Gencos: Days of Unruly Antics by Discos are Over

•  Over N200bn gas debt forces generation firms to operate fewer plants

Chineme Okafor in Abuja

Electricity generation companies (Gencos) in Nigeria’s power sector have lauded the federal government recent declaration of the eligible customers’ regime in the sector, stating that it would eventually become a lifesaver for them.

They specifically stated that its implementation would put an end to unhealthy market practices among the sector’s 11 electricity distribution companies (Discos).

Speaking wednesday in Abuja, the Gencos disclosed that they were extremely happy with the declaration which they said would boost competition and the financial fortunes of the sector which is troubled by heavy revenue shortfalls.

Speaking under the aegis of the Association of Power Generation Companies (APGC), the generation firms said the decision of the Minister of Power, Works and Housing, Mr. Babatunde Fashola, to declare the eligibility regime was taken in good faith.
APGC also claimed that the declaration was made after the government consulted with operators in the sector, and it was clear the Discos would not be able to take as much power as the Gencos would generate in a very long time.

Frequently, the Discos have been accused by the sector of being dishonest in their management of the market’s monthly revenue collected by them. This has reportedly contributed significantly to the market’s financial troubles wherein the Gencos are unable to pay their gas debts to gas suppliers as well as meet other operational obligations.

However, APGC Executive Secretary, Dr. Joy Ogaji, told journalists at a briefing that with the declaration, bulk electricity consumers who are willing and have the capacity to procure power directly from the Gencos would now deal with them without the Discos.
Ogaji, explained that this would in addition to boosting the revenue of the Gencos, put to an end the reported recalcitrant behaviours of Discos wherein they allegedly fail to honestly declare to the market their monthly receipts.
She also stated that the trading agreements to be adopted in the new provision would be without the usual loopholes which operators in the sector often capitalise on to shirk their responsibilities.
According to her, this would include, “water-tight contractual agreements because this is not going to be about any national cake.”
Ogaji, equally informed journalists that the Discos would be allowed to register as eligible customers and take extra power above their daily Multi Year Tariff Order (MYTO) allocations, to satisfy their customers without being fined but under the strict provisions of the regime.
“Discos are actually able to get power through this arrangement on the grid. Those Discos which are willing to get additional power qualify as eligible customers as well.

“If they have more customers and are not getting enough due to the strict national grid allocation, they can ask for extra power. In that case, a Disco will need a bilateral contract not with the Nigerian Bulk Electricity Trading Plc (NBET) but with a Genco, and the Transmission Company of Nigeria (TCN) being the third party,” Ogaji said.
While the eligible customer directive is yet to commence because according to Ogaji, the Nigerian Electricity Regulatory Commission (NERC) has yet to complete its implementation framework, its implementation would include the deposit of a credible bank guarantee by a customer to secure the contract, as well as initiation and initialling of enforceable service level agreements between parties involved.
Eligible customers does not mean it is only the Gencos and Discos that must become competitive, even the TCN has to become competitive and deliver on contract. When TCN defaults by not wheeling my available capacities, it will be held liable.

“It is going to be a contractual framework because NERC is not part of the activity. NERC will only register the participants after they meet the requirements which it is working on now,” Ogaji stated.

Similarly, Ogaji stated that the Gencos have largely scaled down their operations and now run fewer generation units because they are unable to pay for the volume of gas needed to run all their functional units.

She said this was as a result of accumulated debt of over N200 billion owed to gas companies for supplies made by them.
According to her, the gas suppliers have now resorted to supplying Gencos gas on pay-as-you-go basis.

“To procure gas, we need money. Currently, Gencos are being owed over N600 billion and we owe gas companies nearly N200 billion. Most gas suppliers now say they can’t supply anymore until we pay.

“Most of them like Shell, Total now do pay-before-service and the electricity market is only remitting about 30 per cent. Most of the Gencos can’t operate all their machines, and this depends on what they can pay. We are in that state, a precarious and pitiable one,” Ogaji noted.