The Federal and State Governments have been charged to settle the huge outstanding electricity bills of their Ministries, Departments, and Agencies (MDAs) and parastatals, to reduce the revenue constrains of electricity Distribution Companies (DisCos) which has exposed them to sanctions by the Market Operators for their non-compliance to the Market Rules.
Otunba Akinbo Akin-Olugbade, the former Chairman, Power Sector Group, Lagos Chamber of Commerce and Industry, LCCI, made this known in a chat with EnergyDay, on the sideline of the 60 days grace period issued to the DisCos to cure their defaults or face sanctions in line with the Market Rules.
According to Otunba Akin-Olugbade, who is also the Managing Director, Kawai Technologies Ltd, funnily enough, a lot of MDAs and parastatals are on the debtors’ lists.
EnergyDay’s checks showed that at the root of the problem is the very high power sector’s aggregate technical, commercial, and collection (ATC&C) losses with distribution companies (DisCos) reporting an average loss of 50% in 2020, versus 26% allowed by the Nigerian Electricity Regulatory Commission (NERC)’s tariff policy.
According to Market Operator, from January 2020 to date, the MO invoice outstanding to the market participants stands at N80 billion.
“By December 2019, the outstanding on MO’s services invoice stood at N443b with interest. This figure may have been traded for DisCos credit on Tariff-Gap, reason, the Service Providers belong to the Federal Government,” MO said.
Based on the recent World Bank’s Nigeria Public Finance Review, the high ATC&C losses in the country are exacerbated by inadequate metering of end-use customers and the failure of many ministries, departments, and agencies (MDAs) of federal, state, and local governments to pay their electricity bills.
The World Bank report emphasised that the growing percentage of ATC&C losses, payment discipline by DISCOs, and inadequate contractual enforcement of those payments by the Nigerian Bulk Electricity Trading (NBET) and the NERC, result in low remittances to NBET by the DisCos.
As at July 2021, federal, state, and local government MDAs were reportedly owing DisCos up to N202 billion, plus N93 billion estimated to be owed by Armed Forces and other security agencies in Nigeria.
Meanwhile, EnergyDay gathered that the Federal Government had verified N48 billion as MDAs’ debts, while N61 billion was yet to be confirmed.
Otunba Akin-Olugbade confirmed that the growing debt crisis facing the DisCos and other liquidity challenges within the electricity value chain has further constrained the revenues of investors in the sector.
He emphasised that apart from the ATC&C losses, the power losses due to the activities of free riders who are connected to the national grid illegally must be urgently addressed.
He revealed that energy theft is a fundamental issue that the DisCos cannot address alone without strong backing of the Federal and State laws, criminalising the activities of individuals and institutions willfully and unlawfully connected to the grid by tempering with meters and vandalizing electricity infrastructure.
EnergyDay’s check showed that the eleven (11) DisCos valued the cost of electricity theft in the first three months of 2021 to around N97,000,000,000.00 (Ninety-seven Billion Naira).
Association of Nigerian Electricity Distributors (ANED) in another release established the monthly cost of electricity theft, meter bypass, vandalism, and unpaid electricity bills by consumers is valued at N30, 000,000,000.00 (Thirty Billion Naira).
The former LCCI Power Chair further emphasised that the failure of the Federal Government to fulfill its rollout of about 6 million prepaid meters under the National Mass Metering Programme (NMMP) in 2020 over the 18 to 24 months period is any reason why the DisCos should not be completely blamed for the ATC&C losses.
While charging the DisCos to double their efforts on the Meter Asset Provider(MAP) metering scheme, Otunba Akin-Olugbade, noted that if all electricity users in Nigeria are metered and pay in advance then discos shouldn’t have these shortfalls.
The former LCCI’s Power Sector Chair further commended the Market Operator for its commitment to enforcing the market rules and its compliance by all market operators.
He however warned that this issue of compliance with market rules and commitment to cash drive must also be enforced up above the value chain.
According to him, the payment discipline should go all the way up the value chain. “What percentage of invoices does the bulk electricity trader pay to Gencos? About 25%. These issues further constrain their revenues.