Stricter Regulations for Underperforming Power Distribution Companies in Nigeria

The Federal Government, through the Nigerian Electricity Regulatory Commission (NERC), announced on Monday at the 1st NESI Stakeholders Meeting of 2024 in Lagos, that power distribution companies (Discos) not meeting the set standards in the Nigeria Electricity Supply Industry would face a 50 percent reduction in their operating expenditures.

Nigeria’s electricity sector, serviced by 11 power distribution companies, caters to over 12 million registered users nationwide. These companies, privatized in November 2013 along with power generation companies, are crucial for distributing electricity from the national grid, managed by the Transmission Company of Nigeria, to consumers across the country. However, the sector has been challenged by financial liquidity issues and the Discos’ inability to ensure sufficient financial remittances, critical for sustaining power production.

In a series of updates on NERC’s official X account, Vice Chairman Musiliu Useni emphasized the commission’s intent to evaluate the Discos’ performance individually, stating that inefficient Discos would only receive half of their administrative operating expenses. NERC’s authority includes the approval of Discos’ operating budgets, a practice that has been ongoing for years.

Operational and Safety Initiatives

Addressing the operationalisation of a centralised billing platform for Ministries, Departments, and Agencies (MDAs), Useni mentioned that the finance ministry is managing a payment system for crucial MDAs. This system is designed for the central settlement of their electricity consumption, factoring in their meter readings.

Useni also highlighted the importance of sustainable payment structures within the sector, noting the market rules’ lack of provisions for tariff shortfalls or subsidies. The NERC meeting aimed to set strategic directions for the NESI, assess compliance, and offer a discussion platform for licensees.

Chidi Ike, Commissioner for Engineering, Performance, and Monitoring at NERC, expressed concerns over building construction under transmission lines and cautioned Discos against supplying electricity to such illegally situated structures. Ike announced plans for a comprehensive workshop to review the responsibilities of licensees within the NESI, covering legal, safety, and operational standards, and warned of sanctions for non-compliance.

John Joseph, Assistant General Manager for Engineering, Performance, and Monitoring at NERC, pointed out that 38 percent of accidents in 2023 resulted from unsafe conditions, underlining the need for adherence to safety guidelines to prevent such incidents.

The recent announcements signal the Federal Government’s commitment to enforcing stricter regulations on power distribution companies to ensure efficiency, safety, and legal compliance within Nigeria’s electricity supply industry.