The Nation Newspaper

Tag: GENCOs

  • GenCos may shut down facilities over N156b debt

    GenCos may shut down facilities over N156b debt

    The electricity generation companies (GenCos) have threatened to shut down over N156 billion debts owed them by consumers, especially government agencies.

    Investors that bought the six power generating companies unbundled from the state firm, Power Holding Company of Nigeria (PHCN) said they would shut down their power plants if the N156 billion debts about $485 million owed by government agencies were not paid. They also said banks were recalling loans advanced to them.

    In a joint statement yesterday, the GenCos said they will shut down power supplies unless the government pays longstanding bills it owes them and improves gas supplies.

    The GenCos, which include Transcorp’s power and Forte Oil’s power, said they struggled to repair their networks because imports of spare parts had become too expensive due to naira devaluation. “In 2013, when we bought the power plants, exchange rate was N150 per dollar. Today it is N310  per dollar. How can we repair, equip, acquire new turbines at this rate of N310 per dollar and yet still operate with an old tariff?A shutdown is, indeed, imminent,” they said.

    If the companies make good their threat, most industries and residential homes will be in darkness except for those that rely on expensive diesel generators.

    The government has paid arrears of N186.7 billion. The Central Bank of Nigeria (CBN) has stepped in with a N213 billion loan to keep the system afloat and allow the power firms to access credit, but more is needed as the oil price slump puts pressure on Nigeria’s currency.

    The naira has lost 40 percent of its value since Nigeria ditched its 16-month-old peg of 197 naira to the dollar in June in a bid to lure back foreign investors who fled both the equities and bond markets after the plunge in crude prices.

    After the privatisation of the PHCN assets, the government pledged to review tariffs as more power is generated and upgrade the transmission network to give more people access to the grid. But tariff reviews have not kept pace with rising cost, worsened now by the naira devaluation.

    In February, the Nigerian Electricity Regulatory Commission (NERC) increased tariffs by 45 percent, triggering protest from consumers, already under pressure from rising inflation, which hit a 10-year high in June. But the tariff increase was not enough to cover their cost, the generating companies said.

    As of last month, the generating firms have received only 28.6 percent of their April invoices, they said.

    Chronic power shortages are one of the biggest constraints on investment and growth in Africa’s largest economy. Producing less than 4,000 megawatts (Mw), Nigeria’s requires ten times the amount it currently produces to guarantee power to its 170 million people.

    However, the generating firms are holding off on expansion. Generating companies have around 5,000Mw of spare capacity which has no access to gas, they said.

    In 2013, the government privatised the power sector to attract private sector investment into it and boost supply but the improvement is yet to be seen as militants and vandals continue to destroy the gas pipelines.

  • GENCOs threaten to shut operations over N140b debt

    The power sector is under threat as generation company (GENCOs’) operators have warned they will shut  down over huge debts of about N140 billion and shut-in of about 5,000megawatts (Mw) of electricity, following lack of gas supply.

    The GENCOs, in a document obtained by The Nation, showed that stranded power caused by inaccessibility to gas  as a result of renewed attacks by Niger Delta militants is 4991Mw.

    The report stated that the GENCOs can supply the national grid 7856.52Mw, but owing to lack of gas and other issues, the output currently is 2804Mw, reflecting a shortfall of 4991Mw.

    Egbin can generate 880Mw but gives out only 201Mw;  with a shortfall of 679Mw; Transcorp can generate 529Mw, but current output is 280Mw with 249Mw stranded generation.

    Others power stations include Shiroro, 450Mw, 412Mw and 0Mw; Geregu 276Mw, 0Mw and 276Mw; Kainji/Jebba 836Mw, 656Mw and 170Mw; Sapele 120Mw, 65Mw and 55Mw; other stations 4775Mw, 1190Mw and 3562Mw as available capacities, generated capacities and stranded capacities.

    On the debts, according to the report, Egbin is owed N68.71billion, Transcorp N28.29billion, Shiroro N9.66billion, Geregu N7.975billion, Kainji/Jebba N20.94billion and Sapele N9.90billion.  It noted that payments to thermal plants dropped from 47 per cent in January, this year, to 26 per cent in April, while payments to hydro plants were 26 per cent and 29 per cent in January and February, this year, with no payments in March and April.

    The operators said GENCOs have been at the receiving end of the lapses and deficiencies in the sector, as well as the insurmountable challenges in the sector. Very little has been put in place to give the GENCOs a chance of survival based on the realities, they added.

