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Why power generation is at 4,000MW, by APGC
The Association of Power Generation Companies (GenCos) has said electricity generation has remained at an average of 4,000MW for years because the companies, including the National Integrated Power Projects (NIPPs) have been operating without adequate risk protection.
APGC Chief Executive Officer (CEO) Dr. Joy Ogaji revealed this in a press statement.
Her words: “From the foregoing, the legacy GenCos and the NIPP plants in the market have been operating without adequate sector risk protection, hence exposed to various operational and regulatory risks.
“This singular reason has kept the sector at about 4,000 MW of average grid generation, for many years, notwithstanding an installed capacity of 15,500MW.”
The press statement was titled: “The GenCos dilemma: A clarification on capacity payments, PPAs, and market realities.”
She said the fact that Nigerian Bulk Electricity Trading (NBET) claims that they have only “five active Power Purchase Agreements (PPAs)” entails that most of the power plants do not have PPAs.
The CEO described the situation as a scary scenario for any investor, as no guarantee of any sort is in place to ensure any form of return on investments.
The non-availability of the active PPAs, according to her, has made it impossible to secure a gas supply agreement (GSA), as there is no backstop to support such agreements.
Ogaji said the lack of PPAs also means that the GenCos are exposed to the vagaries in the downstream in the electricity market: when the transmission company is unable to wheel power efficiently, load rejection occurs, resulting in idle generation capacity, and when the DisCos are unable to distribute available power efficiently, load rejection also occurs.
She stressed that a third exposure the GenCos face occurs when the DisCos are unable to efficiently collect revenue for energy distributed and sold and hence cannot make payments for energy taken.
The GenCos CEO said the inability to enforce performance and efficiency towards optimal utilization will lead to all computations for a full return on investment thrown into chaos.
She added that “Sanctity of contracts may continue to be a mirage in the power sector. Thus, the issue of security of supply is strongly dependent on how quickly the electricity market can debottleneck the constraints imposed by other critical stakeholders.
The current market design, as envisaged, is not reflected adequately in the incentives and enforcement measures for performance.”
She said unfortunately, GenCos’ increased capacity has not translated to a corresponding increase in power supply to consumers.
According to her, this has become a big challenge and an inhibitor to the Nigerian Electricity Supply Industry (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.
She depicted any process of verifying the GenCos invoices as akin to undergoing a doctoral degree (PhD) viva.
Ogaji insisted that participant lack the power to negotiate inflated invoice payment, contrary to the allegation disparaging the GenCos.
Explaining the process, she said 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.
The CEO added that Market Operator (NISO) validates the metered data submitted by the participants with System Operator (NISO) figures.
The capacity figures, according to her, are obtained from the System Operator.
She relayed the invoicing process from the beginning to the end, noting the Final Settlement Statement (FSS) – Prepared after considering objections raised, if any.
Ogaji said then the final payable/receivable is made. She said the GenCos have kept to the terms of all industry and privatisation agreements as well as the PPA since the takeover on the 1st of November 2013.
The APGC boss regretted that in exchange, they have been rewarded with liquidity challenges, default on contractual terms, regulatory risks, and increased market volatility, lackluster performance of agencies andparticipants, leading to disregard for the sanctity of contracts.
She said the foregoing goes to buttress the fact that GenCos’ outstanding amount, which is over ₦6.2 trillion, does not represent all their entitlement, contractually.
Continuing, she said “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.
“This persistent nonpayment has rendered most GenCos technically insolvent and severely constrained their ability to invest in capacity maintenance and expansion.
“In summary, GenCos are not beneficiaries of the current subsidy regime but are, in fact, its biggest victims. GenCos are only requesting their receivables, which have accumulated over the years, as can be verified from the MYTO and 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.”
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