Sell Gas to Us in Naira, GENCOs Tell Marketers

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The power Generation Companies, GENCOs, have called on gas marketers to sell the product to them in Naira denomination against the current practice of indexing price in US dollars. Recall the Nigerian Electricity Regulatory Commission, NERC, had recently proposed to the Federal Government for a review of gas pricing to GENCOs from dollar to naira. The commission argued that it had become imperative that pricing policy be reviewed to relieve the electricity market of the pressure from foreign exchange, following Nigeria’s current economic challenges, which it said impacted on electricity production by GENCOs, which pay for gas in dollars.

The call by GENCOs also tallied with the position of the Distribution Companies, DISCOs, which asked for harmonization of currency for all transactions in the market. GENCOS, which made the call in a communiqué issued at the end of the 2nd quarter market participatory and key stakeholders’ interactive forum, in Abuja, also called for alignment of market payment with the gas payment cycle. According to the communiqué, “Gencos declared that they have the capacity to generate 8,500MW and called for improvement in transmission and distribution capacity to accommodate this level of generation.’’ They also called for, among others things, centralization of market collection and appropriate disbursement based on the agreed percentages (relevant ruling documents), activation of their existing contracts with NBET as well as demand for a payment mechanism for the outstanding N504 billion.

The communiqué noted also that GENCOs and service providers called for the declaration of eligible customers, while DISCOs on their own, called for implementation of the last tariff review for the end users. The DISCOs called for immediate payment of MDAs outstanding debts in order to improve liquidity in the market and a holistic approach of addressing the sector challenges not only the upstream. “DISCOs and TCN called for cost-reflective tariff that assumes no borrowing. However, it was noted that tariff reviews should be based on proper tariff studies taking into consideration all possible impacts (positive and negative). “DISCOS called for subsidy in the market to support purchasing power of the population, and that Government should remember to redeem her earlier promise of the N100bn subsidy. “Discos called for legislative action or backing to address cases of electricity theft and delinquent customers through the introduction of special electricity courts which will have time limit to address disputes and issues of delinquent customers. Delinquent customers should be made to pay interest on their outstanding bills,’’ the communique read.

The DISCOs called for the addition of their revenue shortfalls as a Regulatory Asset and restructuring of CBN loan repayments, so some money could be freed to address liquidity challenge in the sector The communique read further:  “Service Providers called for promotion of Demand Side Management by NERC to improve energy efficiency in the industry. “Service Providers recommended the formation of a Metering company to manage both Trading and consumers metering in order to ensure standards and efficient deployment of meters in the industry.” The communiqué said “NBET should be empowered to fulfill its mandate of bridging the Market revenue shortfall. “DISCOs vesting contract should be made to have specific nomination tied to their contracts in order to establish an effective demand.

To facilitate successful transactions in this regard, a sustainable Balancing mechanism should be established for the market. “ATC&C losses should be transparently monitored and reported. It was noted that increase in electricity generation need not be encouraged without significant improvement in loss reduction. “Transmission Service Provider (TSP) should have clear Service Level Agreements with Discos and GENCOs    for effective service delivery. “Market Operators, MO, and NERC should be mandated to enforce full compliance of the market rules and sanction noncompliance. “Intervention (political, regulatory or even legislative) in the market will be required to kick-start improvements in liquidity that is self-sustaining, however, such intervention must be targeted (i.e tied to projects) with predictable impacts.”

Source: Vanguard

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