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GenCos To Declare Force Majeure Over NBET’s 0.75% Charge



The electricity generating companies (GenCos) under the auspices of the Association of Power Generating Companies (APGC) have threatened to declare force majeure and relieve themselves of all market obligations should the proposed 0.75% gas payment administrative charge by the Nigerian Bulk Electricity Trading company (NBET) be implemented, describing the charge as unregulated and extortionist.

Briefing newsmen on the grievances and position of the GenCos at the weekend in Abuja, the Executive Secretary, APGC, Mrs Joy Ogaji argued that based on the directive, NBET appeared to have usurped the role of the regulator, adding that the Nigerian Electricity Regulation Commission (NERC) to whom NBET is also a licensee has never approved such a policy as far as they (GenCos) know.

She said “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%, giving each GenCo 3 working days ultimatum to respond or face non-payment of energy invoices.

She warned that placing such a charge on GenCos who are already overburdened in the system by an agency meant to ensure fair play is an aberration, and as such NBET is not stopped from having its way, there may be no better time for the GenCos to take the necessary action.

She said “If the relationship between the GenCos and other markets participants and agencies of government which is progressively becoming a master-slave or master-servant relationship is not addressed quickly, the time may just be right for GenCos to declare force majeure and relieve themselves of all market obligations.”

According to her, going by the principle of privity of contracts, thermal GenCos have contractual obligations to pay their gas suppliers or bear the burden.

Ogaji also said the insistence by NBET that thermal GenCos make 15% pro-rata payment from their monthly invoices is not tenable.

“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% to operate,” she said.

The APGC boss said during an interface between NBET the GenCos’ management recently, NBET claimed that it was directed by the Presidency to take over the processing of gas payment on behalf of the GenCos and that the charge is a pre-condition for GenCos to access the N600bn the federal government has approved for immediate payment to gas suppliers and GenCos.

She accused NBET of failing to fulfill its promise of 100% GenCos invoice settlement in line with theTransitional Electricity Market (TEM).

even as the GenCos are yet to get paid for capacity not utilised, adding that the promise provoked some additional investments by GenCos with its attendant high cost of capital leading to increased debt profile.



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