The electricity generating companies want to declare force majeure in Nigeria over accumulated debt owed them by the Nigerian Bulk Electricity Trader since 2013

By Anayo Ezugwu

THE electricity generation companies, Gencos, are threatening to declare force majeure on their operations over accumulated debts owed them since 2013. The Gencos in a document presented in Abuja indicated that they were weighed down by the huge financial debt the market owed them.

It equally showed the Gencos’ frustration with the settlement status of their invoices by the Nigerian Bulk Electricity Trading Plc, NBET, which it accused of being inefficient and failing to pay them 100 percent of their invoices as reportedly agreed in their Power Purchase Agreements, PPAs.

According to document which contained the views of the Gencos on the Business Continuity Regulation of the Nigerian Electricity Regulatory Commission, NERC, they want the regulation to be holistic in its implementation instead of simply focusing on them and the distribution companies, Discos, alone. In it, the Gencos claimed the NBET had not fulfilled its obligations to them, noting that the contractual agreements they have with the agency are not respected.

“It is further imperative to bring to the attention of the commission the various challenges of the Gencos with the cost of generating electricity on the rise. Liquidity squeeze is on the top burner of all the challenges faced by Gencos who are owed over N600 billion in accumulated debts for power generated and supplied from 1st November 2013 till end of 2016 along with arrears for 2017, which has cummulated,” the document stated.

It noted that the NBET was established to act as a buffer in the market regardless of the Discos bank guarantees, adding that while the functions of the NBET is not contingent upon the Discos fulfilling their obligations to the market, the NBET is largely guilty of various business continuity failure events in the power market.

The Gencos said that the NBET failed in areas such as performance; compliance; license obligations; financial and contractual obligations failure and liquidation events.

“NBET has consistently failed to meet its obligation to the Gencos. The lack of service level agreement which contains key performance indicators is a problem. It is therefore evidently clear that NBET has failed to meet the minimum performance target from 1st February 2015, to date.

“The fact that NBET has failed in its obligation as a licensee cannot be overemphasised. What is left is for NERC to play its part by relieving the market of such burden by sanctioning the non-performance.

“With a debt burden of nearly a trillion naira by a licensee, who ought to be a buffer, is not only ridiculous but a major failure event which the regulator as the arbiter needs to handle expeditiously. The contract, a PPA, simply say Genco supply power and NBET will pay 100 per cent. NBET has failed woefully on this obligation.

“It is only a matter of time before a liquidation suit is filed against NBET. The commission does not need further evidence before ascertaining that NBET has failed to meet its financial obligations. Allowing it to sign more PPA is detrimental to the market which the commission regulates. In addition, Gencos have not failed but have been incapacitated by NBET’s failure to provide the needed financial security. Gencos are gearing up to declare force majeure due to NBET’s failure.”

Further, the Gencos said they were not in support of the NERC’s proposal to decouple the revenue of Discos in the planned tariff review. They claimed the mechanism could have an undesired effect of rewarding indolence to market licensees and may mean that volume of energy sales will impact them. They urged the NERC to first address other market dislocations that make for efficient electricity market operations before considering the revenue decoupling idea.

In another development, host communities of Gencos are demanding steady electricity supply to them at no cost from them. The Association of Power Generation Companies, APGC, umbrella trade association, claimed that the host communities have equally threatened to disrupt power production from the Gencos if their requests are sidestepped.

Joy Ogaji, executive secretary, APGC, explained the Gencos had made investments to upgrade access to power in their host communities as well as implemented several community relations projects, yet the communities insisted they want free power supplies. She did not specify which of the power Gencos had the challenge with their host communities but noted that the demands have now been heightened. She added that the Gencos do not distribute electricity and cannot afford to meet the demands of the communities.

“We now have challenges with host communities. They want free power supplies and they cannot pay because those companies are sited in their communities and as host communities, one of the benefits they are seeking is free power supply, not access to power. What the Gencos have done in their host communities is to provide infrastructure for them to access power no matter where they are located.

“They have built substations and lines to connect them to the grid so they can have access to power, but the communities said no. They said access is one thing, they want supply as well and that when they are connected, the Gencos should also pay for their supplies but you know these demands are onerous and quite unreasonable,” she said.

– Sept. 28, 2018 @ 7:15 GMT |