Gencos: Without Reliable Data, CBN’s Support to Power Sector Futile

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Chineme Okafor in Abuja
Electricity generation companies (Gencos) operating in Nigeria’s electricity market have said that the market does not have a reliable data bank at the moment.
This, according to them would greatly impair the value of various fiscal support the Central Bank of Nigeria (CBN) has over the years extended to the sector.

Speaking through their umbrella association – the Association of Power Generating Companies (APGC), the Gencos explained that the federal government’s intention to increase the volume of power available in the country, either through capacity recoveries or new plants would need to be subjected to appropriate market mechanisms which included the interplay of demand and supply of electricity in the country.

The Executive Secretary of APGC, Dr. Joy Ogaji, in a note made available to THISDAY, explained that the narrative in Nigeria’s power sector have constantly moved from the lack of adequate generation capacity to transmission inadequacy and now distribution challenges.
Ogaji, noted that these postulations have not been truly tested, stressing the need for dependable data on the sector’s operations collected and kept for practical decisions and actions.

“The NESI lacks quality and dependable data. Reasons adduced for this lack of data is not farfetched from the reasons that there was little or no emphasis on data, as nothing depended on it; investments for the growth of the generation sub-sector did not depend on the returns from the distribution sub-sector,” said Ogaji.

She noted that: “With the advent of the power sector commercialisation that dovetailed into the eventual privatisation of the sector, the narrative gradually began to change, power generation was no longer the issue but rather the ability to distribute the power, and to a lesser extent, the ability to transmit the generated power.
“Load rejection became the new battle cry of the industry, different from the age-old cry for more generation. Hence data became necessary to enable the determination of the concomitant requirements for distribution, transmission, and generation infrastructure growth; enable efficient regulation, monitoring and evaluation.”

While emphasising the need for investment in data acquisition and use, Ogaji added: “Government’s intervention through the Central bank of Nigeria (CBN) to continue market interventions without seeking first a better understanding of the market through bankable data will be an effort in futility.”
She explained that dependable data would be needed by the electricity market to guide its development of efficiency and profitability; enable true customer demographics for tariff calculation; as well as help the distribution companies (Discos) provide metering devices for all their customers.

“Investments to improve data quality and adequacy in all subsectors of the industry, with the priority being the distribution subsector for obvious reasons will solve a number of issues inhibiting the growth of the sector, especially the inability of the Discos to make capital investments,” she added.
The Gencos also complained that their contracts with the Nigerian Bulk Electricity Trading Plc (NBET) have not been fully respected, claiming that payments for power sold to the NBET has remained erratic.
“The impact is more on the Gencos, who due to lack of effective contracts to backstop the gas supply agreements in terms of bankability, are in a tight corner.
“Instances abound where Gencos have had to resort to other means other than the electricity market to support the gas and other services just to put power on the grid.

“The electricity market has the potential to absorb significant investments and provide rewarding returns on those investments if the market is allowed to run on competitive basis with little or no government interference.
“The lack of sanctity of contracts have resulted in huge debt burden on the generation companies who are never fully paid for power generated and supplied to the market.
“NBET has clearly failed to meet its payment obligations to the Gencos as stated in their PPAs. As such Gencos are operating at a loss with little income to maintain their machines and ensure smooth running of their operations,” Ogaji, stated.