Time was when the power generation companies (GENCOs) and the distribution companies (DISCOs) were best of allies ever but all that has become a thing of the past now as both of them no longer see eye-to-eye in a manner of speaking.
The reason for this is not far to seek: the once cordial relationship enjoyed by the GENCOs and DISCOs has turned sour because of the growing debts owed by the latter.
Investigation by The Nation revealed that the DISCOs owe the GENCOs a very humongous sum, accumulated in the last couple of years.
Crux of the matter At issue is that DISCOs receive bulk power through the Nigerian Bulk Electricity Trading Plc (NBET) supplied by GENCOs.
The inability of the DISCOs to meet their payment obligations to NBET for power supplied by the GENCOs, has also made it impossible for the GENCOs to pay the gas suppliers.
Expectedly, the DISCOs have blamed their inability to meet their financial obligations in the electricity value chain on non-reflective tariffs, vandalism, low power generation, inability to access credit facilities from the banks and non-payment of bills by customers.
The DISCOs also claimed that they are being owed a debt of N100 billion by ministries, agencies and departments (MDAs), a debt, which the Minister of Power, Works and Housing, Mr. Babatunde Fashola, said was subject to verification.
However, while a majority of the DISCOs have demonstrated increasing capacity to access funds for network development, others have blamed their excuses on the non-reflective tariffs and the N3 trillion exposure of the financial sector to the banks for their failure to discharge their obligations.
Peeved by the apparent non-performance of some of the DISCOs, Fashola had advised that “those DISCOs who cannot run the business must be honest with themselves and begin to look for options either to raise capitals, to get more strategic partners in or to do whatever they consider appropriate within the framework of their contract in order to get on with this job.”
The Nation gathered that the power companies are battling with a debt overhang of over N400billion.
At the twilight of last year, the Executive Secretary, Association of Power Generation Companies, Dr. Joy Ogaji, had revealed that: “The debt is over N300bn that GENCOs are being owed. If the situation is not checked, there will be blackout. It is so imminent that I don’t know if most of the generation we are having now can go beyond Christmas if the payment problem is not solved. We can’t pay contractors; most of the machines are packing up.”
Ogaji, however, said the Nigerian Bulk Electricity Trading Company Plc should be blamed for the problem, saying, “As GENCOs, we don’t really have any direct relationship with DISCOs at the moment; GENCOs are meant to generate power and government brought NBET as a wholesaler, which takes all the power being generated by GENCOs and sells to the DISCOs. So the onus lies on NBET to collect the money from the DISCOs. “The claim on whether DISCOs are remitting money or not should not be the problem of the GENCOs, but that of NBET. Government told us that NBET is properly capitalised and has enough money to meet all of the GENCOs’ payments. But unfortunately, NBET has not been able to do that.”
In a chat with The Nation, one of the GENCOs confided in our correspondent at the weekend that through their umbrella association, they have resolved to approach the Nigerian Electricity Regulation Commission (NERC) for approval to supply power directly to certain categories of customers and also collect the bills directly.
Thus, the power generators are making subtle moves to bypass the DISCOs and supply power directly to certain class of customers.
“The DISCOs owe the GENCOs a lot of money and that is why there is crisis in the sector. Some of the Discos actually do not have what it takes to run the sector and some of them will soon go under. The GENCOs are not talking like the Discos because they also owe gas suppliers. They have also formed their own association and plan to meet NERC for approval to supply power directly to certain class of customers and also collect the bills directly. That is the only out to ensure that the GENCOs do not collapse,” one of the operators who asked not to be named explained to our correspondent.
In a recent advertisement by the Association of Nigerian Electricity Distributors, the umbrella body for the DISCOs stated that its members were being owed N100bn by consumers, including military and government Ministries, Departments and Agencies as their biggest debtors.
However, different operators in the sector blamed the DISCOs for the drastic illiquidity in the power market, as they argued that the DISCOs were not doing enough with respect to revenue collection from electricity consumers.
Aside the NBET, the Niger Delta Power Holding Company recently urged the DISCOs to ensure adequate remittance to the bulk trader in order to enhance smooth operations of the power business.
The Managing Director/Chief Executive Officer, NDPHC, Mr. Chiedu Ugbo, stated that the indebtedness to his company by the power market as of August 2016 was over N105bn.
“The total energy invoiced by the eight operational NDPHC plants since they started functioning amount to about N235bn. But out of this amount and as of August 2016, we were being owed about N105bn,” Ugbo told newsmen in Abuja.
