Why Power Sector Revenue Collection is Low

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TCN power plant

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The Transmission Company of Nigeria explains why revenue collection in the power sector is low

By Anayo Ezugwu  |  Feb 13, 2017 @ 01:00 GMT  |

THE Transmission Company of Nigeria, TCN, has blamed the low revenue collection in the power sector on the inefficiency of the electricity distribution companies, Discos. Abubakar Atiku, managing director, TCN, in a report in its website on Wednesday, February 1, said the defunct Power Holding Company of Nigeria, PHCN, recorded an excess of 60 percent revenue collection, which the private investors undertook to improve on while acquiring the assets from the Bureau of Public Enterprises, BPE.

Stressing that the record of the present Discos revenue collection is a far cry from what is expected of it, he urged the private investors to scale up its collection to match the agreements they signed with the BPE. “Discos, they are 100 percent responsible for deriving the revenue to the electricity market, and they are not living up to expectations. We expect them to be 100 percent efficient; we know it is not possible but when PHCN was privatised it is on record that the successor companies are doing more than 6 percent in terms of collection.

It was anticipated during the privatisation to see improvement over and above 60 percent. “But what are we witnessing now is lower performance. So distribution companies must step up to live to the expectation they signed with BPE when they bought over these assets.”

According to Atiku, the major challenge facing the TCN is the problem of liquidity in the electricity market. He pointed out that payment of TCN services in the market has gone down from 55 percent to 30 percent in recent past and with that, funds’ coming to TCN in the form of revenue has reduced.

“It would interest you to note that TCN is being paid an average of 33 percent of her total invoice sent to the Market Operator between January and September 2016 which further reduced to 27 percent in the month of November, 2016,” he said.

On the issue of load rejection, Atiku noted that while some of the distribution firms were rejecting, others were taking more than their allocation, which in the long run balanced the system and power frequency and neutralised any cause for concern. He exonerated the TCN from the cause of load rejection that could have worsened the revenue collection.

He said it is on record that the Nigerian Electricity Regulatory Commission, NERC, queried the TCN to prove its claim on load rejection, which it has since responded to. He boasted that the firm has a record of power allocation from the System Operator regarding how some of the distribution companies took more than there allocation while some rejected theirs.

He, however, noted that the fear of not taking more allocation stemmed from the fact that the commission would fine the Discos in line with the stipulation of the Multi-Year Tariff Order, MYTO. “On the issue of Discos rejecting loan, I will agree with you that some of them reject, some of them take more. If those taking more equal the amount that those are rejecting we will have a balance system. We will not have any cause to bother. But in most cases our frequency goes up more than the tolerable limit.

“And once System Operator realises that the frequency is more, that means somewhere somehow load is not taken.  And our records are there. NERC has queried us to substantiate our claim, which we have. We have records by System Operator that any point in time for this and even distribution what it takes.

“Some of them must have taken more at a particular time, and due to micro allocation it is clearly stated that if you take more than your allocation, you will be fined. So, it is not TCN, it is MYTO, which NERC is enforcing that is why they have to pay for that.”

According to him, the federal government has released 98 percent of the company’s 2016 budgetary allocation, while it hopes to secure more funds from this year’s budget for the completion of 22 critical projects. “The federal government has also approved the Contractor Financing Model for reinforcement and rehabilitation of projects in TCN. The first tram his for $200 million worth of projects.

“The implication of this finance model is that the private contractors or investors can now fund TCN projects and be paid overtime. Although this would lead to the timely completion of projects, Uris however premised on our getting about 60% of Israel invoice paid, which is not the case presently.”

Atiku also announced that the present power generation into the Nigeria Electricity Supply Industry, NESI, was 3,200 megawatts, MW. He said TCN has within the six months of taking over its management from the Manitoba Hydro International improved its transmission capacity from 5,500MW to 6,500MW. Following the completion of some of its new projects, the company is expected to increase its wheeling capacity from 6,500MW to 7,200MW by the end of this year.

The TCN, he said, has introduced dispatching tools which resulted in some more efficient interface with Gencos on one hand and Discos on the other hand and have also sucked in reducing Transmission Loss Factor from 8.05 percent last year to7,82 percent as at January 2017. He noted that this improvement in transmission loss translate to more power to Discos for the people and about N5 billion additional revenue to TCN, however due to poor market performance, impact of these is yet to be felt in terms of financial returns to TCN.

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