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Gencos Losing 6,625MW, May Drag FG Agencies To Court

Power generation companies are losing about 6,625 megawatts of electricity and the firms may sue selected agencies of the Federal Government in the sector over “lots of irregularities” in the industry.

It was further gathered that the 6,625MW of energy was not yielding revenue to the Gencos, despite the fact that they supply a sizable amount of this power to the grid.

Power generators argued that Section 76(1a) of the Electric Power Sector Reform Act stipulated that utilities should be given the opportunity to recover their efficient operating costs and a reasonable return on investment.

But this, according to them, had not been the case, as the market was currently using wheeled energy to work-back the generation capacity of generators and was using same to represent the available capacity, which were aberrations.

They argued that the practice was punitive on Gencos as it discountenanced idle capacity and served as an incentive on non-performance for other sector players such as the Transmission Company of Nigeria and the various distribution companies who represent the associated value chain operators in the delivery of power to end-users across the country.

In a detailed response to an enquiry by our correspondent, the Executive Secretary, Association of Power Generation Companies – an umbrella body for power generators in Nigeria, Joy Ogaji, declared that Gencos were losing over 6,000MW of energy, as they make no revenue from that quantum of power.

Providing a breakdown on how the loss was being incurred, she said, “The technical and operational inefficiencies by these operators (TCN and Discos) negatively impact the Gencos in different ways. With a total available generation capacity of more than 7,500MW and maximum (TCN) wheeling capacity of not more than 5,500MW, there will always be a recurring instance of about 2,000MW idle generation.”

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Idle generation represents capital investment not able to yield revenue that will hence impact the ability of the Gencos to support efficient operations and service loans used in developing the power plants.

Ogaji said, “Out of the meagre 5,500MW of transmission wheeling capacity, the Discos have not proven to be able to distribute more than 4,500MW continuously, leaving yet another 1,000MW of generation capacity unutilised. In total, due to the combined technical incapacitation of TCN and the Discos, the Gencos are unable to deploy a total of 3,000MW of capacity that would ensure sustainable and profitable operations.

“If one considers the fact that the Discos have in the recent past been operating around 3,500MW or below, this figure escalates to 4,000MW of idle capacity. In addition to the issues of incapacity as outlined above, the Discos are also unable to account for up to 75 per cent of the power they have distributed to end users in terms of revenue remitted to the bulk electricity trader.”

She added, “In real terms, factoring the impact of poor revenue remittance, the issues facing the Gencos are those of 4,000MW idle generation and 2,625MW of stranded power (0.75 multiplied by 3,500MW).

“In effect, the Gencos are not able to deploy a total of 4,000MW of idle power, and out of the 3,500MW wheeled by TCN on demand by Discos, the Discos only remit about 25 per cent (875MW) of this power as revenue to bulk trader, making a total of 6,625MW generation capacity not yielding revenue for the Gencos.”

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At another event in Abuja, Ogaji wondered how long the generators would fold their arms without taking any action to halt their losses, which, according to her, were primarily caused by the inefficiencies on the part of the Discos and government agencies.

“Are the Gencos going to fold their hands and keep waiting? Remember that they signed Performance Agreement and this was approved by NERC (Nigerian Electricity Regulatory Commission),” she stated.

Ogaji added, “There are lots of irregularities and disharmony that we need to discuss and find solution to. They are waiting for when the Gencos will go to court and sue government agencies and then they will say, ‘oh, why did you run to court?’ I want you to know that for five years, the Gencos have been patient and contracts are being frustrated.”

The executive secretary further noted that the “failure on enforcement of performance and efficiency towards optimal utilisation will lead all computations for a full return on investment thrown into chaos. So the solution is in developing and implementing a sanction regime for poor performance for all participants in the power sector.”

Her position was, however, opposed by the Managing Director, TCN, Usman Mohammed, who argued that “the situation of the Gencos is not completely hopeless as they paint it.”

Mohammed added, “But in a situation where people are known by association of common interest, instead of competing among themselves, everybody will be fighting for the common interest to justify why they are there.”

Source: Punch

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