    “While the GENCOs have been carrying the burden of ensuring that the power sector remains functional, and hoping that the obvious gaps, deficiencies and threat to their existence would be addressed, they are presently cringing under the excruciating pains of carrying this burden.

    “The combined effect of these would render the GENCOs and their investors incapable of delivering power despite their willingness and readiness to so do. This is leading to a situation where total seizure of operations by GENCOs is imminent. The GENCOs have very limited options: to either shut operations proactively or be compelled to do so by the  state of affairs in the power sector.

  • Reps probe NERC, Discos, Gencos over N309b govt’s secured bond

    Reps probe NERC, Discos, Gencos over N309b govt’s secured bond

    • House to remove ‘offensive’ estimates from budget

    The House of Representatives is to investigate the Nigerian Electricity Regulatory Commission ( NERC ) over  the N213b  intervention fund provided by the Central Bank of Nigeria (ÇBN) last year through the Nigerian Electricity Sector Intervention facility.

    The investigation followed  the opposition of the lawmakers to a plan to borrow another N309b through a Federal Government secured bond.

    The bond, according to the Federal Ministry of Power, Works and Housing, was to cover the electricity market shortfall of N187b in 2015 and a projected shortfall of N122b for this year.

    The lawmakers were at a loss on the justification for the bond, which translates to  Nigerians bearing the operational loss of private electricity companies despite paying their electricity bill.

    Consequently, the utilisation  of the N213b  intervention fund has been commited to Committees on Power, Privatisation and Commercialisation, Aids, Loans and Debts Management.

    The House also directed NERC to devise a monitoring mechanism to measure and enforce full monthly remittances  by the DISCOS.

    The lawmakers also urged the regulatory body to recoup all mis-appropriated funds that resulted in the accumulated market shortfalls and apply sanctions for any default whatsoever, including the threat to withdraw the licenses of erring firms.

    The decision of the House followed the adoption of a motion by Edward Pwajok (PDP, Plateau ) who regretted that power sector operators have not lived to the expectations of Nigerian with their poor services in spite of increasing  tariffs twice since 2013.

    Saying that Distribution Companies (DISCOS) have severally failed to remit revenues collected to other market participants in full,  Pwajok added, “Tariff computation was a factor of capital investment that which was considered during the privatisation exercise, but regrettable there is no evidence that the DISCOS and GENCOS invested in acquiring any tangible assets.

    The House of Representatives yesterday went into a closed door session over the 2016 budget impasse.

    The session which lasted over two hours featured discussions on the  budget and how to address the “ grey areas “ as agreed with the President Muhammadu Buhari in an earlier meeting he had with the principal officers of the National Assembly.

    Though there was no briefing on what was discussed by members at the session as was the norm, The Nation learnt that the lawmakers moved to resolve aspects of the budget which the Presidency have designated as part of the “grey areas.”

    A source who pleaded anonymity said the Speaker briefed members on the meeting held with the president and pleaded with them to help ensure the issue of grey areas in the budget was resolved quickly.

    The Nation learnt that one of the things agreed in the closed door session was to scale down amounts added to the estimates brought by the MDAs under different subheads.

    Though the lawmakers had earlier insisted that the National Assembly has the power of appropriation and the prerogative to add or subtract from the Executive’s estimates, members were said to be in agreement  that in order for the budget to be assented to by the President, there might be a need to back down from their previous position.

    “Members agreed that the offensive additions on the part of the Representatives would be drastically reduced,” he said.

    The Speaker was said to have told members that three committees have been set up from the Senate, House and the Executive to work on the details to ensure a speedy transmission to the President to allow him assent to it with the next few days.

  • Much ado about new electricity tariff

    Much ado about new electricity tariff

    The new electricity tariff announced by the Nigeria Electricity Regulatory Commission which kicked off on February 1, 2016, has set the federal government, the electricity distribution companies (DISCOs), Generation Companies (GENCOs) as well as the organised labour and the National Assembly on a collision course, reports Ibrahim Apekhade Yusuf

    s the new electricity tariff a fait accompli? That is the question being asked by the electricity consuming public, many of who are hard pressed to believe that they would have to pay more despite not getting value for their money.

     

    Crux of the matter

    In the circular announcing the new tariff regime signed by Dr. Usman Abba-Arabi- Head, Public Affairs of the NERC, he said part of the concession announced by the acting Head of the Commission, Dr. Anthony Akah is the removal of fixed charge under the new tariff regime, a decision, he maintained, as taken in deference “to consumers and a measure to ensure electricity distribution companies improve on service delivery as their income is dependent on the quantity of electricity used by their customers.”

