MDAs electricity debt profile rises to N100 billion
Government yet to fulfil commitment to pay
The debt profile of Ministries, Department and Agencies (MDAs) has risen to N100 billion up from N93 billion recorded about four months ago.
Although the Federal Government had promised to review and pay once the statuses of the huge debts owed the 11 electricity distribution companies (Discos) have been ascertained, but the Discos said Wednesday that government was yet to take any action regarding the issue.
Specifically, the Eko Electricity Distribution Company (EKDC) put the MDAs indebtedness to the company at N10.7 billion as at July 2016.
The Chairman, Association of Electricity Distributors (ANED), Sunday Oduntan, said liquidity issue in the power sector, remained one of the major challenges bedeviling the industry.
In a paper made available to The Guardian, Oduntan said the sector has been operating at a loss for past three to five years due to series of challenges.
Oduntan disclosed that scuttling or under-recovery of cost due to non-increase in tariff will result in N164 billion revenue shortfalls, from 2016 to 2018. “Delay in reflecting costs means a growing increase in deficits,” he added.
He said although the distribution and generation companies were given clean balance sheets to borrow funds to invest in the power sector during privatisation, no bank is willing to lend money for the critically needed capital investment due to the challenges facing the sector.
Oduntan added that while there was a promise to deliver about 5,000 to 7,500Megawatts (MW) to consumers between 2014 and 2016, the sector would only able to deliver about 2000MW to 3000MW, due to gas pipeline vandalism and transmission wheeling constraints.
Aside the sector’s inability to borrow from banks, the ANED Chairman disclosed that revenue shortfall in the sector due to non-cost recovery nature of the tariff system may hit N809 billion by December.
“Given the highly regulated nature of the tariff, the approved return on equity would preclude the injection of such funding by the investors. In addition, the customers would, ultimately, have to bear the cost of the associated returns.
“With a tariff that does not allow for a complete cost recovery, no lender will be willing to provide the required financing for the sector. And this is a problem that cascades along the electricity value chain.
“A far cry from where NESI currently stands, with electricity market revenue shortfalls projected at N809 billion by December 2016, a direct consequence of the non-cost recovery nature of the tariff.”
He noted that the Federal Government promise to investors was that there would be cost reflective tariffs from day one as specified under the performance agreement. “This never happened as R2 customer class was politically frozen and collection losses removed in 2015,” he added.
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1 Comments
The problem is simple, lack of meter is creating this unnecessary problem, and it is solely due to corruption on the discos and complete useless on the regulators. If consumer are metered, they would be willing to pay for what they consume and not fighting the estimate. when consumer pay for what they consume, revenue would be generated and passed along the value chain.
The solution is simple, a stronger more effective NERC that would monitor and ensure that the rules are followed. NERC should above cost reflective traffic, however it has to be contingent and effective only after each consumer has being meter. In other word, for every meter installed, the disco can being using the new cost reflective price. As long as the government continue to try to control prices and doesn’t use that control of price to ensure good service to Nigeria. we would continue to have problem across every sector of our economy. we control fuel price, which prevent investment in refineries. we control gas price, no investment in pipelines, or gas processing. we control electricity price, and we don’t have light. look at the sectors the government doesn’t control price, Telco, transportation, food, etc.
We will review and take appropriate action.