Nigeria's Federal Government may have deepened the rift between the Nigerian Power Generation Companies (GenCos) and its Distribution counterparts (DisCos) as it orders the former to deal directly with consumers bypassing the latter.
The GenCos and DisCos had been at conflict over unpaid N500bn accumulated debt owed GenCos by DisCos. Thus the Federal Government's move has been hailed by a group of consumers across the country which described it as a promising welcome development and big sigh of relief to the power generation firms in the country.
Though, it was indeed a big sigh of relief for the twenty-six power generation companies in Nigeria, the GenCos, as federal government directed that certain customers can now buy electricity directly from them.
TheLedgerng.com authoritatively gathered that the huge debts incurred by the various electricity distribution companies (DisCos) have almost crippled the activities of the GenCos, hence the Federal government declaration of right of access to purchase electricity directly from the GenCos by willing customers, pursuant to section 27 of the Nigerian Electric Power Sector Reform Act (EPSR) 2005.
The move has however been adjudged promising and a welcome development by industry watchers at a time the sector faces liquidity challenges, indicating a big sigh of relief for the 26 GenCos through their umbrella body- the Association of Power Generation Companies (APGC).
There are fresh insights as to why the operations of the different power generation companies (GenCos) across the country have been rendered prostrate, and plans by the GenCos to bypass the Discos and supply power directly to certain class of customers due to the huge indebtedness by the DisCos.
The APGC have described the declaration as a welcome development when the Minister of Power, Works and Housing, Mr. Babatunde Fashola analysed the eligibility’s status, that bulk customers who are willing and have the capacity can procure power directly from the Generation Companies (GenCos) bypassing the Distribution Companies (DisCos).
At a press briefing in Abuja, its Executive Secretary, Mrs. Joy Ogaji said the move, tagged, ‘Eligible Customer’, will encourage competition and liquidity in the power sector.
Describing their plight as “Monkey dey work Baboon dey shop”, Ogaji laments how GenCos have cried fowled in their quest to compel the distribution companies to settle the backlog of over N500billion in accumulated debt for power generated and supplied from 1st November 2013 till date, thus reducing their ability to pay for gas and maintain their plants amongst other obligations.
The APGC boss added that the declaration will boost liquidity in the power sector and stimulate more competition for the DisCos, the Transmission Company of Nigeria (TCN) and the GenCos to serve customers for the better.
The eligible customer directive is yet to commence as she said the Nigerian Electricity Regulatory Commission (NERC) is working on the framework that will address registration and tariff setting among other conditions.
APGC also confirmed that GenCos now operate fewer turbines to generate power based on the quantity of gas that they can pay for.
“To procure gas, we need money. Currently, GenCos are owed N500b and gas companies owed nearly N200m. Most gas suppliers say they can’t supply anymore until we pay.
“Most of them like Shell, Total offer pay-before-service routine and the electricity market is only remitting about 30 per cent. Most of the GenCos can’t operate all their machines; it depends on what they can pay. We are in that state, a precarious and pitiable one,” she lamented.
On eligibility status, she continues:
“DisCos are actually able to get power through this arrangement on the grid. Those DisCos willing to get additional power qualify as Eligible Customers as well.
“If they have more customers and are not getting enough due to the strict national grid allocation, they can ask for extra power. In that case, a DisCo will need a bilateral contract not with the Nigerian Bulk Electricity Trading Plc (NBET) but with a GenCo, and the Transmission Company of Nigeria being the third party,” she explained.
The GenCos claimed that they have been at the receiving end of the lack of liquidity in the sector and blamed the Discos for not been transparent in the revenue for electricity consumers across the country.
However, gas suppliers have equally corroborated the claim that there is enough gas to generate power but that the generation companies cannot pay for gas.
Since power supply worsened in recent months, which had prompted Africa’s richest man and president of Dangote Group, Alhaji Aliko Dangote, to call on the federal government to cancel the power privatization, there had been blame games among industry players.
The controversy nevertheless have sparked federal government anger, having forewarned the Discos to tread parts of honour and respect terms of agreements as enshrined in the regulatory agency (NERC)’s Acts in ensuring steady electricity supply is distributed to Nigerians.
However, the new order by the federal government, though not without the familiar kicks by the Discos, particularly against the federal government’s plan to escrow the Discos accounts over its obvious failure to meet the terms of the privatization agreements.
The DisCos through its Association of Nigerian Electricity Distributors (ANED) have opposed the move saying the electricity market was immature and not competitive to declare eligible customers.
ANED’s spokesman, Mr. Sunday Oduntan recently said, “Our understanding is that Eligible Customers may only be declared by the Minister when a competitive market exists in the Nigerian Electricity Supply Industry (NESI).”
ANED insisted that such competitive market, “currently, does not exist,” adding that Section 28 of the EPSRA states that DisCos “must be compensated for any reduction in their ability to “earn permitted rates of return on their assets” or any inadequacy in their revenues.”
However, indications emerged that, all players in the Nigerian Electricity Supply Industry (NESI) have actually failed to meet the terms of the privatization agreement leading to the recent liquidity challenges that have crippled power supply in recent months, and the Gencos, one of the key in the electricity supply value chain is at the receiving end of the crisis due to occupational imbalance.
While the Gencos cried fowled of non remittance of proceeds by Discos, Discos on their part blame the federal government and electricity consumers for the failure of the sector, the government has also accused the companies of frustrating its effort to activate their agreements in the Transitional Electricity Market (TEM), which should bind them to objective service delivery.
On several instances of breaches of the market rules, NERC has responded with appropriate sanctions against erring Discos.
But despite NERC’s sanctions, some of the Discos have continued to flout the market rules by extorting customers through exorbitant estimated bills. Ironically, while some Discos have embarked on massive rollout of free prepaid meters to their customers, others, which operate under the same market conditions, have suspended the provision of prepaid meters, citing high cost of forex difficulties.
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