    However, the new tariff will see some residential customers paying between N4 and N41.31 per kilowatt/hour or a little more depending on consumption and DISCOs of the customer. The distribution companies get 25 per cent.

    In line with the multi-year tariff order (MYTO), the tariff will go up in two years and subsequently reduce in the coming years.

     

    Imprimatur of support for electricity tariff hike

    The Minister of Power, Works and Housing, Mr. Babatunde Fashola, while justifying the 45 per cent increment in electricity tariff, maintained that the action remained the only way to enhance stable power supply in the country.

    Fashola, who stated this when he appeared before the Senate Committee on Power, explained that an Act of the National Assembly actually empowered the Nigerian Electricity Regulatory Commission to increase tariff, hence it would not be able to stop the implementation of the new tariff regime at this stage.

    He explained that the rise in the cost of procuring raw materials to generate electricity was one of the reasons for increasing the tariff and that the best way to sustain the current stable power supply in the country.

    Fashola maintained that the federal government and consumers had a duty to sustain the current tempo in the power sector by encouraging the power generating firms to produce maximally at the right price level.

    Shedding more light on the foregoing, Sunday Oduntan, speaking under their umbrella body, Association of Nigerian Electricity Distributors (ANED), the DISCOs said power consumers’ cooperation has become imperative so as to ensure a hitch free service delivery.

    Oduntan who is Executive Director, Research and Advocacy of ANED, urged the customers to pay their electricity bills for the growth of the power industry and the economy.

    Nigerians, he lamented, only pay for 40 per cent of electricity supplied, a situation, he admits, creates grave financial constraints for the entire value chain.

    While attempting a comparative analysis of what obtains within the continent, he said Chad has the highest tariff, while Zambia has the lowest followed by Nigeria.

    According to Oduntan, of the new tariff, 60 per cent of the total money collected goes to the generation companies that in turn, pay the gas suppliers, while 11 per cent goes to the transmission company, four per cent to the regulator, bulk trader and market operator.

     

    Organised labour will not be persuaded

    Alarmed by what it described as illegality of the new electricity policy regime, the Nigeria Labour Congress, NLC, Trade Union Congress of Nigeria, TUC, alongside civil society allies would not be persuaded by what they described as unwarranted tariff increase.

    In a statement signed by Mr. Ayuba Wabba, President of NLC, labour decried what it described as the 45 per cent increase in the electricity tariff as announced by NERC.

    Expectedly, the organised labour picketed all offices of the DISCOs, GENCOs, nationwide and the office of the NERC as planned,

    Giving reasons for the protest, labour said: “The due process in the extant laws for such increment was not followed in consonance with section 76 of the Power Sector Reform Act, 2005.

    “There has been no significant improvement in service delivery. Moreover, the fact is that most consumers are not metered in accordance with the signed privatisation Memorandum of Understanding, MOU, of November 1, 2013, which stipulates that within 18 months gestation period, all consumers are to be metered.”

    In the statement which reads in part, the NLC leader said: “This protest rally has become necessary after all effort to make NERC shelve the idea of increase failed. Indeed, rather than see reason with Nigerians, the Minister of Power, Works and Housing has been advancing spurious arguments in justification.”

    A human rights lawyer, Bar. Toluwani Yemi-Adebiyi had approached the Federal High Court to charge the management of the electricity distribution companies and the NERC for contempt of court.

    Expatiating, he said: “The power sector has illogically taken the bull by the horn by contemptuously increasing the electricity tariff, in spite of the subsisting Order of Court not to bring any Increment until the Substantive Suit is determined.”

    The activist lawyer who said the plaintiffs were guilty as charged. “Form 48, Notice of disobedience of Court Order had been filed. Filing of Form 49 in Conjunction with Order 35 of the Federal High Court will follow thereafter,” he said.

    In a supporting affidavit, the plaintiff said despite NERC’s mission of “keeping the light on and to meet the needs of Nigeria for safe, adequate, reliable and affordable electricity,” most communities do not get more than 30 minutes of electricity supply daily.

    “Poor masses are paying an estimated and indiscriminate bills ranging from N5, 000 to N18, 000, while spending an average of N15, 000 to N20, 000 for fuel to maintain generating sets weekly. Businesses have collapsed, industries have closed down, and residents cannot sleep comfortably at night due to inefficiency of our power industry.

    “Companies and commercial houses are groaning under throat-cutting power bills which they are paying for, yet not getting the benefits of such payment,” Adebiyi stated.

