NERC to revoke Kaduna DisCo licence over N51.93bn debt

The Nigerian Electricity Regulatory Commission (NERC) has notified Kaduna Electricity Distribution Company (KAEDCO) of its intention to “cancel its licence” after 60 days over a N51.93 billion debt.

In a notice published on Monday and signed by Dafe Akpeneye, the commissioner, legal, licencing, and compliance at NERC, the agency gave the DisCo 60 days to resolve the issue.

Cumulatively, NERC said the utility accrued a debt of N93.41 billion from 2015 to 2022 due the Nigerian Bulk Electricity Trading Plc (NBET) and the market operator (MO).

Quoting section 74 of the electric power sector reform act (EPSRA) and the terms and conditions of electricity distribution licence number NERC/LC/023, the commission said it has “reasonable cause to believe that KAEDCO has breached the provisions of EPSRA and the terms and conditions of the electricity distribution licence”.

“The commission considers KAEDCO’s actions to be manifest and flagrant breaches of EPSRA and the terms and conditions of its electricity distribution licence; and therefore, requires KAEDCO to show cause in writing within 60 days from the date of receipt of this notice as to why the electricity distribution licence should not be cancelled in accordance with section 74 of EPSRA,” the notice reads.

NERC said its performance review for 2022 showed that the disco only achieved a combined average of 13.85 percent of its minimum payment obligation to the NBET and the MO, and recorded an average monthly market shortfall of N4.33 billion.

According to the commission, the evaluated level of underperformance indicated that KAEDCO has been unable to recover the additional liquidity required to optimally function as a utility as provided in its approved revenue requirement.

“Based on the commission’s approved revenue requirement for KAEDCO, the utility under-collected its revenues to the tune of N88.75 billion being the sum of its market shortfall, capital investment allowance (N25.33 billion) and allowed operating expense (N11.46 billion),” NERC said.

“KAEDCO is currently experiencing severe liquidity challenges and its commercial viability and continuation as a market participant is in doubt.

“KAEDCO’s management team has not been able to develop and present a clear pathway towards capital injection, operational efficiency, and sustainability despite the various regulatory initiatives of the commission and other financial interventions of the government.

“Over the period of 12 months covering January to December 2022, KAEDCO accrued a total liability to the tune of N51.93 billion to NBET and MO. 

“This is exclusive of the sum of N41.49 billion historical outstanding debts for the 2015-2021 owed to the NBET and MO.

“The commission has afforded KAEDCO’s management team several opportunities to develop and present a clear pathway toward recapitalisation and improvement of operational efficiency, and sustainability of the utility, and they have been unable to present a credible plan that would yield the desired results.”

Last year, KAEDCO was among the five DisCos restructured by the federal government.

Earlier in the month, the Transmission Company of Nigeria (TCN) reconnected the DisCo after disconnecting it from the power grid over non-compliance with market rules.