Electricity Subsidies Cost FG N629bn as Discos Generate N1.1tn in 2023

Planned Distribution Of Free Meters To Nigerians May Suffer Setback

In 2023, the Federal Government spent N628.61 billion on electricity subsidies, while power distribution companies (Discos) collected a total revenue of N1.08 trillion, according to recent data from the Nigerian Electricity Regulatory Commission (NERC).

Quarterly Breakdown of Subsidies and Revenues

An analysis of NERC’s figures revealed a consistent increase in electricity subsidies each quarter:

  • Q1 2023: N36.02 billion
  • Q2 2023: N135.23 billion
  • Q3 2023: N204.6 billion
  • Q4 2023: N252.76 billion

During these periods, Discos’ revenue collection was as follows:

  • Q1 2023: N247.09 billion
  • Q2 2023: N267.86 billion
  • Q3 2023: N267.61 billion
  • Q4 2023: N294.95 billion

Calls for Improved Services

Despite the rise in revenue, consumers have criticized Discos for failing to deliver satisfactory services. The Federal Government continues to cover the gap between the cost-reflective tariff and the allowed tariff through subsidies, primarily applied to the power generation cost payable by Discos to the Nigerian Bulk Electricity Trading (NBET) company. Meanwhile, transmission and administrative service costs payable to the Market Operator (MO) are recovered in full.

Impact of Non-Cost-Reflective Tariffs

NERC noted in its latest report that the absence of cost-reflective tariffs led to a subsidy obligation of ₦252.76 billion in Q4 2023, averaging ₦84.25 billion per month. This marked a 23.54% increase from Q3 2023, primarily due to government policies harmonizing exchange rates while maintaining end-user tariffs at December 2022 rates.

Collection Efficiency and Challenges

In Q4 2023, Discos collected ₦294.95 billion out of ₦399.69 billion billed, translating to a collection efficiency of 73.79%, slightly down from 76.56% in Q3 2023. NERC observed that increases in energy offtake often led to decreases in billing and collection efficiencies, highlighting a potential challenge for the long-term growth of the Nigerian Electricity Supply Industry (NESI).

Consumer Complaints

Consumers have expressed dissatisfaction with the increased revenue of Discos amidst poor power supply. The National Secretary of the Nigeria Electricity Consumer Advocacy Network, Uket Obonga, attributed the Discos’ financial success to NERC policies favoring Discos without corresponding improvements in power supply or network expansion. He emphasized that many customers remain unmetered and face inflated bills.

Regulatory Actions and Refunds

In February, Bizwatchnigeria reported that Discos overbilled customers by N105 billion. NERC responded by announcing sanctions and ordering Discos to refund the overbilled amounts. A 10% fine was imposed on the overbilled amount to deter future occurrences.

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