NERC Hits DisCos with Financial Penalties Over Energy Shortfalls

The Nigerian Electricity Regulatory Commission imposed severe sanctions on electricity suppliers who committed violations likely to cause harm to consumers.
Among other things, NERC announced a 5% reduction in the administrative and operational expenses of all electricity distribution companies that did not purchase at least 95% of the total energy allocated for distribution.
This was contained in the Commission’s Order on the Performance Monitoring Framework for all electricity distribution companies. According to the Order, electricity distribution companies would henceforth be assessed on seven key performance indicators namely energy usage against fractional contracted capacity, revenue collection rate, compliance with Unified Account System reporting, compliance with API feeder streaming, and compliance with order caps. They would comply with the decisions of the forum and adhere to service standards for resolving complaints received through the NERC Contact Centre and NERC Headquarters.

The Order provided that a remedial order would be issued if up to 95 percent of the available nominations were not accepted within one month.
However, if a DisCo fails to accept up to 95% an available nominations in two of the three months in any quarter, the DisCo’s guaranteed and operating expenses for the following quarter will be adjusted downwards by 5%.
Further, for every over-billing to a customer, 10% of the total over-billing amount for that period will be deducted from the DisCo’s annual management and operating expenses allowance at the next Tariff review and a credit adjustment will be made against the over-billing to the customer.

“If the amount of overbilled energy exceeds 20% of the allowable limit or the number of overbilled customers exceeds 20% of the non-metered customer base, the Commission may take other enforcement action including revocation of KYL on electricity tariffs. Billing Officer or Billing Officer The person responsible for the billing function of the utility company.
If the DisCo fails to resolve the complaint through the NERC Contact Centre or Head Office within the expiry of the CPR, the DisCo must pay a penalty within the first month. Billing: N10,000/day; Isolation: N2,000/day; Interruption: N2,000/day; Measurement: 1,000 N/day; Connection delay: 1,000 N/day; Tension: 1,000 N/day.”
After two months of non-compliance with consumer grievance resolution, the order states, “The Commission may take other enforcement action, including cancellation of the KYL of the Customer Service Officer or the official responsible for resolving customer grievances to the power utility.”

“The NERC order states that during the validity of Order No. NERC/320/2022, the Commission conducted periodic evaluations of DisCos’ performance against the set targets and made regulatory interventions as provided for in the order. The Commission found that the DisCos’ failure to fully comply with all KPIs contained in Order No. NERC/320/2022 has led to failure of the distribution companies to perform their business, resulting in compliance obligations, widespread customer dissatisfaction, undermining their ability to maintain market discipline, and jeopardizing the long-term financial sustainability of the power utility.
“The imposition of any resulting regulatory intervention provided for in this Order shall not be construed as limiting or precluding the power of the Commission to impose other enforcement measures under the Electricity Act or any other regulatory instrument.
“The order is issued without prejudice to the existing commitments and obligations of the DISCOs as provided for in the contracts concluded and in the existing regulations of the NESI,” dated July 5, 3024 order, signed by NERC chairman, Sanusi Garba.