Power purchase: Special, international customers fail to remit N64million, $5.3million to FG ― Report

Special and foreign customers failed to remit a total of N64 million and $5.3million to the Federal Government(FG) for power purchased, an industry report has revealed.

The Nigerian Bulk Exchange Trading PLC NBET and the Market Operator had in the 2021 third quarter, issued N52million and N12million invoices to Ajaokuta Steel Company Limited respectively but the company had remitted nothing.

According to the 2021 third-quarter report released by the Nigerian Electricity Regulatory Commission (NERC), during the period, the Market Operator also issued an invoice of $11.52 million to bilateral customers Paras-SBEE, TRANSCORP-SBEE, Mainstream-NIGELEC & Odukpani-CEET but only $6.22 million was remitted.

It states that Ajaokuta had also failed to remit its invoice in 2021 Q2 stressing the need for MO and NBET to activate the safeguards against continued non-settlement of market obligations by market participants.

The report also puts the combined invoice and NBET’s Minimum Remittance Obligation (MRO) adjusted invoice to DisCos in 2021/Q3 at N208.54 billion for energy and administrative services.

Out of this amount, the 11 electricity distribution companies (DisCos) were said to have remitted a total sum of N141.69 billion.

A breakdown of the figures showed that the market Operator received N41.53 billion while NBET got N100.16 billion representing a remittance performance of 67.94 per cent during the quarter.

The Federal Government (FG) had as part of the conditions for the several interventions that the CBN has extended to the DisCos, set up an escrow agreement.

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Under this arrangement, all DisCos revenues are escrowed, while they only have access to these funds after necessary deductions (VAT payments, repayments of CBN loans, payments to upstream players in the NESI – TCN and NBET) have been made.

This escrow mechanism provides visibility into the financial performance of the DisCos with respect to collections

In June 2020, the remit of the fund manager responsible for the escrow was expanded to include the implementation of the payment waterfall framework which was designed by NERC to increase upstream market remittance to NBET to cover the cost of energy taken from Generation Companies and MO for transmission and administrative services.

The regulator stated that because prompt payment of upstream market settlements is critical to securing the availability of generation and transmission capacities, the regime pushes DisCos to boost their collections.

“In the absence of cost-reflective tariffs, the Government undertakes to cover the resultant gap (between the cost-reflective and allowed tariff) in the form of tariff shortfall funding.

“This funding is applied on the NBET invoices that are to be paid by DisCos. The amount to be covered by the DisCo is based on the allowed tariff determined by the Commission and set out as their Minimum Remittance Obligation (MRO) in the periodic tariff Orders issued by the Commission,” the report states.

Meanwhile, the Commission in the 2021 Q3 report disclosed that many industrial customers avoided using the grid power supply for production purposes even when available, due to the potential impact of poor quality on their production cycle.

According to the report, industrial customers account for 12 per cent of annual energy sales by DisCos and constitute the highest tariff class as well as the class with the lowest commercial losses.

“To increase the utilisation of grid electricity by industrial customers, the Commission continues to push that the quality of grid supply to them improves by ensuring the grid frequency remains within the statutory bounds.

” In the short/medium term, while the infrastructure investments required to improve the reliability and redundancy of the grid are being done, the Commission will explore options for improved contractual discipline and associated monitoring/evaluation around the quality of energy generated, transported, and delivered along the National grid,” it stated.