NERC may cancel KAEDC licence
The Nigerian Electricity Regulatory Commission (NERC) has issued a 60-day notice to the Kaduna Electricity Distribution Company (KAEDC) Plc, over its contravention of Section 74 of the Electric Power Sector Reform Act (EPSRA’ or the Act) and the terms of its Electricity Distribution License No: NERCA/LC/023 (the Electricity Distribution Licence or EDL).
At the end of the notice period, NERC warned that it will cancel the licence of the DisCo in the event of its inability to provide satisfactory explanations.
In a notice signed by the NERC Commissioner, Dafe Akpeneye, dated May 15, the electricity regulator noted that it conducted a detailed review of the performance outlook of KAEDC for the period covering January-December 2022, following which it was discovered that the DisCo only achieved a combined average of 13.83 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 or underpayment of N4.33 billion.
According to the Commission, the evaluated level of underperformance indicates that the utility has been unable to recover the additional liquidity required by KAEDC to optimally function as a utility as provided in its approved revenue requirement.
NERC further stated that based on its approved revenue requirement for KAEDC, the utility under-collected its revenues to the tune of N88.75 billion being the sum of its market shortfall, capital investment allowances of N25.33 billion and an allowed operating expense of N11.46 billion.
“TAKE NOTE that pursuant to section 74 of the Electric Power Sector Reform Act (“EPSRA” or the “Act”) and the terms and conditions of Electricity Distribution License No: NERCA/LC/023 (the “Electricity Distribution License” or “EDL”) issued to Kaduna Electricity Distribution Plc (“KAEDC”) by Nigerian Electricity Regulatory Commission (herein referred to a “NERC” or the “Commission”) has reasonable cause to believe that KAEDC has breached the provisions of EPSRA and the terms and conditions of the Electricity Distribution License”, NERC said.
“The commission considers KAEDC’s actions to be “manifest and flagrant breaches” of EPSRA and the terms and conditions of its Electricity Distribution License; 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 License should not be cancelled in accordance with section 74 of EPSRA”, NERC added.
Like some other DisCos, KAEDC is currently experiencing liquidity challenges, casting doubts on its commercial viability and continuation as a market participant. NERC further 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.
“Over the period of 12 months covering January -December 2022, KAEDC accrued a total liability to the tune of NGN51.93 billon to NBET and MO. This is exclusive of the sum of N41.49 billon historical outstanding debts for the 2015-2021 owed to the NBET and MO,” the notice read