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HomeBusinessConsumers owing DisCos N77.4 bln debt in three months ~NERC

Consumers owing DisCos N77.4 bln debt in three months ~NERC

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The Nigerian Electricity Regulatory Commission (NERC) said Electricity Distribution Companies (DisCos) collected only N188.29 billion in revenue out of a total of N265.68 billion billed between April and June 2022.

According to the power sector regulator’s report for the second quarter of 2022, the total energy received by all Discos during the period was 6,344.14GWh, while the energy billed to end-use customers was 4,959.53GWh.

It was noted that this indicated an average billing efficiency of 78.17 percent, a 0.79 percent increase from the 77.38 percent recorded in 2022/Q1.

“The total revenue collected by all Discos in 2022/Q2 was N188.29 billion out of N265.68 billion billed to customers. This corresponds to a collection efficiency of 70.87 percent which represents 1.53 pp increase compared to 2022/Q1 where the average collection efficiency was 69.34 percent,” the report stated.

Collection efficiency is an indicator of the proportion of the amount that has been collected from customers relative to the amount billed to them by the Discos.

“Many customers continue to default in payment of their billed amounts in part due to a lack of willingness to pay (including unsatisfactory Disco services). This has led to mounting commercial losses recorded by Discos,” the NERC stated.

Despite being the most populous black nation on the planet and having Africa’s largest economy, Nigeria only distributes between 3,500mw and 4,500mw daily.

Customer’s inability to pay cost-reflective tariffs is one of the major causes of system illiquidity.

In terms of money, NERC stated that both billing and collection decreased at nearly the same rate when compared to 2022/Q1, with billing decreasing by N30.02 billion (10.15 percent) and collections decreasing by N21.8 billion (10.41 percent).

The commission emphasized the importance of Discos implementing NER operational procedures to improve billing and collection performance in order to avoid long-term financial challenges.

These could include, among other things, holistic energy accounting procedures, customer and infrastructure metering.

The commission calculated the aggregate technical, commercial, and collection (ATC&C) losses for the period to be 44.60 percent, with technical and commercial losses accounting for 21.83 percent of the total (29.13 percent).

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“All Discos did not meet their allowed ATC&C loss targets as specified in the Multi-Year Tariff Order (MYTO). This means that all Discos did not meet their loss reduction targets, and were therefore unable to earn the revenue requirement upon which their approved tariffs for the period were set.

“Persistent inability in meeting loss reduction targets could prevent Discos from meeting their upstream market obligations and adversely affect their long-term financial positions,” NERC warned.

Concerning market remittances, the commission stated that the combined invoices from the Nigerian Bulk Electricity Trading Plc (NBET) and Market Operator (MO) to Discos in 2022/Q2 were N185.01 billion, with generation costs amounting to N149.89 billion and transmission and administrative services amounting to N35.12 billion.

Furthermore, NERC stated that in 2022/Q2, special customers, Transcorp SBEE and Mainstream NIGELEC, received invoices from MO totaling $2.42 million and $5.56 million, respectively, and remitted $2.42 million (100%) and $5.55 million (98 percent).

NERC noted that during the same period, Ajaokuta Steel Company was invoiced N264.76 million and N66.71 million by NBET and MO, respectively, but made no remittance, while Paras-SBEE and OdukpaniCEET were also invoiced $2.39 million and $2.03 million by MO, respectively.

According to the report, the overall increase in collection efficiency in 2022/Q2 could be attributed to increased metering and a 10.15 percent decrease in total billings caused by lower energy delivered to Discos (13.10 percent) in 2022/Q2..

Given that two-thirds of energy delivered to Discos in 2022/Q2 went to residential customers most of whom are not metered and whose monthly energy budget is fixed, it stated that delivery of more energy does not always translate to collecting more from them.

“The increase was largely driven by Benin, Jos, and Enugu DisCos who recorded a significant increase in collection efficiency by 7.76, 6.90 and 4.80 pp respectively.

“Abuja, Eko, Ibadan, Ikeja, Kaduna, Kano and Port Harcourt Discos also recorded increase in collection efficiency by 2.36, 1.60, 3.58, 2.04, 2.73, 2.56 and 1.71 pp respectively. Only Yola DisCo recorded a decline in collection efficiency (8.43 pp) between 2022/Q1 and 2022/Q2,” the report added.

It stressed that the current demand structure is dominated by households that are mostly unmetered and whose demands are inelastic due to affordability concerns.

“Thus, beyond a certain threshold, increased supply may result in decreased collection efficiency.
“A direct correlation between improved energy supply, customer satisfaction and collection efficiency will be experienced when commercial and industrial customers represent a more significant share of the demand.

“To sustain improvements in collection efficiency, the commission will continue to actively track each Disco’s progress under the various metering interventions. Furthermore, the commission is also closely monitoring the delivery of energy to customers under the SBT regime, especially to the industrial customer clusters,” it added.

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