The Minister of Power Works and Housing, Babatunde Fashola will dig into the allegation that the Nigerian Electricity Bulk Trading (NBET) Plc was inflating electricity invoice in favour of the Electricity Generation Companies (Gencos), it was learned on Monday.
According to the Executive Secretary, Association of Power Generating Companies (APGC) Barrister Joy Ogaji, who revealed this in a statement on Monday, the allegation gives the impression that the power sector operators are uncontrollable.
The statement came nearly a month after which The Nation broke the story of June 27 that the NBET was inflating electricity invoice in favour of the Gencos.
She accused the Electricity Distribution Companies (DisCos) being responsible for the rumour that the power producers under the watch of Fashola, were involved in sharp practices.
She noted that the power producers, who are entitled to 60% of the invoiced energy bill that are facing an outstanding debt of N500 billion deserve pity instead of ridicule.
Ogaji condemned the position of the DisCos on the removal of capacity charge, stressing that, there is nowhere in the world where power generating companies are paid only for energy.
The statement reads: “Relative to the news trending in the sector that Gencos are fraudulent and are conniving with NBET to inflate their monthly invoices, we wish to state here that we are not aware of any such practice, although we hold no brief for NBET whom we expect should respond to this allegation as soon as possible.
“We are not sure what could have led to this allegation but since it is been perpetrated by the DisCos, they should make public the evidential proof of this allegation immediately, as it is said in law “He who asserts must prove”.
This allegation will be escalated to the Minister of Power, Works and Housing, who as the leader of the sector is expected to intervene and deal with the issues as appropriate.
“It is a fact that GenCos, who are entitled to about 60% of invoiced energy bills, face the greatest risk in the electricity value chain with an outstanding unpaid invoice of over five hundred billion (N500bn) naira 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.
“On the issue of calling for the removal of capacity charge from GenCos payments, we want to put on record that this call has been borne out of sheer ignorance of how the electricity market works. There is no place in the World where a generation company is paid only on energy. Projects will have to be privately financed, supported by non-recourse or limited recourse loans, with long-term agreements financed by the Electricity Market.
“Capacity payment is needed in order to guarantee energy supplies and to keep the prices as low as possible. Without a capacity payment system, new investments in power plants will come to a standstill. It incentivises the Gencos to make capacity available when it is needed most.
“Amongst other things, the MYTO is based on benchmarks on projections of the available capacity of energy to be sold in the market; the cost of gas and other feedstock; and the prediction of inflation and foreign exchange. The MYTO tariff methodology was developed in consultation with industry stakeholders, labour groups and consumer groups.
“MYTO is supposed 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. The MYTO methodology sets tariffs for the key electricity sectors players, namely – Generation, Transmission and Distribution, based on certain key assumptions and inputs.
“Generation companies are paid based on their negotiated Power Purchase Agreements (PPA) and hence are not unilaterally determined. All negotiated PPAs are approved by NERC after ensuring that 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 a propagandist and misleading information which we believe are distractive tactics. GenCos take exception to being used as a weapon for such dirty politics.”