Resolving Revenue Collection Lacuna in Power Sector

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Power supply situation in Nigeria continues to face challenging times as the burden of revenue collection, transmission, gas supply among others continue to affect the distribution companies (DISCOS).

The financial shortfall in the sector has exceeded N1tn, as power generation companies are owed over N500bn; distribution firms about N200bn; while the Niger Delta Power Holding Company is indebted to the tune of over N100bn.

Report indicates that other service providers in the sector such as the Nigerian Electricity Regulatory Commission (NERC), Transmission Company of Nigeria (TCN) and Nigeria Bulk Electricity Trading Company are also owed billions of naira. Power distribution companies, on many occasions, had complained that the average of N31.5 that was approved by NERC as the unit price for a kilowatt-hour of energy was not sustainable as the amount required from the Discos by generation companies for the same quantum of energy is N68/KWh.

It is therefore in a bid to address the increasing revenue shortfall in Nigeria’s power sector, that operators in the distribution arm of the industry, with the support of other participants in the market, have commenced a nationwide consumer enumeration.

The Discos also stated that aside from the fact that the amount approved by the regulator for the sale of the product was low, many power consumers were not paying for electricity, because most of them were not on the records of the electricity distributors.

Industry close watchers in the sector observed that the obvious non-payment of electricity bill by consumers is a major reason for the ever-widening revenue shortfall in the industry, adding that the move for proper enumeration of electricity customers nationwide remain a welcome development.

Analysts opine that it is imperative that core investors inject significant patient capital to address the challenges mentioned above. Short-term debt or borrowings will not suffice and only serve to exacerbate the financing and operational challenges.

They say that the entire electricity sector is faced with huge revenue shortfalls adding that the implementation of cost reflective tariffs, access to long-term debt capital and equity injection, will still not address the revenue shortfall to the system in the short term.

Sunday Oduntan, Executive Director, Association of National Electricity Distributors, an umbrella body for the Discos was quoted to have said that the official number of eight million consumers on the books of power distributors was too low.

According to him, “Several millions of consumers used electricity without paying and this is adversely impacting on the revenues of Discos”, adding that power firms had resolved to effect a complete enumeration of the consumers to address the problem.

Energy operators however argue that considering the importance of power as the fundamental ingredient for the growth of any economy, getting all the parts to work in sync is crucial. But, getting the distribution to function effectively is vital.

Industry close watchers further disclosed that Discos are faced with huge operational challenges, which are clearly visible in their operations and service delivery.

They pointed out that the customer enumeration is a good avenue to capture new power consumers and know the real number of the various locations, although it is capital intensive, adding that the enumeration would also assist the power firms to capture better revenue needed for the payment of energy being supplied to them by generation companies.

Source: IWIN

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