Gencos Ask Discos to Prove Their Integrity, Accept Open Revenue Management

Chineme Okafor in Abuja
The systemic blame games that have come to define operators’ approach to the current challenges in the Nigeria’s power sector,on Tuesday took a different dimension when the 26 power generation companies (Gencos) called out the 11 electricity distribution companies (Discos) on their opposition to transparent revenue management model as recently proposed by the government.

Requesting the Discos to come clean on why they are opposed to the open revenue management which the Nigerian Electricity Regulatory Commission (NERC) said it would set up for the sector, the Gencos alleged that the Discos were increasingly creating lots of suspicions among sector operators on their operational integrity.
They had for the first time since taking over the generation assets in 2013, made such sweeping attack on the Discos.

The Gencos in fact, openly blamed the financial troubles of the power market on the Discos which they alleged have remained financially irresponsible in their obligations to the market.
Previously, the sector’s buck-passing practice was often shared between the Discos, government, and Transmission Company of Nigeria (TCN), with each of them making counter claims against each other.

However, the 26 Gencos said at a press briefing their umbrella body – the Association of Power Generation Companies (APGC) held in Abuja, that the Discos opposition to NERC’s central revenue management initiative suggested that they might be hiding something from other operators.

The Executive Secretary of APGC, Dr. Joy Ogaji, said at the briefing that claim by the Discos that the proposal was an attempt by the government to nationalise their operation was unfounded.
Ogaji stated that concerns raised by the Discos on the proposal were worrying especially on the basis that the revenue in question belonged to the entire market and just them.

According to her: “The recent development to escrow the account of the distribution companies is not just a welcome development but also a wake-up call to all participants in the electricity market.

“About a fortnight ago, the Association of Nigerian Electricity Distributors (ANED) likened such move to centralise their revenue accounts to nationalisation of the Discos. The electricity sector is a value-chain which needs to be remunerated as applicable covering the cost of generation, transmission and distribution.”

Ogaji further explained that: “The Gencos are entitled to 60 per cent of market remittance as they not just generate power but also pay for gas supply and gas transportation. Transmission charge cost 11 per cent, distribution gets 25 per cent while the remaining four per cent is meant for regulatory charges and NBET.

“The revenue referred to by the distribution companies are not their personal revenue but market funds to which they were made trustees to collect and remit. The poor remittance of market funds by the Discos has prevented the rest of the electricity value-chain from meeting up with their operations and also service their liabilities which includes gas payments.”

Buttressing the Gencos backing of the new proposal, she said: “The need to monitor the flow of market funds has become necessary as this will enable transparency in the market and also give the regulator the ability to identify issues that will progress the sector and act accordingly in advising the government and stakeholders where funds actually needs to be plunged into in order to bring about self-sustenance and competitiveness.”

She noted that this would also send the right signals to potential investors and licensed generation investors to advance their commitments to the sector.
She further questioned the Discos’ mindset on the development, saying: “The issue of everyone crying wolf should be fast gone. There have been blame games being played by the various players in the sector; it does not matter whose voice is loudest.

“The truth is, the generation companies have in keeping to the terms of their contract, generated power which has been sold by NBET to the distribution companies. What the generation companies want is to be paid fully for power received and sold. If one claims electricity consumers are not paying, let us see the payments transparently.”

“If centralising the payment system is tantamount to nationalising, the question that comes to mind is: what does selling the electricity and keeping the money all to oneself mean? If Discos claim they are not collecting enough, then they should open their books to make it plain for all to see and confirm their story. He who asserts must prove,” she added.

Ogaji also disclosed that the huge debts in the books of the Gencos have become major setbacks to their capacity expansion plans. She explained that while their lenders frequently write to them on this, investors have also stayed away from advancing negotiations on financing future capacity expansions.
“Lenders have written to our members on debts owed them, in fact, our auditors find it quite difficult to deal with the debt figures in our books, they are caught between writing them off as bad debts on carrying them over to new accounting years,” Ogaji explained.