Power sector under-recovery may hit N500b

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There are fears that cash under-recovery in the power sector may increase to over N500billion from N435.7billion, by the first quarter of next year.
It was gathered that the fears emanated from the inability of the sector to deal with its under-recovery since June, a development believed to be making operators to lose sleep.
Currently, owners of power distribution companies (DisCos) are groaning under the weight of N5.5billion investment ceiling slammed on them by the Nigerian Electricity Regulatory Commission (NERC).
An industry source, who does not want to be mentioned, said fears had mounted among DisCos over their inability to increase their collections in the past one year.
The source, an official of a DisCos, said the issue of rising under-recovery had been a source of concern to the energy firms.
The Director, Research and Advocacy, Association of Nigerian Electricity Distributors (ANED), Mr Sunday Oduntan, in a telephone  interview, said the shortfall of the sector was in excess of N1trillion, adding that it would be wrong to blame the shortfall  on the DisCos alone.
According to him, the inability of the operators to recover their shortfalls, has worsened liquidity crisis in the sector, urging stakeholders, including the Federal Government, to  address the issues.
According to him, problems, such as the huge under-recovery and debts, were affecting efficiency of the operators in the value chain, stressing that the issue is more complex in the distribution sub-sector of the industry.
The source said: “Part of the challenge is that the  DisCos must not spend more than N5.5billion a year as allowable investment. And there is a demand and need for investment. In fact, one DisCo bought commercial application software at N2billion recently. How much is left from N5.5billion ceiling?”
The sector has been  under-performing, despite its privatisation in 2013. This is evident from poor generation, distribution and transmission mechanism.  Worst hit is the transmission segment, which has recorded 100 cases of system collapse since 2013.
A recent case was the collapse of the system, which occurred during the brief nationwide electricity workers’ strike.