The Nigerian Electricity Regulatory Commission (NERC) has said will cancel the Electricity Distribution Licence (EDL) issued to Kaduna Electricity Distribution Company (KAEDCO) over the DisCo’s over N93.42 billion energy debt among others.
The NERC, in a published notice tagged NERC/LC/023, signed by the Commissioner, Legal, Licencing and Compliance, Dafe Akpeneye, and dated May 15, 2023, gave the distribution company 60 days to repay its debt or have it’s operating licence revoked.
NERC said, “Take note that KAEDCO is hereby given 60 days from the date of this notice to show cause why the electricity distribution licence should not be cancelled in accordance with section 74 of EPSRA.”
The NERC performance review for 2022 showed that KAEDCO only paid 13.85 per cent of its minimum payment obligation to the Nigerian Bulk Electricity Trading Plc (NBET) and the Market Operator (MO) with a N4.33 billion average monthly underpayment, reaching about N51.96 billion bettween January and December 2022.
This is exclusive of the sum of N41.49 billion historical outstanding debts for the years 2015 to 2021 owed to both NBET and MO, which bring total outstanding debts to N93.41 billion.
The Commission also said it considers KAEDC’s actions to be manifest and flagrant breaches of EPSRA and the terms and conditions of its Electricity Distribution Licence, and therefore requires KAEDC 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 Commission said it conducted a detailed review of the current performance outlook of KAEDC for the period covering January – December 2022 confirming that KAEDC only achieved a combined average of 13.85 per cent of its minimum payment obligation to the Nigerian Bulk Electricity Trading Plc (NBET) and the Market Operator (“MO”) and recorded an average monthly market shortfall (underpayment) of NGN4.33billion as indicated in Table 1 4 The Commission further notes that the evaluated level of underperformance indicate that the utility has been unable to recover the additional liquidity required by KAEDC optimally function as a utility as provided in its approved revenue requirement Based c the Commission’s approved revenue requirement for KAEDC, the utility under-collected its revenues to the tune of NGN88.75billion being the sum of its market shortfall, capital investment allowance (NGN25.33billion) and allowed operating expense.
NERC also stated that KAEDC is currently experiencing severe liquidity challenges and its commercial viability and continuation as a market participant is in doubt.
The Commission noted that KAEDC’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.
Reacting to the development , the management of Kaduna Electric acknowledged receiving the notice. Nevertheless, it assured its customers that it will continue to provide electricity in its Franchise Area – Kaduna, Kebbi, Sokoto and Zamfara.
“Kaduna Electric acknowledges the 60-day Notice of Intention to Cancel its Electricity Distribution License by the Nigerian Electricity Regulatory Commission.
“The notice is coming on the heels of an initial engagement between the Commission and Shareholders/lenders to Kaduna Electric-in-Receivership in sustaining the mutual objectives of the federal government for an intervention in a number of Electricity Distribution Companies including Kaduna Electric for a turnaround of the DisCos and sale of core interests to new investors.
“While the Board and Management have continued to work on the intervention objectives, challenges remain, and stakeholders continue to engage on addressing them.
We assure our customers of ongoing engagements between the Commission and shareholders including the Bureau of Public Enterprises and Lenders as to address the long-running and current issues at Kaduna Electric.
“We will continue to provide electricity in our Franchise Area – Kaduna, Kebbi, Sokoto and Zamfara States – with the utmost sense of duty and professionalism,” the management said in a statement yesterday.
Meanwhile, NERC highlighted several regulatory interventions for the DisCo, noting that after KAEDCO failed to provide a credible plan for the financial sustainability of the utility, the Commission issued a notice of imminent regulatory intervention dated March 23, 2023 to the core investors – Africa Export Import Bank, Fidelity Bank Plc and Bureau of Public Enterprises (BPE) with 14 days to present their plan.
The Commission noted that KAEDCO’s investors in April sought more time from it without commitment to pay for energy remittance defaults.
On April 14, 2023, NERC met with the investors to discuss their final plan proposals and how to reduce their debts by N1 billion in one year, a N2 billion stabilisation loan to cut the DisCo’s N4.3 billion shortfall by N250 million immediately, among others.
The firm submitted the proposed plan by April 17th but NERC said it reviewed the plan and it failed to meet the obligations and moves to revoke the DisCo’s licence.