Featured, Power
By Anayo Ezugwu
UNLESS the federal government addresses the challenges of the electricity generation companies, Gencos, Nigeria may witness power outage across the country. The Gencos have signified their intention to declare force majeure on their operations over 0.75 percent administrative charge for gas supply transactions being introduced by the Nigerian Bulk Electricity Trading Plc, NBET.
The Gencos in a statement said they would be forced to return the power generation plants to the federal government and relieve their investors of the obligation of generating electricity for Nigeria because NBET was making it difficult for them to operate. Joy Ogaji, executive secretary, Association of Power Generation Companies, APGC, a trade association of the Gencos, said the NBET was making demands on the Gencos which was unfair.
The new charge is said to be a condition precedent for the Gencos to draw from the recently approved N600 billion federal government’s intervention fund to cushion the liquidity crisis in the power sector. If this action is taken, it could cut available power generation capacity to 5,266 megawatts, mw. The Independent System Operation, ISO, data of September 6, 2019 shows 6,691mw available capacity at 27 Gencos. The thermal Gencos have 5,266mw of this while three hydropower plants – Kainji, Jebba and Shiroro – have 1,425mw capacity.
But Ogaji said the NBET claim that the Gencos were not making pro-rata payments for their gas suppliers and in that regards decided to pay the gas suppliers by itself, but with a 0.75 percent administrative charge was false. She said the development would impact the operations of the Gencos negatively as they would have no funds to run their plants.
“The NBET on September 13, 2019 issued a letter to individual thermal Gencos directing them to obtain, as a matter of urgency, their respective board approvals or resolutions, bequeathing responsibility for payment of gas and transportation to the respective supply companies for an administrative charge of 0.75 percent. The letter gave each Genco three working days ultimatum to respond with the board resolution or face non-payment of energy invoices,” she said.
Ogaji said the Gencos were contesting the decision because the NBET did not have the approval of the Nigerian Electricity Regulatory Commission, NERC, to make such decisions. “The fact that NBET is placing the extortionist 0.75 percent administrative charge on Gencos which are already convulsing in the NESI is an aberration on the duty of care placed on NBET.
“In addition, going by the principle of privity of contracts, thermal Gencos have contractual obligations to pay their gas suppliers. If they do not pay, that burden remains with them. NBET claims that thermal Gencos have not been making pro-rata payments for gas from monthly invoices paid by the market. For example, from the paltry 15 percent of the June 2019 energy invoice paid to each Genco, NBET expects each thermal Genco to make pro-rata payments of 15 percent of the gas invoice to gas suppliers and transporters.
“Given that a thermal Genco’s gas bill is between 50 percent and 70 percent of their total monthly revenue, depending on their efficiency and tariff, the implications of carrying out NBET’s directive of pro-rata payments is that a thermal Genco with about 60 percent of its total revenue as gas cost, will be left with about 6 percent of such total energy invoice to operate the power plant. This is because of the 15 percent received from the market, about nine percent must be allocated to gas as pro-rata payment. This is certainly not sustainable.”
According to her, each of the Gencos requires between 20 and 30 percent of its total revenue to meet its direct operating cost on a monthly basis and that if NBET’s directive on pro-rata payments is carried out, only six percent of the monthly invoice would be left for them. This, she stated was not enough to pay Gencos’ staff alone.
Ogaji regretted that politics and government interference are hindering development of the sector in Nigeria. She said out of the 13,427mw installed electricity capacity, only 7,500mw was available. Yet, of this available capacity, only 3,500mw is being utilised.
She noted that over 80 percent of power generated in the country came through thermal power plants which use gas. According to her, that makes the gas sector a critical stakeholder to those that generate the power. “To that extent, there’s need to make that value chain or subsector very viable so that gas should be available for us to generate more power,” she stated.
– Sept. 27, 2019 @ 16:59 GMT |
Tags: New Gas Charge: Blackout looms as Gencos threaten to poll-out
