Further Govt Intervention In Electricity Market Dims | Independent Newspapers Limited
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Further Govt Intervention In Electricity Market Dims

Posted: May 13, 2016 at 5:13 am   /   by   /   comments (0)



Phillip Oladunjoye Lagos


Prospects of further interventions by the Federal Government in the energy market to ensure viability of electricity distribution companies may have dimmed as only five of the 11 Discos have taken advantage of the Central Bank of Nigeria-Nigerian Electricity Market Stabilisation facility (CBN-EMSF), Independent has gathered.

Equally, some of the Discos inappropriately utilised the CBN-NEMSF by depositing the disbursed amounts into an interest yielding fixed deposit account.

“We are aware that the CBN is in the process of approving a set of sanctions to which will be imposed on erring Discos and conniving bank(s), to curb their activities,” according to Power Investment Outlook, May 2016, a publication of Africa Power Systems (APMS) and Detail Commercial Solicitors on the electricity industry.

The CBN-NEMSF is a N213 billion facility initiated by CBN in 2014 for the purpose of settling outstanding payment obligations due to the market participants within the Nigerian electricity supply industry (NESI). The outstanding payment obligations include debts, which accrued during the interim rules period (IRP) as well as the legacy gas debts of the pre-privatisation PHCN generation companies owed to gas suppliers.

The facility, as structured for each Disco includes what is owed to other market participants (Gencos and gas suppliers) as well as revenue shortfalls owed to the Discos. In both instances, the facility covers the period November 2013-December 2014 (save for legacy gas debts, which are pre-2013).

Much as government wanted to support the Discos, many of them could not take advantage of the facility because of other financial obligations, which in the long run will make repayment a challenge.

Independent learnt that the Nigerian Electricity Regulatory Commission (NERC) in order to guarantee repayment of the CBN-NEMSF, had factored in the line of repayment of principal and interest into the MYTO 2.1 and MYTO 2.1 Amended 2015 tariffs; and is committed to including the same line of repayment in subsequent tariff reviews.

Repayment is to be made by the Discos (being the cash collectors in the value chain) over a 10-year period, with an initial 12 months moratorium on the principal payment.

The Power Investment Outlook publication, however, believes that there is a likelihood of other interventions since the CBN-NEMSF has made significant impact across the NESI value chain and still has the potential to make further impact once further disbursements resume.

In addition, according to the publication, there are, however, ongoing challenges that may necessitate further government interventions as revenue shortfalls are increasingly rising.

“Whilst the CBN-NEMSF has helped, and is still helping to resolve historical debts, a growing shortfall for the period commencing January 2014 (now estimated to be about N400 billion as at August, 2015) is accumulating. The shortfall affects the Discos, and other participants upstream, including the TCN, Gencos gas suppliers and other service providers in the NESI,” the publication stated.

The MDAs and the military owe the Discos an accumulated debt of above N32 billion from 2013 till date, as they have a track record of not paying for electricity.