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    Home » DisCos Pay N21.9bn For N235bn Worth Of Grid Electricity
    5 Mins ReadJune 9, 2024

    DisCos Pay N21.9bn For N235bn Worth Of Grid Electricity

    By Samuel AkpenpuunJune 9, 2024No Comments5 Mins Read
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    The financial crisis facing the Nigerian Electricity Supply Industry, NESI, shows no sign of easing soon, as electricity distribution companies, DisCos, remitted just N21.95 billion (or 9.33 percent) to the Nigeria Bulk Electricity Trading Plc for N235.09 billion worth of electricity off-taken from the National Grid in the month of March, 2024.

    Industry documents sighted by Vanguard indicated that due several policies by the Federal Government, the DisCos were issued an actual invoice of N22.26 billion for total energy off-taken from the grid while the government undertook to pay for the balance N212.8 billion out which nothing was paid.

    The Nigerian Electricity Regulatory Commission, NERC, had set DisCos Remittance Obligation at 9.47 percent for the March payment cycle, leaving the government with 90.53 percent of the bill for electricity consumed during the month.

    The documents revealed that of the N21.95 billion remitted by the DisCos, N17.238 billion was paid to power generation companies, representing 7.31 percent of their total invoice of N235.66 billion while gas suppliers through the Gas Aggregation Company of Nigeria, GACN, was paid the balance N4.72 billion. The GasCos had sent in an invoice worth N50.65 billion to the power generation companies for the month of March.

    The poor remittance occurred despite a report from the Nigerian Electricity Regulatory Commission, NERC, indicating that the DisCos actually collected N100.44 billion as revenue in the month of March.

    An investigation by Vanguard showed that the Federal Government’s decision to subsidize electricity tariff and subsequent failure to meet its obligations to the market, has steadily pushed the sector to financial brink.

    Checks showed that despite having a budget provision of N450 billion as electricity subsidy in 2024, the Federal Government was yet to release any money to the sector, more than three months into the implementation of the budget.

    Power generation companies’ owners have in the past three weeks raised alarm over the deteriorating financial status of the companies following a huge N1.3 trillion debt from the market.

    They claimed that they were holding the short end of the stick as they received the least attention when payments were made in the market.

    The GenCos’ Board Chairman, Col.Sani Bello (Rtd) observed that power generated by GenCos have “continued to be consumed in full without corresponding full payment, notwithstanding the commencement of the Partial Activation of Contracts in the NESI which took effect from July 1, 2022, the minimum remittance order, bilateral market declaration, waterfall arrangement, the risks of inflation, forex volatility with no dedicated window to cushion the effect of the forex impact, the supplementary MYTO order which leaves about 90% of GenCos monthly invoices unmet without a bankable securitisation, or financing plan. This situation has dire consequences for the GenCos and by extension the entire power value chain”.

    Bello, who noted that the GenCos were being owed N3.7 trillion, stated that GenCos liquidity challenges “is further worsened by the various policies introduced such as the payment waterfall in the NESI, which deprioritized payment to GenCos”.

    He said GenCos should be “accorded the utmost priority when it comes to payment to enable them to have the capacity to continue to produce the electricity which is the product around which the entire power value chain is built”.

    Currently payment model unsustainable – expert

    In a note to Vanguard on the financial crisis facing the electricity sector, energy market expert, Mr. Lanre Elatuyi pointed out the current financing model in the sector was unsustainable and could lead to the total collapse of the industry.

    According to him, “It is not sustainable! This has been going on for many years, and one wonders how the GenCos have managed to stay afloat with this level of indebtedness to them. Not surprising though that the available generation capacity is below 7,000MW today despite our installed capacity of over 14,000MW.

    “Besides, we haven’t seen any new investment in power generation in the last few years and the implication on our resources adequacy is that we may wake up one day to realise the whole country is in darkness”.

    Mr. Elatuyi warned that “there may not be enough power to transmit and distribute in the future, thus making the country look for alternative off-grid solutions that may not meet our reliability and affordability needs for economic growth and social wellbeing”.

    On the Federal Government’s failure to meet its subsidy payment obligations to the market, he wrote: “It is clear that the FG does not have the money, and they can not continue with the policy of subsidy to deny the market the needed liquidity. The budgetary allocation for subsidy in 2024 is 450 billion while the subsidy by the end of the year will be around N1.9 trillion. Government must be strategic in sourcing for fundings that can be used to defray subsidy obligations, but this has limits as previous interventions by the government did not abate the circular debts in the sector.

    “Subsidy removal for Band A customers was another strategic move to lessen this burden of subsidy, but given the reactions to the recent move that mandated the Band A customers to pay the cost-reflective tariff, the government may have to continue to subsidize. The inevitable end goal is for the market to transition to a full wholesale competitive electricity market where any intervention by the government will be minimal”, he explained.

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    • Samuel Akpenpuun
      Samuel Akpenpuun

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