Experts hinge DisCos’ revenue rise on contract-based agreement with NERC

INDUSTRY analysts in the electricity sector have attributed the rise in revenue collection by electricity distribution companies (DisCos) to the performance-based contract they signed with the Nigerian Electricity Regulatory Commission (NERC).

The 11 electricity DisCos in Nigeria’s electricity supply industry (NESI) earned N842.42 billion in revenue in 2022, the highest in five years, according to a new report by NERC.

Data sourced from the report showed that the total revenue all the DisCos collected increased by 91 per cent, from N442 billion in 2018.

Last year, NERC went into a contractual agreement with the various parties in the NESI to demand efficiency, as well as track the performance of value-chain players and enforce sanctions where necessary.

To some industry watchers, this has yielded positive results and the market is taking efficiency shape gradually.

“The increase in revenue collection by the DisCos shows that the market is taking shape following the contract-based agreement they signed with NERC,” a power sector governance expert and energy lawyer, Chuks Nwani, told The ICIR.

Nwani posited that “a competitive market would be healthy for a regulatory market, which gives positive signals to the market.”

A general manager at the NERC, Sharfudeen Mahmoud, who spoke on the agreement last year, had expressed optimism that the proposed plan would ensure that all the value-chain players work as a team to deliver power to Nigerians.

Mahmoud had explained, “The contract-based agreements are to ensure we get the commitment of various power stakeholders in the sector. It is to build trust between the regulators and the DisCos, while ensuring a committed response to the power sector cause.”

Notably, the contractual agreements is targeted at improving the capacity off-take by DisCos to attract commercial and industrial customers.

Most importantly, it is geared towards providing a stable base-grid through infrastructural expansion, creating certainty in the gas-power market segment through contracting as a way of improving firm gas availability to power stations, addressing challenges surrounding securitisation of payments across the industry, and widening the gap between peak demand and availability generation.

An energy sector expert and director at Bullox Resources Limited, Chinedu Onyegbula, linked the revenue increase to improved metering, technological monitoring of money flows, enhanced regulatory oversight by NERC and Bureau of Public Enterprise, and increased investments in infrastructural projects by the DisCos.

Data from the electricity regulator indicate a substantial increase in metering installations, rising from 85,510 meters in the first quarter of 2022 to 164,612 in the fourth quarter, reflecting a 93 per cent growth.

“The intentional efforts by the DisCos to meter the citizens are seen in their revenues. Metering has improved, as the price of power has also increased,” said Pedro Omontuemhen, Partner, PricewaterCoopers (PwC).

In the last eight years of the immediate past administration, electricity tariff rose by 168 per cent, with billing jumping from an average of N23.5 a kilowatt-hour (kWh) in 2015 to N63 kWh as of January this year.






     

     

    To an experienced professional in the oil, gas, and energy industries, James Akwaji, the revenue increase can be attributed to three factors: an increase in the estimated number of customers, a rise in the number of customers using prepaid meters, and improved collection efficiency.

    “This resulted in a higher recovery of funds, approaching or matching the amount billed to customers,” Akwaji said.

    According to NERC figures, the collection efficiency of DisCos showed a gradual increase from 67.36 per cent in the first quarter of 2022 to 73.33 per cent in the fourth quarter, with an improvement in the total revenue collected, compared to the billed amounts.

    Also, according to data obtained from the National Bureau of Statistics, electricity customers increased by 58 per cent from 6.99 million in 2015 to 11.06 million in 2022.

    Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.

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