DisCos to offtake 95% of allocated energy or face NERC’s sanction

The Nigerian Electricity Regulatory Commission (NERC) has introduced stricter penalties for electricity distribution companies (DisCos) that fail to offtake at least 95 per cent of their monthly energy allocations and customer service standards.

The enforcement, outlined in an addendum to the Performance Monitoring Framework for DisCos, aims to enhance regulatory efficiency and improve service delivery to customers.

The order was originally released on July 5, 2024 and an updated framework, which takes effect on December 23, 2024, will remain operational until amended or revoked by the Commission.

The order, jointly signed by NERC Chairman, Sanusi Garba, and Commissioner for Legal, Licensing and Compliance, Dafe Akpeneye, aims to improve regulatory efficiency by aligning the frequency of Key Performance Indicators (KPIs) evaluations with data availability, ensuring timely and effective interventions. It also seeks to enhance compliance and enforcement measures by refining the regulatory framework to support DisCos in achieving performance targets.

The commission noted that the evaluation of compliance with two KPIs relies on data available only at the end of the market cycle. This delay may hinder the implementation of regulatory interventions outlined in the orders. The affected KPIs include Energy Offtake Relative to PCC and Compliance with the Reporting of Uniform System of Accounts (USoA).

Under the directive, DisCos that fail to meet the 95 per cent energy offtake threshold in any month will receive a rectification directive. Failure to comply for two out of three months in a quarter will result in a five per cent downward adjustment in their guaranteed Administrative Operational Expenditure (OPEX) for the next quarter.

The order further stipulates that DisCos failing to meet 100 per cent reporting compliance targets within a month will receive a rectification directive. Continued failure to meet compliance targets for two months within a quarter, using the Uniform System of Accounts, will attract enforcement actions, including the withdrawal of the “Fit and Proper” approval for Chief Financial Officers (CFOs) or equivalent positions.

“The order will drive increased operational performance from DisCos, thereby improving energy delivery to customers under the DisCos’ franchise areas, drive DisCos towards achieving customer-centric operations and enhanced efficiency, which will consequentially boost the satisfaction of customers under the DisCos’ franchise areas, reinforce market discipline and ensure that DisCos’ commercial performance sets them on the path of long-term financial sustainability and hold the top management of DisCos accountable for meeting all targets specified herein,” the commission stated.

On customer service, DisCos are required to resolve 75 per cent of total customer complaints lodged through the NERC Contact Centre or their headquarters within respective timelines. Failure to meet the resolution rate will lead to enforcement actions.

Penalties for unresolved complaints after the expiration of timelines include: Billing issues: N10,000 per day; Disconnection issues: N2,000 per day; Interruption complaints: N2,000 per day; Metering issues: N1,000 per day; Delays in connection: N1,000 per day; and Voltage-related complaints: N1,000 per day.

“Failure to attain a 75 per cent resolution rate for total complaints in any quarter within the respective timelines may result in other enforcement actions, including the withdrawal of the KYL of the Head of Customer Service or the officer responsible for resolving customer complaints in the utility,” the commission stated.

NERC added that in evaluating compliance with the three affected KPIs for the third and fourth quarters of 2024, rectification directives will be issued for all non-compliance. The updated enforcement framework contained in this order will be applied starting from Q1 2025.