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GenCos Threaten To Shut Down Power Supply

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Power Generation Companies (GenCos) in Nigeria have threatened to shut down operations if the pressing issues in the sector were not addressed immediately by the federal government.

The industry critical stakeholders spoke in Abuja, yesterday, through the executive secretary of the Association of Power Generation Companies (APGC), Dr. Joy Ogaji.

Ogaji told journalists at a press conference that their threat was due to the inability of Nigerian Bulk Electricity Trading Company (NBET) to honour the agreement it reached with the companies.

She said that the GenCos were facing liquidity challenge due to NBET’s breach of the Power Purchase Agreement (PPA) term of 100 per cent payment for power generated and supplied.

NBET (bulk trader) is a trading licensee; it is licensed and regulated by the Nigerian Electricity Regulatory Commission (NERC) to undertake bulk purchase and resale of electricity in the transitional electricity market.

APGC accused NBET’s management of constituting itself as “the alpha and omega” authority that has the capacity to make or mar generation businesses in the country.

According to her, the situation had become so bad that to remain in business and provide power to Nigerians, GenCos have to plead and lobby to be paid for power generated and utilised.

Ogaiji said: “NBET has now reduced its role to blackmailing and threatening GenCos’ investors and chairmen who have refused to concede to NBET’s illegal demand of a 0.75 per cent charge on invoices paid to gas suppliers. NBET has clearly threatened not to release payments due GenCos until they accede to its request, urging them to agree for a quid pro quo with the 0.75 per cent administrative charge.

“The situation is truly grave and completely unprecedented as NBET has completely shed its role as a licensee of the industry and has taken on some sort of regulatory role. This singular action by NBET may lead to shutdown of power supply by GenCos, which have unanimously agreed to call the bluff of NBET.

“GenCos have in addition to the mounting debts being owed, working under the harsh, unprofessional and unethical dealings from the NBET management staff.

“GenCos’ chief executives and other key staff all have a bucket full of tales of abuses, insults, aggression, nonchalance, non-responsiveness, bullish, belittling, and ostracising actions. All these are geared towards intimidating the GenCos and keeping them at bay from seeking legitimate clarifications,” she said.

The executive secretary said that the matter had been reported to the Nigerian Electricity Regulatory Commission (NERC) and other high authorities but yet nothing had been done.

She therefore called on federal government through the board chairman of NBET to review the professional conduct of the management of NBET and ensure that business etiquettes were instilled.

“In a nascent market as ours, there are processes entrenched in the market rules and other applicable codes that should be followed in dealing with sectorial issues at all times. This is in order not to leave room for arbitrariness, duress or undue influence. The Power Purchase Agreement (PPA) clearly delineates the terms of the business relationship and expectations of the parties. NBET was designed to help smoothen these relationships, removing frictions which may exist between Gencos and DisCos.

“NBET was envisaged to occupy the space between GenCos and DisCos, acting as a ‘shock absorber’ in times of market turbulence and not to make it worse,” she said.

Ogaji stated that there was N600 billion the federal government needed to pay GenCos through the Central Bank of Nigeria (CBN), which if not released on time, would contribute to the shutdown of power generation in the country soon.

The managing director/chief executive officer of NBET, Dr Marilyn Amobi, could not be reached for her comment. Calls and short messages (SMS) sent to his mobile line were not responded to.

The GenCos also called on the federal government to consider having the administration of their finances reverted to the market operator (MO) from (NBET).

The GenCos said that they were fed up with the financial oppression being meted out on them by NBET and would want the federal government and all stakeholders to note they can no longer bear the burden.

According to Ogaji, despite the GenCos outright condemnation and rejection of the 0.75 administrative charge earlier proposed by NBET for the DisCos to pay out of what is due to them monthly, and the disapproval of the proposal by stakeholders following the  letters written to them, NBET is going ahead to implement its decision unilaterally.

“We hereby reiterate our position, strongly recommending to the government and other key stakeholders that the administration of the GenCos’ finances reverts to the market operator (MO) while NBET focuses on engagements with new entrants or intending power project developers.

“NBET like other market participants is a licensee of NERC and as such is expected to understand that in a regulated market, every expense/cost must be backed by a regulatory approval for effective computation of the market tariffs,” she said.

APGC enjoined the federal government to intervene in the matter and call NBET to order while ensuring that the N600 billion intervention fund it declared earlier is disbursed as soon as possible to ease the gas crisis now threatening the operations of the GenCos, “or else we will be forced to shut down operations,” Ogaji warned.

According to Dr Ogaji, unconfirmed  information reaching them shows that the N600 billion has not yet been released from CBN, but NBET has told some GenCos that it is already with the money, waiting for the GenCos to comply with 0.75% administrative charge order to begin disbursement.

She noted that what NBET owes the GenCos far outweighs what the latter owes the former, saying “GenCos indebtedness to their gas suppliers is due to NBET’s indebtedness to them. No GenCo has any outstanding gas payment that is more than what NBET is owing that GenCo. Put differently, NBET is indirectly charging 0.75% for paying its debt to GenCos.

“Besides being owed huge debts, the Gencos also are operating under very harsh monetary and fiscal conditions, occasioned by the economic realities that face the country today.

As contractual parties, the unilateral/lack of clarity surrounding most of NBET’s activities/decisions in the market, is not applaudable.

“The GenCos are concerned and will appreciate better clarity as doing so will also help in sustaining a high transparency threshold (a major reason NBET was established) which the GenCos will always want to be associated with.”

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