenges. It is, therefore, important that all relevant key stakeholders work together to develop coherent policies and measures to improve the sector.”

Vanguard News Nigeria

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