…NERC warns default will attract sanctions
…. As DISCOs get window to take new loans
By Udeme Akpan
BARELY a week after the introduction of its controversial Service Reflective Tariff, SRT, the Federal Government has adopted a new plan, targeted at recovering more than N173 billion Nigerian Bulk Electricity Trading, NBET Plc debt from 11 Distribution Companies, DISCOs.
The debt owed NBET Plc – the administrator of the electricity pool in the Nigerian Electricity Supply Industry, NESI, involved in purchasing electricity from the Generating Companies, GENCOs, through Power Purchase Agreements, PPAs and sells to the DISCOs, through Vesting Contracts – had risen over time because of liquidity challenge, which constrained the DISCOs from meeting their financial obligations.
The huge indebtedness, which became a source of worry to many stakeholders, including the Ministry of Petroleum Resources, Ministry of Power, Nigerian National Petroleum Corporation, NNPC and International Oil Companies, IOCs, had crippled the operations of not only NBET, but also the Generation Companies, GENCOs and major gas suppliers.
However, in a document, directed to the DISCOs and cited by Vanguard, the Nigerian Electricity Regulatory Commission, NERC, stated that henceforth, the DISCOs, shall be availed the opportunity to earn their revenues only upon fully meeting major financial obligations such as the Central Bank of Nigeria, CBN-Nigeria Electricity Market Stabilization Facility (NEMSF), 100 per cent settlement of Market Operator’s invoice and NBET invoices.
Specifically, the DISCOs included: Abuja Electricity Distribution Plc (AEDC), Benin Electricity Distribution Plc (BEDC), Eko Electricity Distribution Plc (EKEDC), Enugu Electricity Distribution Plc (EEDC), Ibadan Electricity Distribution Plc (IBEDC), Ikeja Electricity Distribution Company (IKEDC), Jos Electricity Distribution Plc (JEDC), Kaduna Electricity Distribution Plc (KNEDC), Kano Electricity Distribution Plc (KEDC), Kano Electricity Distribution Plc (KEDC), Port Harcourt Electricity Distribution Plc (PHEDC) and Yola Electricity Distribution Company Plc (YEDC).
According to NERC, the non-compliance of DISCOs would attract strict sanctions, which differ from one DISCo to another.
In the case of Eko Electricity Distribution Plc, NERC expect the company to ensure, “Full settlement of 75 per cent of NBET’s monthly invoices being the minimum remittance threshold prescribed in this Order”, stated: “EKEDC shall be liable to relevant penalties/sanctions for failure to meet the minimum remittance requirement in any payment cycle in accordance with the terms of its respective contracts with NBET, MO and the provisions of the Market Rules and Supplementary TEM Order.”
“EKEDC shall maintain an adequate and unencumbered letter of credit covering three months of the minimum payment obligations to NBET and MO in accordance with the provisions of the Market Rules and Market Participation Agreement.”
It stated: “Where EKEDC is unable to comply with its minimum remittance threshold to the market prescribed in this Order from its operations as a utility, the company may seek external financing under the CBN intervention to cover the payment deficit.”
The Commission, which stressed that such plan, should be made known to NERC, stated: “The terms and conditions for the financing of the remittance shortfall shall be mutually agreed between EKEDC and the lenders and filled with the Commission. The submission the submission to the Commission, no later than two weeks from the effective date of this Order, of the utility’s financial model covering the remittance ramp up period and projections for the repayment of the external financing.”