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Non-performing DisCos will be sanctioned – FG

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By Abiodun Okunloye

Failure to meet standards will lead to 50% cut in their operating expenditures.

The Nigerian government declared that power distribution companies failing to meet stipulated standards in the country’s electricity supply industry will face a significant penalty. They will be required to reduce their operating expenditures by 50 percent. During the inaugural NESI Stakeholders Meeting held in Lagos in 2024, the Nigerian Electricity Regulatory Commission (NERC) declared that, henceforth, it will thoroughly assess the performance of each power distribution company separately. Presently, Nigeria is home to 11 official power distribution companies responsible for providing electricity to more than 12 million registered power consumers nationwide.

In November 2013, the DisCos, along with the power generation companies responsible for supplying electricity to the national grid, underwent privatization. The Transmission Company of Nigeria serves as the intermediary, transmitting power from the Gencos to the DisCos, who then distribute it to users across the country. However, the energy industry has been heavily burdened by a multitude of problems, with poor liquidity being the primary concern. Additionally, a major issue revolves around the inadequate financial remittances made by the companies, hampering the industry’s ability to ensure sufficient power production.

DisCos to enhance their performance or face repercussions.

Also, in a series of posts made by the power sector regulator’s official X handle, it was communicated that Musiliu Useni, the Vice Chairman of NERC, had advised them to enhance their performance or face repercussions. Useni emphasized that NERC would evaluate performance individually, resulting in diverse sanctions and measures. Thus, he urged them to focus on enhancing their efficiency. Meeting the expected level of efficiency ensures that they will receive their complete operating expenditure (OPEX). Failing to meet the performance standards will result in only receiving half of your administrative OPEX.

Over the years, NERC has exercised its authority as the governing body of the power sector to grant approval for the operational expenses of DisCos and other prominent entities in the industry. Discussing the implementation of the centralized billing platform for Ministries, Departments, and Agencies, Useni added that the responsibility for this task rests with the finance ministry. According to him, the Ministry of Finance established a payment system for vital MDAs, allowing for the central settlement of their electricity usage. This arrangement entailed granting the Ministry access to their meter readings.

A system that guarantees sustainable payments is needed.

According to Useni, it is crucial for the sector’s operators to manage payment obligations sustainably. They must take necessary measures to establish a system that guarantees continuous sustainable payments. Although the market rules are straightforward, they do not anticipate any deficit in tariffs or subsidies. The commission added that the main goals of the meeting were to offer strategic guidance to the NESI, assess adherence to regulations since the previous meeting, and create an opportunity for license holders to engage in conversations on various matters.

Chidi Ike, the Commissioner in charge of Engineering, Performance and Monitoring at NERC, addressed the meeting and emphasized the need to scrutinize the obligations of NESI’s licensees. To effectively assess their responsibilities, a thorough workshop will be arranged. This workshop will provide an extensive overview of the legal framework, grid code, HSE, and other essential information. Any violations will not be taken lightly, as strict penalties will be imposed for non-compliance. His concern regarding the development of houses underneath transmission lines was evident, as he issued a firm caution to DisCos, urging them to refrain from providing electricity to such constructions.

Related Article: 11 Discos fined ₦10.5bn for order violation

There are several communities beneath transmission lines where DisCos deliver power directly violating TCN’s Right of Way. Ike emphasized the significance of addressing this issue and ensuring that DisCos do not reap any advantages resulting from unlawful practices in those regions. During his presentation on the Health and Safety Performance of the NESI in 2022 and 2023, John Joseph, Assistant General Manager of Engineering, Performance, and Monitoring at NERC, shed light on the primary factors behind accidents. Unsafe conditions accounted for 38% of the accidents in 2023. According to him, accidents occur when safety guidelines are ignored in favour of other actions.

Related Link

NERC: Website

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