The Nigerian Independent System Operator (NISO) has rejected payment proposals submitted by some electricity distribution companies (DisCos) for settling their outstanding obligations to the Nigerian Electricity Market and service providers. The proposals were considered unacceptable, particularly given the magnitude and age of the outstanding debts, following a four-day public hearing with the DisCos in Abuja.
The hearing, which began on Sept. 1 and ended on Sept. 4, was convened to review the outstanding market obligations of the distribution companies and examine proposed arrangements for settling the balances. The hearing was conducted by a five-member committee chaired by NISO’s Executive Director, Market Operations, Mr Edmund Eje. The committee also expressed concern over the payment frameworks proposed by some of the DisCos, describing the plans as inadequate in addressing their outstanding market obligations.
According to NISO, the Federal Government had already netted off about 97 per cent of the DisCos’ outstanding obligations incurred between 2015 and 2020. It said that the committee stressed the need for the affected DisCos to take immediate steps to clear their remaining balances. The system operator said that it would proceed with the next stage of the process, including the application of sanctions provided under the Market Rules.
The hearing provided an opportunity for NISO to review the outstanding market obligations of the distribution companies. It also examined DisCos proposals aimed at liquidating debts that have continued to affect the effective functioning and development of the Nigerian Electricity Market. NISO noted that the hearing highlighted growing concerns over market discipline and the failure of some participants in the Nigerian Electricity Market to meet their financial obligations.
The winners: NISO, which is enforcing market discipline. The losers: the DisCos, which face potential sanctions for failing to clear their debts; and the Nigerian electricity market, which suffers from the lack of financial discipline.
Bottom Line: The DisCos’ payment plans have been rejected. The debts are old and large. The question is whether the DisCos will find the money or face sanctions.