Electricity War: NERC, GenCos on Collision Course Over Underutilised Licences

Electricity-distribution

Nigerians expecting uninterrupted or steady power supply may have to wait a little longer as early hopes of realising such across the country face stiff challenges.

Part of this threat is the plan of the Nigerian Electricity Regulatory Commission (NERC) to revoke about 100 unutilised licenses issued to power Generation Companies (Gencos) to generate 3,000 megawatts of electricity.
The Commissioner in charge of Legal Licence and Compliance, Mr. Dafe Akpeneye, had last week, handed down the warning during a stakeholders’ meeting on the Lagos State Embedded Power Programme in Abuja.

Akpaneye said the commission was monitoring the licensed Gencos to see when the power they promised to add to the national grid would come on stream.

He said the commission would not hesitate to withdraw the licences from those who are not utilising them, and allocate same to others who are in position to do so.

Generation capacity of Gencos
The Association of Power Generation Companies (APGC) says it has the capacity to generate 12,000MW to reduce the electricity needs of Nigerians.

The Executive Secretary of APGC, Joy Ogaji, said the Gencos currently have available 8,000MW capacity, given the readiness of the transmission and distribution networks to absorb the power generated.
“Currently, the generation companies have an installed capacity of 12,500MW. If you put all of them together, they have a capacity to give Nigerians 12,500MW.

“Then they have an available capacity of 8,000MW. Out of that 8,000MW, transmission company or the transporter that can take this power from us to give to the distribution has a capacity of maximum 5,500MW, which is what they claim, but we believe they can’t take more than 4,500MW.
“A system stress test conducted on the distribution lines shows that the distribution companies (Discos) can take a maximum of 4,600MW. With the available capacity, I have 8,000MW; if I say, okay, come and take, no one can take.”

Why new licensees can’t operate
A Director with Eko Electricity Distribution Company (Eko Disco), Mr. George Utomi, told Daily Sun in a telephone interview that the challenges preventing the 100 Gencos from taking off could be attributed to macro-economic factors.

He said the pervading economic atmosphere, which is affecting the operations of the Discos could have been a spanner in the wheel of progress of the Gencos. He explained that fluctuations in exchange rate remained a major bottleneck for the smooth operations of Discos and Gencos.

‘‘For instance, a Genco that placed an order for a turbine at N150 to a dollar could have not progressed with the procurement process when exchange rate suddenly skyrockets to N400 to a dollar. The bank will simply call you to come and add up the difference,’’ he said.
However, he said the reason or reasons they have not taken off could vary from one company to the other, adding that each company should be taken up and analyzed on a single case basis because their reasons may differ.

Not a case of threat
Utomi said NERC being a regulator would always want to issue threats, warning that such could dissuade other would- be investors from making further investments in the power sector.
He advised NERC to move away from the era of constantly issuing threats and warnings and be more practical in its approach by engaging the licensees and knowing exactly what their problems are or what could have prevented them from taking off.

He maintained that such engagements would yield better result and help the sector move forward, stressing that no company would have a license and wish to hold on to it without adding value to the industry.
‘‘NERC has cultivated the habit of issuing threats. This is not the first time it is saying this. But threat is not the way to go because the operating environment is harsh for businesses in this country. Rather than compound the woes of operators, NERC as a regulator should be innovative and seek ways of creating a conducive business environment for investors, Utomi advised.

Gencos operating under huge debt burden

On current reduction in power generation despite its capacity to produce more, Ogaji said paucity of funds hindered Gencos from procuring gas to fire their power plants.
“For now, we don’t have vandalism problem but inability to pay for gas. How do we pay for the gas, my members were paid just recently for the electricity generated in January.

“And when they put 100 per cent on the grid, maximally they have been paid 30 percent of the money. This is one of the issues. As we speak, the sector owes Gencos about N600 billion, unpaid for power that has been generated and consumed already,’’ she disclosed.

“Now, the Federal Government announced on March 1, that it is bringing N701 billion for the Gencos. Where is this money; that N701 billion, where is the money? We have written to government, please show us where this money is.’’
Ogaji also said it was important to overhaul the transmission and distribution networks in the country to facilitate the supply of more electricity to Nigerians, saying that Gencos were ready to advance power generation in the country.

What should be done?

Akpaneye stated that Nigeria could no longer continue to run its economy with between 3,800MW and 4,500MW of electricity. He said the key to unlocking the country’s development was in the power sector.
The NERC Commissioner urged the Discos to also address the issue of metering, which he described as very disappointing.

He said the situation had made many Nigerians to believe that they were paying for darkness.
The commissioner added that Discos needed to carry out significant investments on their networks, noting that during a trip in May, he discovered that the investment in the network that needed to be done to supply Ikoyi, Victory Island and Lekki in Lagos were not in place.

Akpaneye also said the firms needed to do more to address customers’ complaints.
He regretted that the relationship between the Discos and their customers was tensed because they did not feel their issues get attended to when they complain.

But Utomi equally gave his thoughts to NERC, when he advised that the regulator should take a cue from the banking consolidation by the Central Bank of Nigeria (CBN).
He advised that NERC should consolidate some of the licensees by merging two or four license holders to float a single a company.

On the other hand, he said those that lack the technical know-how or financial muscle to continue with the business should seek for technical partners and financiers either within the country or offshore to help them achieve their mandate.

On his part, Partner, Bloomfield Law Practice, Mr. Ayodele Oni, said it is first pertinent that the commission pre-conditions the grant of license upon an analysis of the various variables for performance.
“It is not sufficient to merely grant licenses to seemingly, eligible applicants. To avoid the formalities of having to revoke and remove licensees from the commission’s website at intervals, it is advisable that the commission only lists performing licensees into its database of generation companies and perhaps trigger investment incentives only when each licensee reaches certain milestones of operation.

Also, it may be helpful to ensure that applicants for licenses demonstrate practical, technical and financial competence beyond mere paper work, and are only granted interim licenses (to the extent allowed by the law) until they can demonstrate availability of the necessary infrastructure relevant to commence operation,’’ he advised.

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