APGC Executive Secretary, Joy Ogaji

Power Generation Companies (GenCos) under the aegis of Association of Power Generation Companies (APGC), has faulted Nigerian Bulk Electricity Trading Plc (NBET) over imposition of 0.75 percent administrative charge for transportation and payment for gas supplies to GenCos.

GenCos which accused NBET of arbitrary usurpation of its responsibilities of transporting gas and effecting payments based on payments made to it (GenCos) from the invoices prepared by Market Operator (MO) and presented to the NBET for onward presentation to the Central Bank of Nigeria (CBN) for release of funds to the GenCos, asked NBET to show legal authorization suddenly empowering it to hijack such functions and impose administrative charges.

It reminded NBET that it is not a regulator neither does it have power to undermine the Nigeria Electricity Regulatory Commission (NERC).

The Executive Secretary of APGC, Mrs Joy Ogaji, who lamented on the absurdity in a briefing with Journalists, noted that the recent development as condition for accessing the just approved N600 Billion by the Federal Government as short term intervention to pay for energy generated and delivered, runs counter to the objective of Government.

She recalled that NBET had in the past, made GenCos to sign “various obnoxious agreements (Security Trust Deed and PPA Activation agreements or such documents) before they are paid.”

According to Mrs Ogaji, “As if that was not enough, NBET is at it again, this time mandatorily issuing arbitrary and unilateral decision, which should not be possible for a market licensee.

“NBET, on 13th September 2019 issued a letter to individual thermal GenCos directing them to obtain, as a matter of urgency, their respective board approvals or resolutions, bequeathing responsibility for payment of gas and transportation to the respective supply companies for an administrative charge of 0.75%.

“The letter gave each GenCo three (3) working days ultimatum to respond with the board resolution i.e. September 18, 2019 or face non-payment of energy invoices.

“It should be noted that NBET like other market participants, is a licensee of NERC and as such is expected to understand that in a regulated market, every expense/cost must be backed by a regulatory approval for effective computation of the market tariffs

“The generation companies are not aware that such approvals have been issued by NERC nor is there any policy directive to this effect.

“The fact that NBET is placing the extortionist 0.75% “administrative charge” on GenCos who are already convulsing, in the NESI is an aberration on the duty of care placed on NBET.

“In addition, going by the principle of privity of contracts, Thermal GenCos have contractual obligations to pay their gas suppliers. If they do not pay, that burden remains with them.

“NBET claims that thermal GenCos have not been making pro-rata payments for gas from monthly invoices paid by the market. For example from the paltry 15% of the June 2019 energy invoice paid to each GenCo, NBET expects each Thermal GenCo to make pro-rata payments of 15% of the gas invoice to gas suppliers and transporters.

“Given that a Thermal GenCos’s gas bill is between 50% and 70% of their total monthly revenue, depending on their efficiency and tariff, the implications of carrying out NBET’s directive of pro-rata payments is that a thermal Genco with about 60% of its total revenue as gas cost, will be left with about 6% [15% – (0.6*15%)] of such total energy invoice to operate the power plant!

“This is because of the 15% received from the market, about 9% must be allocated to gas as pro-rata payment. This is certainly not sustainable.
Given that a GenCo requires 20% to 30% of its total revenue to meet the direct operating cost of keeping the plants running on a monthly basis, gas exclusive.

“If NBETs directive on pro-rata payments is carried out, the 6% that will be left for the GenCos cannot even cater for staff cost not to talk of having the resource to procure basic spare parts that the machines require to keep them in operation.”

The Executive Secretary of APGC, challenged NBET prove where and when a stakeholders meeting, involving all parties such as the Regulator (NERC), NBET, Gas suppliers and GenCos held to discuss and explore the intricacies of such multi-party transaction before issuing such a directive.

“Introducing an additional burden of 0.75% to GenCos gas invoices payments implies that NBET is looking to rake in a windfall of not less than N2.7bn as its administrative fees for a service of only collating and submitting invoices to the Central Bank of Nigeria (CBN) who in effect makes the payment to GenCos and the gas parties.

“The GenCos are worried that, if NBET is allowed to carry on with this shenanigan, for services that is nothing more than being a “delivery truck” since Market Operator (MO) does the major work of preparing the invoices and settlement statement for NBET to pass same to CBN for payment. It should also be noted that NBET, acting only as a “conveyor belt” or “agent” of GenCos funds, is currently paid 2.5% of the total market payments.

“NBET does not have the moral right to receive 100% of its service charge from the Market Operator (MO) while it does virtually nothing to enable GenCos receive their invoices in full”, she said.

Further, urged the Federal government and other stakeholders to revert the administration of the GenCos finances back to the Market Operator (MO) while NBET focuses on engagements with new entrants or intending power project developers to avoid a situation where any player in the Nigeria Electricity Supply Industry (NESI) would wake up and start acting as a regulator thereby undermining the existence of Nigeria Electricity Regulatory Commission (NERC).