Power Sector Puzzle, The Industry May Be Heading For A Total Collapse In 2019

Except urgent steps are taken by stakeholders in the power sector value chain, the industry may be heading for a total collapse in 2019.

Should this happen, the country’s economy has lost almost a quarter of its value from $500 billion in 2015 to about $370 billion in 2018 will take a turn for the worse as millions of jobs would have been lost in the process. Already, the manufacturing sector is groaning over the effects of poor power supply with many spending about 40 percent of their income to generate power supply.

First to raise the alarm in January (the first month in 2019) was the Association of Power Generating Companies (APGC), who last week threatened, to shut down power plants across the country over the inability of its members to fulfill their financial obligations to gas suppliers.

Other challenges raised by APGC, include gas constraints, on-going maintenance by some gas suppliers and low load demand by Distribution Companies (DisCos) which resulted in reduced generation or outage of some power plants.

On the other hand, the Electricity Distribution Companies (Discos) have equally been battling with challenges of revenue shortfall as a result of debt owed it by Ministries Departments and Agencies (MDAs) households, and energy theft among others.

Gencos N1trn debt as albatross

Executive Secretary of APGC, Joy Ogaji, told Daily Sun in a telephone interview that members of the association are being owed about one trillion naira for electricity generated and supplied to the Discos.

The huge debt profile according to her has led to a cut in gas supplies to about four power plants by the gas suppliers. Some of the power plants cut off last week included, Afam and Alaoji power plants and three others supplied gas by Shell Nigeria Gas and Total.

Ogaji said Gencos in 2018, fared as the system allowed them to, saying they had enough power that the syetem could not take and that when taken, they were not fully paid for because there are no guarantees for same.

She noted that, what could be done to bring lasting solution to the sector challenges was to completely separate or remove politics from the business of power.

‘‘The power sector should be clearly managed as a fully commercial sector controlled by the forces of demand and supply so that the ability to pay for efficient services delivered are guaranteed,’’ she advised. On her expectations for the sector in 2019, the Gencos Executive Secretary said government, policy makers and regulators should live up to their expectations to do the needful, adding that the power sector is the wheel upon which the economy resolves, hence the state of the sector resonates in other sectors.

She said available generation capability experienced a drop due to various factors such as gas constraints, on-going maintenance by some gas suppliers and low load demand by Distribution Companies (DisCos) which resulted in reduced generation or outage of some power plants,” the statement read.

“For instance; Afam power Plc (Afam VI Gas/Steam),GT12, 13 and ST10 power plants were shut down for a period of about 16 days due to a planned maintenance that was carried out by the gas suppliers on their facilities. Although Afam power Plc was duly notified about the maintenance, it resulted in a reduction of Afams available generation capability from about 490MW to 0MW.

‘‘Also within this period,   most of the NIPP’s suffered from various gas constraints, for example Alaoji NIPP, Sapele NIPP, Olorunsogo NIPP, Omotosho NIPP,  Some of the companies’ generation capability dropped to 0 due to the outage of their power plants which was as a result of gas constraints. Case in point was Aloaji NIPP whose supply was cut off by their gas suppliers due to their inability to pay for their gas.

Jebba Power plant generation capability reduced by about 110MW to 360MW due to low load demand. This reduction demand was also suffered by Egbin Power plant and FIPL-Omoku.

The decline was not an act of rebellion by the GENCOS neither was it deliberate but was beyond their control. It can be traced to the various challenges experienced by the GENCOS in the electricity market such as liquidity issues, power rejection by the DisCos and Gas constraints due to the sorry state of the market.

This should serve as a wake-up call to the federal government to the on-goings in the industry with regards to the GENCOS and if the actions are not taken by the necessary agencies, GENCOS will be forced to shut-down business,”

Discos state position

But in the face of these daunting challenges for the power sector, the Discos seem to be the worst hit as they are the ones at the receiving end being the closest to power consumers.

Executive Director, Research and Advocacy,  Association of Electricity Distributors (ANED), Mr. Sunday Oduntan, had during a world press conference in Lagos last year, said none of the promises made by the Federal Government prior to the takeover of the assets by the power investors have been met.

He noted that, these commitments or preconditions were fundamental to the Discos ability to meet the obligations of their Performance Agreement with the Bureau of Public Procurement (BPE) which requires them to improve customer service delivery, meter 1.7 mill customers, expand the distribution network and minimize power interruptions.

 On Discos franchise area exclusivity, Oduntan said the issue of non-exclusivity of Discos franchise areas is a reminder of our nation’s inability to optimize its prospects as a preferred investment destination of choice, based on a constant reoccurring deficiency – lack of sanctity of contract. This issue, he said is even more worrisome when put in the context of the $1.4 billion that the Disco investors paid into the coffers of the Federal Government. He further queried the use of REA ‘Energizing Economies’ initiative to cannibalize and infringe upon Disco franchise areas as being a wrong model.

Oduntan equally explained that the indebtedness of the Discos to NBET will remain a reoccurring decimal as long as a cost reflective tariff was not put in place, adding that the current electricity tariff does not cover the cost of the supply of energy to consumers, a development which he said is a product of ministerial directives and the regulator’s lack of independence.

The ANED ED lamented that the minister’s relationship with stakeholders is headmaster/pupils rapport, which gives no room for the much-needed “sincere collaboration.”

Consumers slam NERC

Electricity consumers in the South-West geo-political zone  recently in Lagos indicted the Nigerian Electricity Regulatory Commission (NERC) over its failure to effectively monitor the power sector.

The consumers representing households and different communities expressed their frustrations to members of the House of Representatives’ Ad-hoc Committee on Electricity Customers Complaints with a call for the reversal of the power sector privatisation. The consumers said the failure of NERC to address the mounting complaints of electricity consumers across the country has given most of the electricity distribution companies (Discos) the soft landing to treat customers with disdain.

A common feature of the complaints across consumers from the South-West geo-political zone remained the challenge of outrageous billing system, poor customer service and the inability of Discos to meter households.

In his submission to the Ad-hoc Committee, a troubled Chairman of Magodo GRA Phase 1, Gateway Zone Community Development Association (CDA), Mr. Bode Ojomu, said the group has written several  letters to Ikeja Electric on the issue of excessive charges levied on residents of the estate via estimated billing and has pleaded with them that each house be metered to put the issue of estimated billing to rest.

For their part, Olowogbowo CDA, represented by its Secretary, Mr. Bello Abdulwasiu, said the group has been inundated with series of complaints from residents over the incessant and astronomical increases in electricity billings by Eko Disco.

source: The Sun