The indication that the Federal Government had concluded plans to centrally manage monthly revenues generated by operators, particularly incomes generated by the electricity Distribution Companies (DisCos) in the power sector has stirred the hornet’s nest in the power sector.
The reason being that the DisCos which are the major collectors and generators of revenues on behalf of the rest of the other key stakeholders, can no longer hide under the alibi of no payment by the end users of electricity to under declare to the rest of the parties revenue generated. Further, the DisCos monthly remittances will be marched with the total revenue collected.
The Federal Government through its agency, NERC which is the apex regulator of the power sector, said that for proper management of revenues and sharing, it will soon escrow the revenue accounts of the DisCos. The NERC Vice-Chairman, Sanusi Garba who made the disclosure at the 14th power sector stake holders meeting in Oshogbo, Osun state, explained that by centrally managing the revenue accounts, each key players namely: Generating Companies (GenCos), Nigeria Bulk Electricity Trading (NBET), Transmission Company of Nigeria (TCN), DisCos and the Federal Government would be certain of what amount of money due to it out of the total collections and remittances by the DisCos.
He said as each stakeholders monitors the incomes and losses, there will be no doubt about whether more than what were remitted by the DisCos were less than the actual generated revenues or not. With this in place, it will enhance transparency and trust just as it will attract more investors to the sector.
Certainly, the DisCos are in the eye of the storm for they deals directly with electricity consumers and collect payments for services rendered by the entire power sector in terms of electricity supplies. This implied that the funds/revenues thus generated is commonly owned by the sector operators.
The NBET has consistently said and published that the DisCos remitted only 30 percent of their monthly energy invoices in 2016. Also, The Market Operator (MO) which is an arm of the TCN, overseeing market settlements and invoices due to the market participants and service providers in the Nigerian Electricity Supply Industry (NESI) had complained of alleged poor collections of revenue by the DisCos. It warned that should the alleged poor revenue collections by the DisCos persists, its accounts would be escrowed.
The TCN on its part said that payment for its services in the market had gone down from 55 percent to less than 30 percent, thereby reducing its revenue. For now, it lamented that it is being paid an average of 33 percent of its total invoice sent to the MO between January and September, 2016 and further reduced to 27 percent in November, 2016. TCN claimed that the poor return on invoices had negatively affected its operations and development of the nation’s grid. It cited that over N100 billion is being owed to it as arrears of wheeling charges revenue.
The DisCos had been accused of either not paying for power wheeled to it for distribution or rejecting power loads wheeled to it by the TCN. The TCN claimed that these had impoverished it and put pressure on its transmission system just as it often lead to system collapse.
But the Association of Nigeria Electricity Distributors (ANED), which is an umbrella of body of DisCos, has opposed the Federal Government plans to escrow the revenue accounts of DisCos. The ANED Executive Director of Research and Advocacy, Sunday Oduntan who doubles as the spokesman of the association, said such attempt at escrowing the revenue accounts of DisCos amounted to nationalisation or appropriation of the power sector and assets.
In a reaction to proposed central management of the revenue accounts, he accused government of reneging on its privatisation contract agreement of providing N100 billion subsidy to the sector. He said: “To date, the government has not met the privatisation transaction foundational requirements of providing N100 billion in subsidy to the sector. Indeed, any attempt at escrowing our accounts runs counter to the objectives of the National Electricity Power Policy, 2001 (NEPP) and the Electric Power Sector Reform Act, 2005 (2005), of a private sector-owned and managed electricity sector.
“Singularly and in aggregate, such proposed action would endanger the ability of the government to hold the Discos responsible for performance, at a minimum, and at worse, amounts to government takeover of the Discos. It would absolutely, preclude further private sector investment in the sector.”
However, the Association of Power Generation Companies (APGC) has thumbed up for the federal government’s intention to escrow the revenue account of power Distribution Companies (DisCos), saying that it would enhance equity in revenue sharing, transparency and attract investors to the power sector. It attributed to inappropriate remittances and nondisclosure of actual revenue earnings by DisCos as partly responsible for the growing debts of over N500 billion owed to it by the Federal Government for electricity generated.
The Executive Secretary of APGC, which is the umbrella body of power Generation Companies (GenCos), Dr.Joy Ogaji, maintained that the introduction of centralised revenue account would motivate performance and improvement in the Nigeria Electricity Supply Industry (NESI).
She argued that the electricity sector is a value-chain which needs to be remunerated as applicable covering the cost of generation, transmission and distribution. The APGC stressed that the revenue being generated by the DisCos should not in any way be seen as personal funds but should be remitted as it belonged to the entire market for sharing.
She gave the revenue sharing formular thus, saying “GenCos are entitled to 60 of market remittance as they not just generate power but also pay for gas supply and gas transportation. Transmission Company of Nigeria charge cost 11 percent, distribution gets 25 percent while the remaining four percent is meant for regulatory charges and Nigeria Bulk Electricity Trader (NBET).
“The revenue referred to by the distribution companies are not their personal revenue but market funds to which they were made trustees to collect and remit. The need to monitor the flow of market funds has become necessary as this will enable transparency in the market and also give the regulator the ability to identify issues that will progress the sector and act accordingly in advising the government and stakeholders where funds actually needs to be plunged into in order to bring about self-sustenance and competitiveness.
” Then the argument from the DisCos that Nigerians don’t pay for electricity, we really want to know. Are they paying or not? For us to be able to know that they are not paying, let us know how much you’re collecting.
“And to know that, we need to have this your (DisCos) account centralised so that as the electricity consumers are paying, the GenCos, TCN, NERC and others will see it. Now if you say that you’re not collecting revenue, then why are you hiding the revenue accounts book from being centralised?”