The Minister of Power, Works and Housing, Mr. Babatunde Fashola, has said the N701 billion Payment Assurance Guarantee introduced to raise monthly payment for electricity Generation Companies (GenCos) has significantly impacted on power generation capacity, raising it to 7,000 megawatts (MW).
Fashola who spoke at the 29th monthly power sector meeting hosted by Mainstream Energy Solutions Limited (MESL) in Minna, Niger State, on Monday, said since the payment began in 2017, it had raised GenCos’ monthly payment to 80 per cent, from 20 per cent.
Daily Trust reports that the GenCos raise monthly invoices for energy delivered to the 11 Distribution Companies (DisCos) through the Nigerian Bulk Electricity Trading (NBET).
However, the DisCos had been remitting less than 40 per cent average of energy charges to the GenCos through NBET, citing poor revenue collection, among other losses.
“This was not in any law. It was a creation of the Buhari government to give comfort to investors in the generation side of the value chain that they will be paid for supplying power,” Fashola said at the meeting.
While appraising the scheme, the minister said power supply capacity had improved from 4,000MW to 7,000MW, further noting that 80 per cent capital recovery was better than the 20 per cent. “But they would rather have 100 per cent recovery,” Fashola added.
GenCos tasked on transparent invoice, harmonised gas price
Despite the milestone enabled by the Federal Government to promote power generation, the Minister of Power spoke of two key challenges at the GenCos’ end.
The first, he said, was the need for transparent invoicing for their output. Industry sources, particularly, at the DisCos’ side of the power sector value chain have claimed that GenCos doctor their invoices before presenting them to NBET.
The Bulk Trader, as it is called, had dismissed such claims of aiding the GenCos, saying it read the invoices from the GenCos along with the Market Operator (MO), a section of the Transmission Company of Nigeria (TCN).
The minister has also tasked the GenCos, especially the 23 stations that are dependent on gas as fuel source to strive towards harmonising the price of gas.
“We must harmonise the price of gas for payment under the scheme, where there are differential prices arising from different gas suppliers,” he said.
The N701bn fund is meant to help the GenCos pay for gas and other services so that they can have guarantee for gas to generate more electricity sustainably.
However, the minister’s call indicates a clear disparity in gas pricing by the various suppliers.
He charged stakeholders on sustaining the N701bn assurance policy, saying, “Therefore, we must work as the parents and owners of the policy to nurture and improve on its capabilities.”
Eligibility rule: 6 industrial users emerge, 26 others on process
Another key policy driven by the Minister of Pewer in 2017 was the Eligible Customer Regulation.
The Minister, Mr. Fashola, had declared it on May 15, 2017, while the Nigerian Electricity Regulatory Commission (NERC) passed the Regulation on November 1, 2017, about six months after.
The regulation seeks to improve power distribution by allowing consumers who use at least 2MW of electricity to trade power directly from a GenCo either through TCN by signing off the Transmission Use of System (TUOS) and providing the transmission facilities, or through the DisCos after agreeing to a Distribution Use of System (DUOS).
Giving an update on the progress made almost nine months into its implementation, the minister said he got reports that five industrial customers now benefitted from the policy.
Fashola said they were now taking “their power directly from a GenCo, which incidentally is our host today, Messrs Mainstream Energy Ltd.”
The minister further announced that 26 other industrial customers were making arrangements to benefit from the policy.
Eligibility: Respite as Fashola approves DisCos’ compensation
Mr. Fashola, also gave his nod to NERC to work out modalities to effect compensation to the DisCos under the Competition Transition Charge (CTC) contained in the Electric Power Sector Reforms Act (EPSRA) 2005 as remedy for declaring eligibility for the customer.
The DisCos, under their umbrella association – Association of Nigerian Electricity Distributors (ANED), in November 2017, after NERC rolled out eligible customer regulations, said implementing the CTC was key as they feared that the regulation would contribute to the N892bn electricity market shortfall as at August 2017.
They said the shortfall was about N1.3tn as at July 2018.
The DisCos did not question the legitimacy of the minister’s right to declare Eligible Customers, but said, “We believe that the declaration is premature and is inconsistent with the pre-conditions established under the Electric Power Sector Reform Act (EPSRA) 2005. Nor has there been an implementation of the CTC that is specified under the Act.”
The GenCos, through their umbrella group – Association of Power Generating Companies (APGC), backed the declaration and have keyed into it.
“This policy directive will lead to increased energy generated/available and expanded generation capacity as GenCos would potentially ramp up their generation capacities to provide supply to eligible customers,” a clarification report by APGC’s Executive Secretary, Dr. Joy Ogaji, said.
Fashola acts right on CTC
– EPSRA indicates
An independent analysis of the EPSRA Act 2005 by Daily Trust on the Eligible Customer policy has confirmed the right of the Minister of Power to make the declaration in Section 24, Sub-Section 2.
The analysis of section 28 of the EPSRA 2005 shows that after the declaration becomes effective for a time, in which case it is about nine months after the regulation began, the minister can determine to intervene once he consults with the president.
This is so if “the directive issued on section 27 will result in decreasing electricity prices to such an extent that a DisCo would have inadequate revenue to pay for its expenditures or ‘earn permitted rates of return on its assets’ despite its efficient management.”
The minister may issue further directives to NERC on the collection of a Competition Transition Charges (CTC) from consumers and eligible customers and distribute same to the DisCos and other participants with duration for it. Section 30 states that the public must be consulted by NERC before determining what amount to set.
Giving his approval for the computation of the CTC yesterday, the Minister, Babatunde Fashola, said, “The DisCos must be interested to know that I have also issued directives to NERC to work out and implement Competition Transition Charges (CTC) as provided by law, to safeguard them from any losses.
“We will continue to monitor the impact of the policy and remain flexible to keep what works and change what does not; and I urge everybody to remain open-minded, adaptive and responsive,” Fashola assured the stakeholders.