Echoing similar sentiments, President, Nigerian Gas Association and Managing Director, Frontier Oil Limited, Mr. Dada Thomas, in a media interview recently blamed the DISCOs for the parlous state of the sector.
But the DISCOs had argued that aside the fact that the current Multi Year Tariff Order put together by the Nigerian Electricity Regulatory Commission was not cost reflective enough, the refusal of ministries, departments and agencies of government to settle their electricity bills was also hampering their ability in making the required remittances.
The Chief Executive Officer, ANED, Mr. Azu Obiaya, recently told our correspondent that to avert an increase of over 200 per cent in electricity tariff payable by residential consumers in the near future, the federal government had to intervene in the sector.
He explained that the government’s intervention was vital in order to address the N809bn revenue shortfall in the industry.
Obiaya insisted that the intervention could come in form of subsidy to consumers, access to foreign exchange by the companies, as well as commercial reasonable financing for the DISCOs.
He explained that DISCOs were not willing and could not impose any increase in tariff on consumers, but maintained that to avoid a situation where the consumers would have to pay as high as N70 to N105 per kilowatt-hour as energy charge, the federal government must do something.
Currently, the average rate being paid as energy charge by residential consumers across the country is N22.8/KWH, but this may increase if nothing is done to address the N809bn revenue shortfall in the power sector, according to the DISCOs.
The blame game
The blame game in the power sector has come to the fore again as Transmission Company of Nigeria (TCN) claimed that DISCOs 30 percent remittances on monthly invoices is responsible for the current poor state of the country’s electricity services.
Nigeria’s economic growth has been slowed by lack of steady power supply, despite claims by government of embarking on privatisation of the sector, which has divided the former PHCN into different components: GENCOs, DISCOs and TCN with the promise to double power generation from its present 4.5 mega watts.
According to the General Manager in charge of Transmission at TCN, Bede Opara, DISCOs have not been able to pay their debts due to energy theft and other issues. “The low revenue collection affects transmissions as well as gas plants. All these are parts of the issues affecting the sector at one point or the other.”
Power drop in months
It is however instructive to note that the Nigeria Electricity System Operator, NESO, a section of TCN responsible for operating the transmission system, has indicated that due to these shortfalls there is constant collapse of the system.
According to their report in May 2016, the national grid collapsed five times. In June, it collapsed four times. July, September and October, each witnessed one collapse, while November and December witnessed three collapses each. The transmission network was said to have recorded over 26 system collapses in 2016. These were largely blamed on weak transmission network, regarded as the weakest link in the electricity value chain.
Before now generation and distribution companies have asked for more time and patience from Nigerians to improve electricity supply. Their plea came as they identified weak transmission network as a major hindrance in the attainment of the 10,000 megawatts target set by President Muhammadu Buhari to be achieved in 2019.
Data obtained, showed that Kaduna, Eko, Jos, Yola, Port Harcourt, Abuja, Ibadan and Benin DISCOs rejected the 1,336.75MWH of power from TCN in the third quarter of this year, despite instability in the supply of electricity across the country.
Specifically, in the month of July, a total of 318.83MWH, which was three per cent of the total energy delivered to the DISCOs, was rejected by four of the firms. In July, the Kaduna DISCO’s rejection of 132.99MWH made it the highest in the month. The Eko DISCO rejected 67.46MWH; Jos, 63.05MWH; while the Yola DISCO rejected 55.33MWH.
In the same month, the Port Harcourt DISCO took in the highest quantum of power at 441.43MWH; Kano accepted 397MWH; while the Enugu DISCO collected 302.49MWH.
In August, there was an increase in load rejection by the distribution companies to the tune of 541.56MWH, which was four per cent of the total energy delivered to them as against the 318.83MWH delivered in the previous month.
The Port Harcourt DISCO rejected the most quantum of power with a total of 239.88MWH, followed by the Eko DISCO with 134.8MWH. In the month under review, five DISCOs took excess load beyond their Multi-Year Tariff Order allocation to the tune of 187.21MWH.
The Abuja DISCO took the most, with 132.81MWH; followed by the Kaduna Disco, with 23.21MWH; Ibadan, 16.24MWH; and Enugu, 12.42MWH. Further analysis showed that September saw the rejection of 476.36MW, representing 12 per cent of the total energy delivered to the Discos. It was, therefore, the highest load rejection in the quarter.
The Abuja DISCO rejected 94.72MWH, followed closely by Port Harcourt, with 92.35MWH; Ibadan was next with 67.14MWH; and the Benin DISCO turned down 46.40MWH. Among all the DISCOs, only Kaduna accepted power beyond its MYTO allocation, taking in 65.96MWH in excess of its MYTO allocation.