    But NERC’s lawyer, Chief Anthony Idigbe (SAN), said he had filed an appeal against the order by Justice Idris.

    He said he also had a pending application for stay of proceedings pending determination of the appeal.

    But Idigbe said the application for stay of proceedings should take precedence since an appeal has been lodged.

    Ruling, Justice Idris said after a careful examination of the records of court, there were a number of pending applications to be dispensed with.

    Justice Idris said: “I understand it to be the law that contempt proceedings are criminal in nature and should therefore ordinarily in the context of our jurisprudence be first dealt with either by the court trying the case when the alleged contempt took place or by another court.

    “The purpose of taking contempt proceedings first is to demonstrate to the public that the court being the creation of the Constitution to decide cases between all manners of litigants vide Section 6 of the Constitution should protect its dignity and will neither allow a citizen nor any other arm of government to brazenly do an act that will diminish the powers duly invested by the Constitution and the common law in the administration of justice.

    “On the other hand, the basis upon which the contempt application is premised, which is the order that parties maintain status quo ante-bellum, is on appeal, and there is a motion for stay of proceedings in this suit pending appeal.

    “It is in the interest of justice, therefore, that this application to stay further proceedings be heard and determined. Until then, no further proceedings should go on. I will, therefore, take arguments on the application to stay further proceedings in this suit.”

     

    Shape of things to come

    In what appears to be a groundswell of support, the Senate had last Tuesday mandated the NERC to halt the 45 percent tariff increase being implemented by electricity distribution companies.

    This development was as a result of the deadlock in discussions between the Senate leadership and the Minister of Power, Works and Housing, Babatunde Fashola and his counterpart in the Labour and Employment ministry, Dr. Chris Ngige.

    The Nation gathered that the upper legislative chamber had asked the NERC to maintain the status quo pending the outcome of further deliberations with the ministers.

    The motion to suspend the implementation of the new tariff which came was moved by Senator Suleiman Nazif (APC, Bauchi).

    Echoing similar sentiments, Deputy Senate President, Ike Ekweremadu, said Nigerians were already on life support and urged his colleagues to reject the new increment and stand with Nigerians.

    Several other speakers, including Senator Dino Melaye, urged lawmakers to look beyond the suspension of the new tariff regime.

    Melaye said, “This increase makes it the fourth time that electricity tariffs will be up after the privatisation of the power sector. Their excuse has always been that they want to improve on the electricity. There was a time that the government gave loans to distribution and generation companies to buy metres and give to customers. They are yet to pay back that loan.

    Expectedly, Senate President, Bukola Saraki mandated the Senate Committees on Labour and Power to meet with the relevant agencies of government with the view to finding a lasting solution after public hearings on the matter.

    Meanwhile, the NLC may have commenced the process of compelling the NERC to reverse the recent increase in electricity tariff.

    Comrade Wabba in a statement made available to The Nation in Abuja said:”We wish to assure all Nigerians that we are focused on the main objective of our campaign to ensure that the tariff increase does not stand.”

    But it does appear the federal government has already considered the new policy regime as a fait accompli judging by the preparedness DISCOs to go ahead with the implementation.

    But will Nigerians have to pay more for electricity, or will labour succeed in making the DISCOs bring down the price of the product Nigerians hardly enjoy?

    So, between labour and the DISCOs who will back down, or will there be a middle ground?

    Time will tell.

  • Labour to picket DISCOs, GENCOs Monday

    Labour to picket DISCOs, GENCOs Monday

    The Organised  Labour is set to  picket all DISCOs (Electricity Distribution Company) and GENCOs (Electricity Generation Company) across the country by Monday, next week.

    In a communiqué by the  Secretary-General, Trade Union Congress (TUC), Comrade Musa Lawal, on behalf of TUC and the Nigeria Labour Congress (NLC), the decision against DISCOs  is to drive home what they described as unilateral and unlawful hike of electricity tariff. The picketing is expected to be led by theTUC, NLC and the Civil Society groups.

    The communique, which read in part, said: “Please be informed that Monday, 8th Ferbruary, 2016 has been chosen as a day of action against DSICOs to drive home the fact that the unilateral and unlawful hike of electricity tariff will be resisted by consumers ably led by TUC, NLC and Civil Society allies.

    “You are, therefore, requested in furtherance of the above position to mobilise workers in your council to massively picket all offices of DISCOs in your states, on Monday 8th February, 2016.”

    NLC President, Comrade Ayuba Wabba, last week  noted as illegal, unfair and unjustifiable, a further exploitation of the already exploited Nigerians with the intention to increase electricity tariff.

