Gencos Accuse FG of Selling Electricity to Neighbouring Countries on Non-commercial Terms

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  • Pass vote of no confidence on NERC

Chineme Okafor in Abuja

Electricity generation companies (Gencos) have accused the Nigerian Government of taking power from them and selling to countries in the West African region under the West African Power Pool (WAPP) on non- commercial but diplomatic terms.

The generation companies stated that the agreement on the daily export of about 300 megawatts (MW) of electricity to African countries did not take into account the commercial frameworks in Nigeria’s electricity market such as the Multi Year Tariff Order (MYTO) upon which the gencos also produce power

The arrangement, they said, had made the deal shrouded in opacity as they often do not know the monetary benefit accruing to them from such sales.

The Gencos also declared that they do not have absolute confidence in the ability of the sector regulator – Nigerian Electricity Regulatory Commission (NERC), to opti-mally regulate the power market, stating that although NERC had reportedly been fragile in the past, it currently has no control of developments in the market.

These misgivings were contained in a note made available to THISDAY by the Executive Secretary of the Association of Power Generation Companies (APGC), Dr. Joy Ogaji.

According to the Gencos, NERC currently does not have a means of independently validating the Aggregate Technical, Commercial and Collection (ATC&C) loss reduction figures of the 11 electricity distribution companies (Discos) in the country.

The generation companies explained that the power sector is currently faced with regulatory risks occasioned by regulatory uncertainties, government’s continued influence in the affairs of the regulator; as well as NERC’s ineffective regulation of the sector.

“Arguably, since the completion of the privatisation process, NERC has, in our view, been ineffectual in discharging its regulatory functions. The power sector is still faced with regulatory risks arising from regulatory uncertainties, government’s continued influence in the affairs of the regulator and ineffective regulation of the sector by NERC.

“The technical and operational capabilities of NERC need to be further strengthened to address obvious gaps in the Commission’s regulation of the power sector so far, which can be described as being reactive rather than proactive. For instance, NERC has no means of independently validating ATC&C loss reductions achieved by Disco (if at all).”

“Regulatory independence is key to private sector confidence in the power sector and has a significant effect on the ability of government to attract and sustain investments in the power sector. NERC, pursuant to the provisions of the EPSR 2005) Sections 32 and 96, has the mandate to provide leadership and coordination.

“Currently, there is lack of coordination and consistency across industry stakeholders leading to overlap of responsibilities and unclear boundaries among organisations; regulatory uncertainty related to NERC decision and tariff setting; capacity and skills constraints across the industry, scarcity of capital; lack of accountability due to absence of corporate governance,” they said.

On Nigeria’s daily export of about 300 megawatts (MW) of electricity to African countries, the Gencos explained that the agreement has operated without reference to the commercial frameworks in the country’s electricity market such as the Multi Year Tariff Order (MYTO) upon which they also produce power.

“The Nigeria Government allocates 300Mw of its grid power to international customers.

“No transparency in receipts and disbursement of funds paid by international customers – it appears markets rules do not apply in this area.

“Several written requests to NERC and relevant stakeholders to undertake reconciliation has not yielded any outcome. The arrangement of the supply is not based on commercial terms but diplomatic; transactions are not purely commercial as compared to the MYTO to which generation tariffs is tied to.

“In a present day competitive market, resource belongs to other market participants and are no longer freely and readily available to the transmission provider and so must be treated a service which should be obtained and paid for on a commercial basis as stated on the grid code,” the gencos noted.

The gencos added that being the producers of the power, they should be availed copies of records of sales and payment receipts as they relate to international customers, as well as the basis for distributing the portion paid to them.

They warned that they could eventually pack up their operations on account of the perceived ills.

“Contrary to widely held belief, Gencos have been at the receiving end of the lapses and deficiencies in the Nigerian power sector, as well as the seemingly insurmountable challenges of operating within the sector.

“The fact is that Gencos have been and do remain far more vulnerable than any other player in the electricity supply value chain. For whatever reason, very little has been put in place to give the Gencos a legitimate chance of survival based on the realities on ground.

“While the Gencos have been carrying the burden of ensuring that the power sector remains functional, and hoping that the obvious gaps, deficiencies and threat to their existence would be addressed, they are presently cringing under the excruciating pains of carrying this burden.

“Given that life is literally being snuffed out of the Gencos they owe all stakeholders and the generality of Nigerians the duty to cry out.