NERC: FG Paid N35.2bn Electricity Subsidy as Discos’ Remittance Slumped by N70bn in Q1,2022

Emmanuel Addeh in Abuja

The federal government subsidised electricity supply in the country to the tune of N35.27 billion, even as the expected remittance by Distribution Companies (Discos) to the Nigerian Bulk Electricity Trading Company (NBET) dwindled by N70 billion in Q1,2022, a report just released by the Nigerian Electricity Regulatory Commission (NERC), has indicated.

The delayed NERC report also showed that although NBET was expected to receive N164.86 billion under the Market Remittance Order (MRO) invoice of N203.13 billion issued for energy generation costs during the period, the bulk trader only received N109.96 billion during the quarter.
“This means that the government is responsible for covering the difference in form of subsidy to energy consumers to the tune of N35.27 billion,” the NERC report stressed.

But it wasn’t clear where the subsidy payment by the federal government came from. In March, 2022, the Minister of Finance, Zainab Ahmed,  told the nation that the authorities ‘quietly’ removed the subsidy on electricity tariff.
At a virtual meeting of African Finance Ministers (AFM) and the International Monetary Fund (IMF) Ahmed said clearly that the government had removed any buffers it was paying in the sector.

“We have been able to quietly implement subsidy removal in the electricity sector and as we speak, we don’t have subsidies in the electricity sector. We did that incrementally over time by carefully adjusting the prices at some levels while holding the lower levels down,” she stated.
However, NERC stated that NBET received only N109.96 billion during the quarter, stressing that overall, the total Disco remittance performance to NBET was 66.70 per cent compared to 68.34 per cent in Q4,2021.

In addition, NERC stated that the total invoice from the Market Operator (MO) to Discos in 2022/Q1 for which a 100 per cent remittance was expected was N40.77 billion, but that only N25.73 billion was received across all the Discos.

“This means that the remittance performance to MO for the quarter was 63.12 per cent. This represents a 15.47 per cent decrease compared to 78.59 per cent, that is, N39.75 billion remitted against an invoice of N50.58 billion, recorded in 2021/Q4,” it said.

In the quarter under review, NERC said no payment was made by the special customer, Ajaokuta Steel Company Ltd and the host community in respect of the N391.65 million and N69.45 million market invoices issued by NBET and MO respectively in Q1, 2022.
Furthermore, it hinted that in the period under consideration, bilateral customers like Paras-SBEE, Transcorp-SBEE and Mainstream-NIGERLEC received invoices of $2.72 million, $2.74 million and $4.61 million from the MO and each remitted $2.72 million (100 per cent), $2.74 million (100 per cent), and $4.52 million (98 per cent) respectively.

According to the commission, Odukpani-CEET received an invoice of $3.42 million from the MO during the period but no payment was made by the customer.
In terms of billing performance, the total energy received by all Discos during the period was 7,300.05GWh while the energy billed to the end-use customers was 5,649.21GWh indicating an average billing efficiency of 77.38 per cent.

This billing efficiency was an increment of 1.02 per cent from the 76.56 per cent recorded in 2021/Q4.
For the period, the total revenue collected by all Discos was N199.90 billion out of N295.69 billion billed to all customers which corresponded to a collection efficiency of 67.36 per cent, representing a 1.98 per cent reduction compared to 2021/Q4 where the average collection efficiency was 69.34 per cent.
“In monetary terms, although the billing in 2022/Q1 reduced by N7.41 billion (2.44 per cent), revenue collections reduced at a higher rate N10.98 billion (5.22 per cent).

“It is imperative for Discos to employ technologies and operational procedures to increase both their billing and collection performances to forestall long-term financial challenges. These could include holistic energy accounting procedures, customer and infrastructure metering, etc,” NERC stated.

The Aggregate Technical, Commercial and Collection (ATC&C) losses for the period was 47.88 per cent comprising technical and commercial loss (23.44 per cent) and collection loss (30.66 per cent), the report said, stating that the ATC&C loss increased by 0.97 per cent compared to 2021/Q4 of 46.91 per cent.

“All Discos did not meet their allowed ATC&C loss targets as specified in the MYTO -this means that all Discos exceeded their efficient loss targets and thereby were not able to earn the revenue requirement upon which their approved tariffs for the period were set.
“ Consistently incurring these inefficient losses could prevent the Discos from meeting their upstream market obligations and have adverse effects on their long term financial positions,” the commission added.

Nigeria still grapples with electricity supply challenges and is only able to generate just between 4,000 megawatts to 4,500 megawatts for its over 200 million population. Operators blame illiquidity due to non cost-reflective tariffs as one of the biggest problems besetting the sector.