The power Generation Companies (GenCos) have disclosed why power generation in Nigeria remains at 4,000 megawatts for many years despite installed capacity of 15,500MW.
Dr Joy Ogaji, Chief Executive Officer (CEO), of the Association of Power Generation Companies (APGC), gave the reason while speaking on capacity payments, Power Purchase Agreements (PPAs), and the operational realities within the Nigerian Electricity Supply Industry (NESI).
Ogaji, in a statement made available to journalists on Monday in Abuja, said the legacy GenCos and the National Integrated Power Project (NIPP) plants in the market have been operating without adequate sector risk protection, hence exposed to various operational and regulatory risks.
This singular reason, she explained, has kept the sector at about 4,000 MW of average grid generation, for many years, notwithstanding an installed capacity of 15,500MW.
“This is a clear anomaly in the market, and GenCos, for the record, have kept the records of such losses to date, as a regulatory risk,” she added.
The APGC boss said the GenCos have kept to the terms of all industry and privatization agreements as well as the Power Purchase Agreement since the takeover on the 1st of November 2013.
However, she said in exchange, they have been rewarded with liquidity challenges, default on contractual terms, regulatory risks, and increased market volatility, lackluster performance of agencies and participants, leading to disregard for the sanctity of contracts.
For instance, she said that the GenCos’ outstanding amount, which is over ₦6.2 trillion, does not represent all their entitlement, contractually. Saying that these debts continue to accumulate because GenCos are not fully paid for their output, despite incurring high costs for gas supply, plant maintenance, foreign exchange exposure, and financing obligations.
Dr Ogaji maintained that the persistent non-payment has rendered most GenCos technically insolvent, and severely constrained their ability to invest in capacity maintenance and expansion.
She also mentioned that the GenCos are not beneficiaries of the current subsidy regime but are, its biggest victims. Noting that the GenCos are only requesting their receivables, which have accumulated over the years, as could be verified from the Multi-Year Tariff Order (MYTO) and the Nigerian Bulk Electricity Trading Plc (NBET) documents for power generated and consumed, but only 35% is paid, leaving a huge contagion that is not cash-backed since 2015 to date.
“How would power growth in Nigeria be encouraged if GenCos are not incentivised to make capacity available for dispatch to the NESI?
“What incentives does the market present for GenCos to invest towards recovery of unavailable capacity when they are denied capacity payment for what is already provided and maintained amid constrained and unutilised capacity?
“Unfortunately, GenCos’ increased capacity has not translated to a corresponding increase in power supply to consumers. This has become a big challenge and an inhibitor to the NESI, defeating the effort of the GenCos in recovering unavailable capacities, considering the massive, fixed charges incurred to keep the GenCos machines and units running to make power
available.
“It is international industry best practice in critically underserved countries that available generation capability should be equal to average generation (energy utilised). In Nigeria, available generation has met increased stranded capacity.
“The process of verifying the GenCos invoices is akin to undergoing a doctoral degree (PhD) viva. We dare to state here that, contrary to the allegation disparaging the GenCos, no sector participant has any powers to negotiate inflated invoice payments.
“Metered data is obtained by NISO from the tariff meters, for which GenCos and DisCos have a corresponding check meter, with respect to energy sent out and energy delivered. (MR: 27.6.4).
“Market Operator (NISO) validates the metered data submitted by the participants with System Operator (NISO) figures. The capacity figures are obtained from the System Operator (see Second Interim Rules s. 8a). Capacity reading is taken every hour for each GenCo. The total is then used for preparing the monthly settlement statement and the invoices
processed.
“To authenticate the process, the MO (NISO) prepares two settlement statements in a month: The Preliminary Settlement Statement (PSS) – participants are expected to
check and raise complaints if they disagree with the content of the preliminary statement, The Final Settlement Statement (FSS) – Prepared after considering objections raised, if any. Then the final payable/receivable is made,” she noted.
