The total revenue collected by electricity distribution companies (DisCos) in Nigeria from their customers increased the most last year
The total revenue collected by electricity distribution companies (DisCos) in Nigeria from their customers increased the most last year since the power sector was privatised, buoyed by the hikes in tariffs.
The DisCos and the generation companies (GenCos) unbundled from the defunct Power Holding Company of Nigeria were privatized in 2013 and handed over to the core investors on Nov. 1 of that year, while the Transmission Company of Nigeria (TCN) has remained under government ownership.
Data obtained by BusinessDay from the Association of Nigerian Electricity Distributors (ANED), the umbrella body for the Discos, showed that the revenue collected by them surged by 46.6 percent to N757 billion in 2021.
“DisCos have benefitted from the tariff increases since November 2020 and have even improved the collection efficiency from an average of 67 percent to 69 percent in 2021,” ANED said in a report.
It attributed the revenue growth in the Nigerian electricity supply industry (NESI) to the implementation of the service-reflective tariff in November 2020; the 4.9 percent increase in energy delivered to the market; and better performance on the aggregate technical, commercial and collection (ATC&C) losses.
“We are yet to notice much improvement in electricity supply condition across the country even when DisCos are experiencing increased revenue collection,” Chijioke James, president of Electricity Consumers Association of Nigeria, told BusinessDay.
Total power generation in the country stood at 3,089.3MW as of 6:00 am on Monday, down from 4,311.1MW at the start of the month, according to data from the Nigerian Electricity System Operator. The national grid, which is managed by the TCN, suffered another collapse on April 8, the first this month and the third in 24 days, worsening power supply in many parts of the country.
According to the DisCos, the cost-reflective average tariff, which allows them to recover the cost of service, decreased by N5/kWh between 2019 and 2021 and continues to decrease in 2022, weakening their balance sheets even more.
They said the Nov. 2020 tariff review, which removed subsidies for customers in bands A, B and C, increased the revenue billed by 44 percent, making its naira equivalent reach over N1 trillion for the first time.
Under the service-based tariff arrangement introduced in 2020, customers are categorised into maximum demand and non-maximum demand customers, with different bands (A to E) depending on the level of supply.
The power distributors said the energy received last year increased to 29,629 GWh from 28,249 GWh in 2020 while the energy billed rose to 22,939 GWh (equivalent to N1.3 trillion) from 21,485 GWh (equivalent to N764 billion).
“The daily energy sent out by the GenCos and wheeled by TCN in 2021 was on average 99,186 MWh (4,133 MW), which is about only 4.9 percent increase from 2020 (3,984 MW) and very insufficient to cover the huge unsuppressed demand in Nigeria,” they said.
The number of customers rose to 10,056,285 last year from 9,957,571 in 2020.
ANED said, “With the effective implementation of the service-based tariff in November 2020, the Federal Government removed electricity subsidies (over N500 billion) for the better service customer categories (Class A, B and C) and, therefore, the allowed tariff has increased from N31/kWh up to N49/kWh in 12 months.
“This fact, together with the DisCos’ ATC&C losses recovery in 2021, disproves the paradigm that an increase in tariffs leads to an increase in losses.”
It, however, said that while the industry’s cost of service grew from N1.15 trillion in 2019 to N1.8 trillion in 2021, the cost-reflective tariff in 2021 was N5/kWh cheaper than in 2019.
“It truly doesn’t make any sense that while the generation cost and other costs continue to grow at NESI, the cost-reflective tariff is systematically and artificially reduced,” the DisCos said.
According to the report, DisCos are not able to recover the cost of service as the real ATC&C losses are much higher than that under the Multi-Year Tariff Order.
“This fact is exacerbating DisCos liquidity crisis and cash stress, weakening DisCos’ balance sheets and preventing access to funding, ultimately impeding DisCo performance improvement. Thus, raising the question of whether there can be future DisCo improvement if the situation currently precludes any major investment in NESI,” it said.
According to the DisCos, under MYTO 2020, the Nigerian Electricity Regulatory Commission is projecting that the daily energy sent out should be around 126,000 MWh/day,
The target “is not feasible and is inconsistent with NESI’s historical power supply trend,” ANED said. “This paradox will artificially reduce the cost-reflective tariff, creating a shortfall that increases NESI’s liquidity crisis,” it added.