DisCos revenue rises by 47% to hit N757bn – Report

Agency Report
Agency Report

Revenue collection by the 11 distribution companies increased by 47 per cent to N757bn in 2021.

The Association of Nigerian Electricity Distributors’s 2021 report on Commercial Key Performance Indicator for its members said NESI ́s revenue collection in 2021 set a new record of N757bn, which represented an increment of N241bn.

The revenue for 2020 was put at N516bn.

According to the report; the increment was due to the implementation of the service-reflective tariff in November 2020. There was a five percent growth in the energy delivered to the market and better performance on the Aggregate Technical, Commercial, and Collections losses.

Explaining further, the association said DisCos’ ATC&C losses tendency recovered from 50.3 per cent in March 2021 down to 46.7 per cent in December of the same year, reversing the downwards trend that started in 2020.

This trend, ANED said, was mainly due to the minimum remittance regulations enforced by the end of 2019 that created a huge cash strain on all the DisCos. This forced them to reduce their operational costs to a minimum, with negligible investment, the COVID-19 pandemic, the tariff turmoil in September 2020 and its final implementation in November 2020 removing end-user subsidies for Band A, B and C of the customer.

The spokesperson for Ikeja Electricity Distribution Company, IKEDC, Felix Ofulue, had in a telephone conversation with The PUNCH earlier in the week, said the electricity market had recovered from its liquidity challenges.

“It was in the past that we used to shout about liquidity, but now, the Federal Government is beginning to step in with various interventions to the power sector. No more liquidity. What we have now are shortfalls, and the CBN visited IKEDC last week after its visit to EKEDC,” he said.

Part of the Federal Government’s interventions was in the area of clearing backlogs of tariff debts and provision of loans to bridge the metering gaps.

The report briefly added that the 11 DisCos had benefited from the tariff increases since November 2020 and had even improved the collection efficiency from an average of 67 per cent to 69 per cent in 2021.

It, however, said the NESI’s cost-reflective average tariff which allowed DisCos to recover the cost of the service in Nigeria decreased by 5 N/kWh between 2019 and 2021 and continued to decrease in 2022, weakening DisCos’ balance sheets even more.

Several factors of note in 2021 also included the fact that the energy delivered to the market grew by five percent, the energy billed grew by nine percent and the Extraordinary Tariff Review was approved in November, removing subsidies for customers in B and A, B and C. They also increased the revenue billed by 44 per cent, making its naira equivalent reach over N1trn for the first time and collection rising by 47 percent. However, the collection efficiency performance barely increased by one percent.

Comparing the fourth quarter of 2020 with the fourth quarter of 2021, the report said revenue collection increased by N45bn or 32 percent, and collection efficiency shot up by eight points despite an 18 per cent increase in the allowed tariff.

Also, compared to the previous quarter, revenue collection increased by 7 percent to N203bn mainly due to the beginning of the dry season (more energy wheeled) and a small increase in the Allowed Tariff.

“With the negative trend starting in 2020, average ATC&C losses in 2021 improved and ended at 46.7%, reducing almost 4 points since February 2021. Remarkably, all DisCos improved their ATC&C losses in 2021,” ANED said.

A leading lawyer advising the Nigerian National Petroleum Corporation on oil and gas projects and partner at Bloomfield Law Practice, Ayodele Oni, said the revenue collection increase could be as a result of various interventions by the CBN to rescue the power sector from liquidity.

“One thing you have to first know is that part of the reason is because of the interventions of the CBN that are now taking charge of their revenue collections. Before, it wasn’t like the revenue wasn’t what they currently are. Their revenues have always been higher than what they reported because of market indiscipline. They used to under-report their revenues, but now, the arrangement with the CBN that deposit money banks take over their revenue collections has changed the situation. It is difficult for them to tamper with the data like they used to,” he said.

Again, according to him, the increase will result in adequate revenue distribution among all arms of the sector.

He added, “What it then means is that there will be more money to pay everyone across the value chain because you know it’s the distribution companies that collect money for everybody else.

“Indirectly, it could also mean that power can improve because if they don’t pay for gas, nobody will supply. It doesn’t necessarily mean that things have improved; it just means that market indiscipline and tampering with numbers are no longer there. Not much has changed since their revenue collection increased, except maybe for metering.”

A consultant on the DFID-funded Facility for Oil Sector Transformation managed by the Oxford Policy Management and an independent researcher & development practitioner, Dr. Dauda Garuba, argued that service delivery by the DisCos was yet to improve despite their supposed revenue increment.

“I am not sure the DisCos will agree with you on the claim about their improved financial fortunes. They still complain at every given opportunity. The rise in revenue collection has not in any way translated to better service delivery. Truth be told, Nigerians are paying for darkness. Worse still is that we’ve witnessed many increments in electricity tariff within a short time. The situation has been especially bad since the last quarter of 2021.

“Customers placed under estimated billing are worse off in the ‘stealing’ that goes on in the name of electricity pricing and billing. Even for those with metres, the pace at which these metres run is criminally exploitative. I remember telling a number of friends that the non-regular supply of electricity has not made us appreciate the fact that we are paying too much. My personal experience is that I pay heavily to recharge my meters any time we have a relatively stable supply,” he said.

He added that although a rise in revenue should translate into more investment and better service delivery, “we are far from it as of now and probably in the near future, especially as services are currently delivered as a monopoly. Until we have more DisCos competing in the same space for customers, we may really not get improved services,” he said.

A communications expert, Chido Nwakama, opined that although news of increased revenue collection by the Discos was pleasant and uplifting, they should do more of what earned the increase and change the narrative.

“Many locations across Lagos report improved power supply. Others such as Abuja and most parts of Ibeju Lekki experience reduced power supply. Sources in the industry claim that these parts were the destination for damaged or faulty equipment. No one reckoned with the fast growth of these places as part of New Lagos.

“Significantly, it says that they are yet to make the necessary investment in equipment. I am on the customer platform of the Disco and all we get are apologies and reports of trying to fix one equipment or the other,” he said, adding that the fact of increased revenue collection confirmed that customers would pay whenever they saw improved service delivery.

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