GenCos ‘Inflating Invoice’, DisCos Say, Drawing Rebuke

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Electricity generating companies, GENCOs, have challenged distribution companies, DISCOs, to defend their allegation that GENCOs were inflating invoices and engaging in fraud.

The Association of Power Generation Companies, APGC, which is the umbrella body of electricity producing companies, on Monday challenged the accusers to come up with evidence.

The response followed an allegation,Thursday, by the director of Research & Advocacy of the Association of Nigerian Electricity Distributors, ANED, Sunday Oduntan, who said lack of transparency between GENCOs and the Nigerian Bulk Electricity Trader, NBET, was part of the problems the electricity industry was facing.

NBET is a Federal Government company incorporated under the Electric Power Sector Reform Act, 2005, to buy electricity in bulk from GENCOs for resale to DISCOs.

Mr. Oduntan said the association’s allegation of lack of transparency was based on “inflated invoices” presented by GENCOs to NBET for settlement in respect of capacity charges included as part of the costs paid by DISCOs.

“The capacity charge by the GENCOs should be equal to the quantum of energy consumed. But, GENCOs inflate invoices, therefore making capacity charges to be higher than energy charge. NBET and NERC (Nigerian Electricity Regulatory Commission) should know.

“The volume of energy consumed should be higher than the capacity charged. But, what is obtained is the other way round. Manipulating invoices is not acceptable. It’s time to say enough is enough.

“The capacity charge by GENCOs is higher than the price of the energy sold to DISCOs. It’s time the government looked at the issue. Between GENCOs and NBET, we need to see transparency. They should open their books and let everybody see what is there. Enough of this fraud,” Mr. Oduntan said during the briefing.

But, in her reaction, the Executive Secretary, APGC, Joy Ogaji, in a response to PREMIUM TIMES’ enquiries, denied knowledge of the allegation by ANED, describing it as “display of pure ignorance of how the electricity market works.”

Mrs. Ogaji challenged ANED to immediately make public the evidence to prove its allegation, urging the group to extend same to the Minister of Power, Works and Housing, as the leader of the sector.

“It is a fact that GENCOs, which are entitled to about 60 per cent of invoiced energy bills, face the greatest risk in the electricity value chain, with an outstanding unpaid invoice of over N500 billion. They deserve pity, rather than ridicule.

“Trying to smear our image with such baseless and unfounded allegations is not only unfair, but misleading to the Nigerian populace, giving the impression that the sector is not regulated, and that market participants can do as they please,” Mrs. Ogaji said in a statement.

She said the call for the removal of capacity charge from DISCOs payments was borne out of sheer ignorance of how the electricity market works, arguing that there was no place in the world where a GENCO was paid only on energy.

Apart from projects being privately financed, the APGC official said the same would be supported by non-recourse or limited recourse loans, with long-term agreements financed by the electricity market.

She explained that capacity charge payment was therefore needed to guarantee energy supplies and keep the prices as low as possible, without which new investments in power plants would come to a standstill.

Besides, she said the multi-year tariff order, MYTO, by the Nigerian Electricity Regulatory Commission, NERC, was issued based on benchmarks on projections of the available capacity of energy to be sold in the market; including the cost of gas and other feedstock as well as the prediction of inflation and foreign exchange.

Also, the MYTO tariff methodology, she noted, was developed in consultation with industry stakeholders, labour groups, and consumer groups, to provide a correct pricing of electricity, taking into consideration the key principles of cost reflectivity, affordability of electricity tariffs, and incentives for efficient operations.

“GENCOs are paid based on their negotiated Power Purchase Agreements, PPAs, and therefore are not unilaterally determined. All negotiated PPAs are approved by NERC after ensuring such cost is prudently incurred before it is sent to NBET to make payments.

“We make bold to state here that, contrary to the allegation by the DISCOs of inflated GENCO invoices in cahoots with NBET, no sector participant has any overriding powers to negotiate inflated invoice payments.

“We also expect that only adequately researched and verified information be published by players in the sector and not the propagandist and misleading information which we believe are distractive tactics. GENCOs take exception to being used as a weapon for such dirty politics,” Mrs. Ogaji said.

When contacted for his comment for the story, spokesperson of NBET, Mohammad Modibbo, did not pick up calls to his telephone on Monday.

He, however, responded to a text message, promising to return the call later to give NBET’s side of the story.

He was yet to do this as at the time of filing report.

Source: Premium Times

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