Power sector operators and experts are urging the newly constituted commissioners at the Nigerian Electricity Regulatory Commission (NERC) to among other things, address the N1.1trillion liquidity gap in the sector and quickly pass into law the draft mini-grid legislation to rescue the ailing sector.
Liquidity gaps in the power sector is a result of debts owed the various operators by the government ministries and departments, electricity distribution companies (Discos), electricity generating companies (GENCOs) and customers both residential and commercial.
Gas suppliers have threatened a force majeure over a N200billion debts owed to them by electricity GENCOs.
“Gas power value chain is terminally sick and if government does not do something drastic, we may have a failed system,” said Thomas Dada, CEO of Frontier Energy at a recent industry event.
Meanwhile GENCOs have outstanding invoices from the Nigerian Bulk Electricity Trader (NBET) worth hundreds of billions.
The Niger Delta Power Holding Company (NDPHC) alone is owed over N105billion while Transcorp power has outstanding invoice in the amount of N55billion.
Joy Ogaji, executive secretary of Association of Power Generation Companies said NBET should be blamed for poor debt settlement by the Discos.
“Government told us that NBET is properly capitalised and has enough money to meet all of the Gencos payments but unfortunately this has not happen,” Ogaji said.
Meanwhile Discos groan under the weight of debts by government MDAs, huge technical and collection losses in the form of power wasted along failing transmission grid lines and power theft.
“The gap occurs because the Ministries, Departments and Agencies owe the Discos over N600bn and this has affected their capacity to create new investments. It has to be addressed,” said Sunday Odutan, executive director, the Association of Nigerian Electricity Distributors (ANED).
A recent BusinessDay investigation showed that the discos lose N174bn yearly on power theft through illegal tampering of meters by residential and commercial customers.
Discos say the new commissioners should focus on an intervention in the huge debts in the sector as well as address a lack of market reflective tariffs.
“The issue of liquidity is the greatest issue in the sector and it has affected power generation and supply,” said Mohammed Kandi, spokesman of Kano Disco.
“Also the issue of lack of market reflective tariff has been a key issue to the core investors. There is provision for periodic tariff review this must also be assured,”
Chuks Nwani energy lawyer and vice president, Powerhouse International Ltd, an energy resources firm, thinks a total overhaul of the policy was now required to get the crumbling sector back on its feet.
“The power policy which was the basis for the privatisation exercise needs to be revisited as we have derailed from the plans.
“However, to achieve a quick win, the new commissioners should discuss with industry players, they need to let them understand that despite the backlog, (of debts), the sector must find a way to move forward.
“How do we increase the liquidity? We have money in TSA (Treasury Single Account) what is the money doing? They should discuss with the Central Bank and Finance ministry so the funds can be loaned the power sector at a special rate. With that life comes back to the power sector and they can leverage on it to borrow money outside the country.”
The draft mini grid law has generated interests among renewable energy operators and they are urging the new NERC commissioners to ensure it is passed as quick as possible to drive new investments in the power sector.
“I know of a foreign investor from silicon valley who is angling to come into Nigeria to build 8,000 mini grid sites and that mini grid regulation and law will help him. I think that it is one thing that should be on the front burner of the NERC team,” said Godwin Aigbokhan, renewable energy market adviser, National Competitiveness Council of Nigeria.
The draft mini grid law makes a permit optional for a mini-grid operator that distributes up to 1MW and allows investors to charge market reflective tariff that allows them recover costs and include a profit margin.
Other issues sector operators want new NERC commissioners to address includes resolving legal issues arising from legal issues, resolving legislation on the feed-in-tariff for renewable energy, reviving hydro projects that have been abandoned and carefully monitor the activities of Discos who are often accused of inflicting exaggerated bills on customers.
Babatunde Fashola, minister of Power, Works and Housing on February 7 inaugurated six new NERC commissioners with Sanusi Garba, an electrical engineer as vice chairman.
Others are Frank Okafor, an electrical engineer, Dafe Akpeneye, a Legal Practitioner, Nathan Roger Shatti, an Accountant, Musiliu Oseni, an economist and Moses Arigu, a scientist and mathematician.
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