Amid poor supply, GenCos say 4000MW of power is rejected daily

While millions of Nigerians share around 3,500MW of power supply, resulting in many hours of blackouts, over 4,000MW of power is unable to reach customers daily, according to data from electricity generation companies (GenCos).

“Due to system constraints, generated power is rejected or forced to be reduced to match the infrastructure that transmits and distributes this power to the Customer,” GenCos told lawmakers in a presentation on June 23.

A copy of the presentation to the Senate Committee on Power Investigative Hearing on Power Sector Recovery Plan and the impact of COVID-19 pandemic, obtained by BusinessDay, shows that while power generation has grown by 138 percent from 3,427.5MW to 8,174MW since 2013, supply to Nigerians has not kept pace.

“In the first quarter of 2020, despite an available generation capability of 8,145MW, GenCos were only allowed to generate 3,987MW, thus losing an average of 4,159MWdaily,” the document states.

According to the GenCos, with a total available generation capacity of more than 8,000MW and maximum wheeling capacity of not more than 5,500MW, there will always be a recurring instance of over 2,000MW idle generation.

It gets even worse considering that electricity distribution companies (DisCos) are accused of only requesting for between 3,000MW and 3,500MW daily because of an inability to improve collections.

The implication of this is that those who generate power are bleeding money. According to Joy Ogaji, executive secretary, Association of Power Generation Companies (APGC), debts to GenCos, acknowledged by the Nigerian Bulk Electricity Trading Company (NBET), are over N500 billion, but in their books it has risen to over N1 trillion when stranded power, DisCos are unable to take, is included.

Due to the inability of the market to generate enough revenue to cover the cost of producing power, NBET began paying GenCos only for energy DisCos is willing to take, though the power purchase agreement signed by DisCos obligates them to pay for both energy and capacity, Ogaji said.

GenCos are in dire financial strait over poor remittance by DisCos, she also said. The situation is worsened because GenCos are compelled to bill for only power requested by the DisCos rather than how much power they can generate (capacity).

However, the Nigerian Electricity Regulatory Commission (NERC), which regulates the sector, approved an eligible customer provision in 2018 to allow GenCos sell power directly to customers with capacity for large-scale energy use. But putting the regulation to work has been problematic.

Azu Obiaya, CEO, Association of Nigerian Electricity Distribution Companies (ANED), who speaks on behalf of the DisCos, said the eligible customer rule would adversely impact them because GenCos would cheery pick their most profitable customers without adequate compensation.

The Eligible Customer rule provides for a fee calculated from a percentage of the customers cost, known as Competition Transition Charge. “The CTC charge has not been put in place” said Obiaya.

Idowu Oyebanjo, a power sector analyst, said the exact details of the CTC were yet to be worked out.

“DisCos have experienced a lot of disappointments having signed performance agreements based on promises, which have not been kept by other parties and are thus reluctant to go head-on with the Eligible Customer policy and get their fingers burnt again,” Oyebanjo wrote in an article for BusinessDay.

Obiaya further said the problem with inability to distribute stranded generation was not the fault of the DisCos, but, “What they are telling you is that there is not enough gas, it has nothing to do with the DisCos.”

While operators trade blame, the Nigerian economy is losing over $29 billion annually due to epileptic power supply. The productivity of Nigerians is diminished due to limited access to electricity, and poverty keeps increasing for millions of Nigerians.

Six years after the privatisation, GenCos have exceeded their contracted capacity but payments for their service have failed to catch up. DisCos have maintained the same pattern of distribution for the past six years despite the government sinking over N1.72 trillion in subsidies to keep the sector afloat.

What would have emerged as a sector capable of galvanising economic growth represents the country’s worst example of retardation.

Analysts have said the solution is to fix the electricity market. Nigeria’s electricity market loses money and depends on the government’s bailout to maintain a semblance of normalcy; hence it has been unable to attract investments.

“The erosion of capital in the power sector due to the absence of a credible market and poor tariffs are some of its biggest challenges,” said Eyo Ekpo, CEO, of Excerdite Consulting Limited, at BusinessDay digital conference.

Current efforts to raise tariff have been hampered by lawmakers who are pushing for a postponement on the fear of the impact it would have on consumers whose purchasing power has been affected by the COVID-19.