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Unmetered Consumers Hamper DisCos Revenue as Electricity Subsidy Hit ₦45.08bn Monthly

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electricity NERC
  • DisCos Revenue Declines by 1.33 per cent
  • International Companies fail in remittance

CEM REPORT, ENERGY | The inefficiency of metering electricity consumers in Nigeria inversely limits the capacity of Distribution Companies (DisCos) to effectively collect revenue for electricity supply usage. This is evident as DisCos collected a revenue of ₦267.86 billion from the ₦354.61 billion that was billed to customers in the second quarter of the year (Q2’23).

DisCos billing efficiency declined by 1.33 per cent when compared to ₦359.38 billion billed in Q1’23, however, collection efficiency increased by 6.79 per cent from 68.75 per cent recorded in the previous quarter to 75.54 per cent in the review quarter.

The inefficiency of metering electricity consumers in Nigeria inversely limits the capacity of Distribution Companies (DisCos) to effectively collect revenue for electricity supply usage.

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Of the 12,561,049 registered electricity customers in the nation, 55.84 per cent (7,014,566) are unmetered. This leaves 44.16 per cent (5,546,483) of registered electricity customers metered.

Due to the absence of cost-reflective tariffs across all DisCos, the Government incurred a subsidy obligation of ₦135.23 billion in Q2’23, which is an increase of ₦99.21 billion (+275 per cent ) compared to the ₦36.02 billion incurred in Q1’23, according to the Nigerian Electricity Regulatory Commission (NERC) second quarter (Q2’23), Electricity on Demand report.

The report puts subsidy obligation incurred by the Government per month at ₦45.08 billion in Q2’23.

The commission in its report noted that it collected ₦5.63 billion as revenue indicative of an increase of ₦0.90 billion (19.12 per cent) compared to the ₦4.73 billion revenue collection in the previous quarter.

Additionally, it said that it had an expenditure of ₦2.46 billion in the second quarter of 2023. An increase of ₦0.66 billion (36.80 per cent), from ₦1.80 billion in Q1’23.

Billing

On billing efficiency, NERC stated that the total energy billed was 5,789.21GWh from a total energy offtake of 7,100.87GWh in Q2’23 translating to a billing efficiency of 81.53per cent. This implies that for every ₦100 worth of energy received by DisCos in 2023/Q2, ₦18.47 was not billed to end users.

“Comparatively, the total energy received and billed in 2023/Q1 were 7,495.49GWh and 5,844.21GWh respectively, which translated to a billing efficiency of 77.97per cent. This means that at the aggregated level, the NESI recorded a 3.56pp improvement in billing efficiency between 2023/Q1 and 2023/Q2.”

“Ikeja DisCo recorded the highest billing efficiency of 92.17per per cent, while Kaduna DisCo recorded the lowest billing efficiency of 64.16per per cent. All the DisCos, except Benin, recorded improvements in their billing efficiencies in 2023/Q2 relative to 2023/Q1 with the most significant improvements recorded by Yola (11.09pp), Kaduna (9.74pp), and Ikeja (6.66pp). Benin DisCo recorded a –1.55pp reduction in its billing efficiency relative to 2023/Q1,” it added.

Local Remittance

In the case of remittance, DisCos in Q1’23 remitted ₦152.48 billion as Minimum Remittance Obligation (MRO) from ₦154.04 billion expected to the federal government coffers, indicative of an increase of 31.37 per cent compared to the previous quarter.

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The report details that all DisCos had improved remittance when compared to Q1’23 attributing it to the exchange-rate harmonisation induced increase in Government subsidy.

“The significant improvement in remittance performance by DisCos is because a large portion of the NBET invoice is to be covered by the Government in the form of subsidies. The sharp rise in the Government’s subsidy obligation meant that in 2023/Q2, DisCos were only expected to cover 53.25 per cent of the total invoice received from NBET,” it added.

On remittance to Market Operator (MO), DisCos made a total remittance of ₦32.88 billion against the cumulative invoice of ₦40.65 billion issued. This payment translates to 80.90 per cent remittance performance and is a 14.38pp increase when compared to 66.52 per cent remittance performance recorded in 2023/Q1.

On a DisCo-by-DisCo basis, Ikeja and Yola DisCos recorded the highest MO remittance performances with 107.18per per cent and 102.89per per cent respectively while Kaduna had the lowest remittance performance of 13.20per per cent.

“Between 2023/Q1 and 2023/Q2, nine (9) DisCos recorded improvements in MO remittance performance with Ibadan (31.23pp), Ikeja (28.91pp) and Port Harcourt (22.58pp) being the best performers. The DisCos that recorded a decline in MO remittance performance in 2023/Q2 relative to 2023/Q1 were Benin (-16.76pp) and Eko (-0.63pp).”

International Remittance

The overall remittance performance for international customers during the quarter stood at 10.12 per cent. Of the four customers, only Transcorp-SBEE made a payment of $1.43 million against an invoice of $2.13 million issued for services rendered in Q2’23.

“Other international customers did not make any payment against the $11.97 million invoice issued to them by the MO for services rendered in 2023/Q2.”

However, it is noteworthy that all the international customers made payments during 2023/Q2 for outstanding invoices from previous quarters.

Bilateral customers on the other hand made a total payment of ₦816.66 million against the cumulative invoice of ₦2,845.08 million issued to them for services rendered in Q2’23.

It is also noteworthy that the bilateral customers made payments during 2023/Q2 for outstanding MO invoices from previous quarters.

Ajaokuta Steel Co. Ltd and the host community did not make any payment towards the ₦0.56 billion (NBET) and ₦0.08 billion (MO) invoices received in 2023/Q2 continuing a longstanding trend of non-payment by this customer and the Commission has communicated the need for intervention on this issue to the relevant FGN ministries

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