Electricity Tariff Shortfall Hits N460bn

Photographer: Dimas ArdianPhotographer: Dimas Ardian
  • Electricity Tariff Shortfall Hits N460bn

The freeze on residential customers’ electricity tariff in the R2 class, smoothening of tariff across the country and changes to tariff assumptions, among other issues, have led to a tariff deficit of N460bn in the Nigeria Electricity Supply Industry.

According to a report released by the Association of Nigerian Electricity Distributors, the N460bn tariff shortfall was from January 2015 to December 2016.

The report, which was made public at a workshop in Abuja on Wednesday, stated that the 2015 tariff deficit resulting from the freeze on R2 residential tariff and removal of collection losses from power distributors’ tariffs, which was reinstated in the Multi-Year Tariff Order of that year, was N187bn.

The R2 class consists of the largest group of electricity consumers who are mainly residents of various households across the country.

The ANED stated that the 2016 deficit resulting from tariff smoothening for over 10 years (2015 to 2024) was N277bn, adding that an additional tariff deficit that year resulting from changes to tariff assumptions was N46bn.

Outlining the tariff shortfall for the 11 Discos in the two-year period, the report stated that the Abuja Disco had a shortfall of N44.86bn; Benin, N53.1bn; Eko, N27.4bn; Enugu, N44.16bn; Ibadan, N58.8bn; and Ikeja, N37.16bn.

Others are the Jos Disco, N36.68bn; Kaduna, N47.65bn; Kano, N39.95bn; Port Harcourt, N47.62bn; and Yola, N20.62bn.

It stated that during the period prior to the declaration of the Transitional Electricity Market when the privatised power sector was under an interim rule, the industry recorded a tariff shortfall of about N200bn.

This shortfall, it said, was due to the average technical and commercial loss validation during the period of interim rule in the power market.

“This (shortfall) is currently being paid back by customers via tariff, with about 10 per cent interest,” ANED stated.

It further noted that the 2015 tariff deficit resulting from the freeze on R2 residential tariff and removal of collection losses from power distributors’ tariffs, which was reinstated in the MYTO 2015 and amounting N187bn, was warehoused, adding that consumers would also pay it.

Similarly, it stated that the 2016 deficit resulting from tariff smoothening for over 10 years and worth N277bn, as well as the additional 2016 tariff deficit resulting from changes to tariff assumptions of N46bn were also being warehoused.

Meanwhile, the latest summary of invoices and remittances by electricity distribution companies to the power Market Operator has revealed that five of the Discos remitted below 20 per cent in terms of the funds required of them for the smooth operation of the sector.

According to the MO in its presentation to participants at the recent power sector monthly meeting, the Eko, Jos, Kaduna, Kano and Port Harcourt electricity distribution firms remitted below 20 per cent revenue to the industry in August 2, as against the usual average of 30 per cent.

This is coming as the power distribution companies on Wednesday insisted that they would reject electricity allocation sent by the Transmission Company of Nigeria to locations where they could not recoup their funds from consumers.

The MO is an arm of the TCN, while the Discos are the primary revenue collector for the power sector.

In the MO’s latest presentation on invoices and remittances, which was obtained by our correspondent from the TCN in Abuja on Wednesday, the agency stated that in the month under review, the Eko Disco remitted nothing; Jos remitted 16.63 per cent; Kaduna, 12.41 per cent; Kano, 16.64 per cent; and Port Harcourt, 19.28 per cent.

The Market Operator’s report also put the percentage of remittances by the Abuja, Benin, Enugu, Ibadan, Ikeja and Yola Discos at 58.2, 70, 27.92, 30, 65.43 and 100, respectively.

It stated that the revenue shortfall as a result of the poor remittances from the Discos in August was N5.1bn, while the accumulated shortfall since the commencement of the Transitional Electricity Market in January 2015 was N130.58bn.

Explaining why the firms were not remitting the required amounts to the sector, the Executive Director, Research and Advocacy, Association of Nigerian Electricity Distributors, Mr. Sunday Oduntan, stated that the sector regulator had mandated the Discos to collect far less than the actual unit cost for a kilowatt-hour of electricity.

Oduntan argued that the Discos would reject electricity allocation transmitted to unprofitable locations by the TCN, adding that this was another factor that was negatively affecting the collection of revenue by the power firms, a development that was adversely affecting the sector.

He said, “There is no way you can pay or remit the required amount when you sell a product that is worth N68 for N31.58. It won’t work! Also, as long as the TCN wants to dump load where we don’t need it, we will reject it.

“People who do not pay for electricity should not expect power and we cannot continue to supply them power since they have blatantly refused to comply by paying their bills. So, why send power to such places and expect us to accept it when you know it is unprofitable to us as business concerns?”

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years' experience as a foreign exchange research analyst and trader. A graduate of University of East London, U.K. and a vivid financial markets analyst.

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