NERC, DISCOS, others disagree over draft interim rule

There were sharp disagreements yesterday among the Discos, Gencos and Market Operators, MO, over the draft interim rules, presented by Nigerian Electricity Regulatory Commission, NERC, for the management of the electricity industry before the Transitional Electricity Market, TEM, is declared.

This may have fuelled speculations that the November 1, 2013 physical takeover of the PHCN successor companies by the new owners may not be actualised after all.

But, the Deputy Director Electric Power Department in the Bureau of Public Enterprises, Mr. Amechi Aloke, swiftly assured that the BPE worked out efficient modalities for management of expectations to ensure the November 1, is actualised. He noted that barring any unforeseen circumstances FG will not go back on its plans for the Gencos and the Discos to physically take the assets of the successor companies of the PHCN which they acquired.

Both NERC and the Discos share similar views of 100 per cent of admin and salaries cost, and 10 per cent, depreciation cost, on the allowable revenue in the interim period, as set out in MYTO 2, by each Disco, they disagreed on fixed and variable costs, as well as return on capital.

Speaking on behalf of five Discos, including Yola, Ibadan, Abuja, Jos, Robert Yates, noted that while NERC’s MYTO 2 provide for 20 per cent fixed and variable costs and 50% return on capital the Discos are of the view that there should be 70 per cent recovery of fixed and variable costs and 60 per cent return on capital. He said the Discos need more than NERC have suggested to cover salaries, other cash outgoings, TSP costs and interest payments

According the Yates, the Discos have covenants with their lenders that require collections to be paid into designated bank accounts, cautioning that arrangements suggested by NERC for full payment for energy and then a top up back to the disco from the MO would breach covenants with Lenders “Accepting the MO bill in full as a liability without the means to pay it would lead to a breach of lending covenant ratios.”

Yates noted that to give some certainty there will be Minimum Payments agreed between each Disco and NERC, these he said, will reflect recent performance on billings and collections. He also pointed out that “if tariffs are rebased in March 2014 the Loss Reduction clock will have been ticking for 4 months – this is not the deal that Investors agreed with BPE.

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