The Power Generation Companies in Nigeria (GenCos) have kicked against the Senate’s proposal for the reversal of the 2013 privatisation exercise of the power sector.
The Senate had reportedly been quoted to have argued that if the privatization was not reversed, Nigeria would stop having electricity in ten years.
But the GenCos said even as they empathise with Nigerians on the current abysmal situation of electricity supply to individuals and the industrial community as well as the attendant effects, this has on the costs of goods and services, they maintained that “the reversal of the privatisation exercise of 2013 is not the solution to resolving the current abysmal state of the sector.”
Admittedly, GenCos in a statement said, “the current situation in the sector is adversely affecting our operations, jeopardising our investments and has a very high potential to negatively impact the inflow of Foreign Direct Investments to the country.”
Instead of cancellation of the privatisation, they said “focus should be on the structural issues” and “emphasis should be placed on fact-finding with respect to commitment of the various stakeholders in the fulfilment of contractual obligations that were drawn up to guide and regulate the privatisation of this all-important sector.”
The GenCos attributed the current state of the power sector non-activation of agreements between the BPE and the new operators agreed on a set of guidelines for sustainability in the post-privatisation era.
They cited some of these agreements as contained in: “The Power Purchase Agreement (PPA), the Gas Supply Agreement (GSA), the Gas Transportation Agreement (GTA) and the Grid connection agreement, commonly referred to as the industry agreements.
“The Provision of securitsation otherwise known as a Guarantee (for 100% payment power made available) for the PPA and also for the power produced for which without any assurance or comfort, no bank would finance the acquisition as the business will be unsustainable and unfeasible.A minimum performance target (MPT) for the GENCOs.”
They said the inactivation of the agreements led to “Non-payment for power generated and supplied to the national grid, as there was no effective PPA. This has led to a huge outstanding debt of approximately One Trillion Naira (N1TRN) owed to GenCos from the inception of privatization till date'”
The GenCos further said “Worthy of note is that the weak transmission (Grid) and distribution network inherited from the PHCN days are still very much in existence and are not complementing our efforts in maximizing our respective available capacities to the benefit of the Nigerian populace.
“The maximum capacity attained by the national grid ever is 5,375 MW as opposed to the current overall average available capacity 8,589 MW and installed capacity of 13,427 MW with an expansion capacity of 20,000MW in an enabling environment.”
Towards creating workable and sustainable solutions to the challenges of the Power Sector, the GenCos recommended as flows:
“Urgent review of the Electric Power Sector Reforms Act (EPSRA), the Multi-Year Tariff Order, Orders made by NERC so far, Policies, Market Rule and other governance document in the NESI;
“Conduct a viable and independent stress test on the Generation, Distribution and Transmission capacities to enable us plan proactively and build the sector.
Immediate separation and unbundling of the Independent System Operator (ISO) and Transmission Service Provider (TSP) from the existing Transmission Company of Nigeria (TCN) to drive efficiency in the wheeling and allocation of power.
“Provide local/foreign guarantees (backed by World Bank/AFDB) to enhance guaranteed payment plan for GenCos to enable them improve generation and implement expansion plans (for power growth).
“Ensure that there is transparency in the billing, collection and remittance as well as develop a viable metering framework to improve collection efficiencies.
“Liberalise the market to create market confidence and ensure the viability and credit worthiness of the power sector.
“Ensure Effectiveness of all market agreements, firm monitoring and enforcement of the rules by the regulator on “all market participants.
“Ensure that the monitoring and enforcement agencies in the sector procure and improve data quality to enable efficiency and improved future planning and projection (by section 55: sub 3, the NASS and the Presidency have a monitoring role in the Power Sector by reviewing the quarterly reports from NERC on its activities).”
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