Electric firms indicted in ‘questionable’ spending

The report x-rayed the firms’ accounts books from November when private investors took over from the defunct PHCN. The report obtained by Daily Trust yesterday in Abuja said some of the expenditures are inappropriate for consumers to bear in its next review of electricity tariff. The report directed that the 11 Discos remit the said […]

The report x-rayed the firms’ accounts books from November when private investors took over from the defunct PHCN.
The report obtained by Daily Trust yesterday in Abuja said some of the expenditures are inappropriate for consumers to bear in its next review of electricity tariff.
The report directed that the 11 Discos remit the said N19.328 billion to the Federal Inland Revenue Services (FIRS), the Nigerian Electricity Liabilities Management Company (NELMCO) and the Operator of the Nigerian Electricity Market (ONEM).
It said the amounts are for deductions on VAT on electricity sold to consumers, net available balances as at take over and baseline electricity remittance backlogs.
In addition, the Commission has requested exhaustive responses to the observations of inappropriate operating and Capital Expenditures (CAPEX) valued at N9.965 billion incurred since take over, 12 months ago.
Daily Trust also learnt NERC had written to the Discos directing them to pay N14.380bn to NELMCO as well as 13% interest annually from December last year, and that  N3.058 bn VAT be remitted to the FIRS.
Seven Discos – Kano, Jos, Abuja, Eko, Enugu, Port Harcourt and Yola – have been equally compelled to remit N1.889bn and 13percent interest to NELMCO/ONEM for outstanding cash collected in November 2013 for PHCN pre-transaction completion agreement.
NERC has also set a deadline of October 17 for the 11 Discos to remit the money and submit evidence of payment. It warned that defaulting Discos will incur a fine of N10,000 for every hour of default period until the remittances are actually completed.
The electricity regulator said its Open Book Audit system was conducted to ascertain the level of compliance of the Discos with the rules for the interim period of the market which was set up shortly before government’s handover of the PHCN assets to successful owners which was also amended in April.
Officials of NERC said the audit looked into the appropriateness of the Discos expenditures under the review period and its findings were collated along with responses of the Discos regarding the appropriateness of their operational and capital expenditures.
NERC questioned Kano Disco’s payment of N670million to Northwest Power from its central collection account as well as N778million and N453million it expended on 40 transactions and payment for management services.
Kaduna Disco had a questionable expenditure of N17.8million which it expended on hosting members of the Senate Committee on Power during an oversight visit.
Abuja Disco had 48 different transactions of over N1.3billion; Enugu had 15 transactions worth over N208 million, and Benin six transactions worth over N546 million.
Jos Disco took N800 million loan to be repaid with 20 percent annual interest rate, but NERC said the alleged borrowed fund has not impacted in its service. This was at a time when they had N2billion in fixed deposit earning an interest of 9.5 to 11 percent.
The audit stated that during the review, Yola paid over N131million technical service fee to Messrs Manila Electric Company but could not provide a copy of the service agreement.
Port Harcourt on its part could not explain a capital expenditure of over N310million and N513million paid to Income-Electrix Limited as fees for maintenance and operations agreement.
NERC declared that Eko’s N1.3 billion transactions with WPG Services Limited for operations and maintenance agreement fees between December 2013 and July 2014 could not be justified.
However, the Commission said N741m paid by Ikeja Disco for insurance premium on its plants, technical and other commercial services may be justifiable.
NERC observed that only Ibadan Disco, the largest Disco, has satisfactorily improved its network and is reasonably well prepared to move into the next stage of the market evolution which is the Transitional Electricity Market (TEM).
The report stated that Ibadan Disco complied with the Interim Rules (IR) of the market but yet to appropriately inculcate best standard practices at its management and board levels.
In a reaction, Chairman of NERC Dr. Sam Amadi confirmed the commission had audited the firms saying it was imperative for evaluating market performance.
He added that it was the best means to resolve issues in the electricity market and inculcate strong corporate governance practice in the market even as it prepares to enter TEM.