Why DisCos should pay charge for rejecting power load allocations: NERC

*Where a DisCo fails to take its entire load allocation due to network constraints, it shall be liable to pay capacity charge 

*Manufacturers spend N67.38bn on electricity self-generation, says MAN

Isola Moses | ConsumerConnect

Following the submission of their extraordinary tariff review application to the regulator, the Nigerian Electricity Regulatory Commission has said the electricity Distribution Companies (DisCos) will be liable to capacity charge for failure to take their entire load allocations caused by constraints on their networks.

ConsumerConnect learnt the country’s power industry stated this in a document in which it informed the DisCos of the review of extraordinary tariff review application they had filed earlier.

The DisCos recently announced what they called “new service reflective tariff”, which took effect from Tuesday, September 1, 2020, with the tariffs being charged residential consumers receiving a minimum of 12 hours of power supply increase by over 70 percent.

The Transmission Company of Nigeria (TCN) Monday said the DisCos failed to distribute 8,733.39MW in the week ended August 30, 2020, according to report.

The TCN, which manages the national grid, is still fully owned and operated by the Federal Government.

NERC in the document said: “Where it is established that the TCN is unable to deliver load allocation, the TCN shall be liable to pay for the associated capacity charge.”

The electricity industry regulator also disclosed that where a DisCo fails to take its entire load allocation due to constraints in its own network, it shall be liable to pay the capacity charge as allocated in its vesting contract.

“The average tariff for each DisCo was determined considering the projected energy offtake of the company based on its percentage load allocation in the vesting contract.

“NBET shall continue to invoice the DisCo for capacity charge and energy based on its load allocation and metered energy respectively in accordance with the December 2019 Minor Review of MYTO 2015 and Minimum Remittance Order for Year 2020,” said NERC.

The Commission disclosed the TCN and several DisCos considered the current Multi-Year Tariff Order (MYTO) load allocation as sub-optimal, given the changes that had occurred in load growth and capacities of the transmission and distribution networks.

According to NERC, “however, a full justification for a holistic review of the MYTO load allocation could not be established during this extraordinary tariff review process.

“Accordingly, the Commission orders that the current MYTO load allocation shall be maintained for the purpose of computing the relevant tariffs of all DisCos.”

In the meantime, Manufacturers Association of Nigeria (MAN) has said that the COVID-19 pandemic with its attendant incomparable challenges in the global economies led to a near shut down of eight subsectors of the country’s manufacturing sector.

Mansur Ahmed, President of the Association, at its 48th Annual General Meeting (AGM) Thursday in Lagos, stated that the manufacturers spent N67.38billion on self-generated electricity in the 2019 financial period.

Ahmed said: “For Nigeria, the outcomes include lockdown, near shut down of the operations of eight manufacturing sectoral groups, disruption in supply chain, inventory and inventory of unsold items and loss of jobs.

“The manufacturing sector spent over N67.38billion on self-generated electricity with energy cost accounting for over 38 per cent of production cost in 2019.”

The MAN President equally acknowledged that in order to cushion the devastating effects of the pandemic on businesses, the government introduced a number of impressive initiatives in forms of economic policies, schemes and projects aimed at encouraging businesses and consolidating prior achievements.

However, despite the government’s intervention, he said that data obtained from manufacturers revealed that some of the initiatives, though held long-term benefits, necessitated tougher business decisions to mitigate the short-term impacts on the manufacturing sector performance in the country.

“These divergent scenarios underscored the policy short-term volatility and the persistence of familiar manufacturing challenges.

“Interestingly, downward movement of key economic indicators reinforced the need for more proactive initiatives as against reactive initiatives.

“For instance, while the aggregated economy recorded a positive growth as indicated by increase in real national output to 2.39 percent in 2019 from 0.81 percent in 2018, manufacturing sector growth plunged significantly to 0.77 percent in 2019 from 2.09 percent recorded in 2018, according to National Bureau of Statistics (NBS).

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