    He said there  have been no significant improvement in service delivery with the fact that most consumers are not metered in accordance with the signed privatisation Memorandum of Understanding (MOU) of November 1st, 2013, which stipulated that within 18 months gestation period all consumers are to be metered.

    He said: ‘’There is a subsisting court order dated 28th May, 2015 by Justice Mohammed Idris of the Federal High Court, Ikoyi, Lagos, in the case of Toluwani Yemi-Adebiyi versus NERC, that no increment until the determination of the substantive suit.

    “The increment at this time negates the present biting and prevailing economic recession vis-à-vis an attempt to further impoverish the poor masses.”

  • Fashola unfolds 13-point agenda to revive power sector

    Fashola unfolds 13-point agenda to revive power sector

    The Minister of Power, Works and Housing, Mr Babatunde Fashola, on Monday unfolded a 13-point agenda to drive efforts towards enhancing power supply in the country.

    Fashola said in Abuja during his maiden meeting with power generation, distribution and transmission companies, and other stakeholders that the agenda was drawn up to ensure effective monitoring of the sector.

    The minister said the agenda involves continuous public engagement on tariff collection, debts, power generation, maintenance, ancillary services, dispatch orders and discipline.

    Other areas include gas requirement and constraints, transmission constraints, 33KV load off take, imbalances-locations of excess, overload safety, service quality, new captive and embedded generation, franchising and other issues relevant to the growth of the sector.

    According to Fashola, President Muhammadu Buhari has approved that all stakeholders in the sector should hold monthly meetings on issues concerning the industry.

    He said that the meeting would be rotated among the various GENCOs, DISCOs, TCN and other stakeholders across the country.

    Fashola said that all decisions reached in such meetings would be binding on all the stakeholders.

    In this respect, the minister stated that the various companies and stakeholders would each be represented by a management member with authority to take decision on behalf of their companies.

    He explained that in order to minimise the cost of hosting the meetings, the companies were advised to jointly pull up resources required to hold the meetings.

    The minister further said the meetings would also involve lawyers, engineers, planners and other stakeholders, adding that the ministry would issue a communiqué at the end of each meeting on steps taken to address challenges in the sector.

     

  • 26 Gencos may lose licences, says NERC

    •Regulator begins revocation process

     “Licensees listed in category two are notified of the intention of the commission to commence the process for the cancellation of their licences on the grounds that the licensees have ceased operations”

    TWENTY-SEVEN power Generation Companies (GENCOS) must justify why their operating licences should not be revoked.

    They have 30 days to do so, the Nigeria Electricity Regulatory Commission (NERC) said yesterday. It said the ultimatum followed the conclusion of an audit of licences granted to the GENCOS.

    NERC’s Head of Public Affairs Department Dr. Usman Abba Arabi said the cancellation of licences notice posted yesterday on the commission’s website was sequel to the discovery that the affected firms could not meet the terms and conditions for their licences.

    The NERC has rated 63 GENCOS and Distribution Companies (DISCOS) as category one with no issues with the commission.

    But 40 firms in categories one to four, however, have to justify their licences or get them withdrawn within 30 days or 12 months.

    In category two are those licensees that have ceased operations. These are CET Power Projects promoted by West African Portland Cement Company (WAPCO), Ewekoro, Ogun State and Contour Global Solutions of Nigeria Bottling Company of Apapa, Lagos State.

    The commission said it would “start the process of cancellation of these licences in line with Clause 17 of the Electric Power Sector Reform Act of 2005”, which listed five conditions for cancellation of licences.

    Thirteen power generation firms in category three are “not in operations but  satisfied their milestones.” These are Ethiope Energy; Supertek Nigeria; Mabon Energy; Bresson AS; Hudson Power; Knox J & L; Tower Power, Abeokuta; Zuma Energy Nigeria transferred to Itobe Coal 1, 2, 3 and 4 firms

    Others in this category are MBH Power; Delta Electric Power; Wedotebary Nigeria; Century Power Generation and Supertek Electric.

    They will “be required to satisfy their outstanding milestones and start construction in 12 months, failing which the commission will commence the process for withdrawal of their licences in line with Clause 18 of the NERC Application for Licences (Generation, Transmission, System Operations, Distribution and Trading) Regulations, 2009”.

    In the fourth category are five power generation firms ‘’not in operations and have not satisfied their milestones.” They have 30 days to convince the commission not to withdraw their licences. In this category are ICS Power; Anita Energy; Ibafo Power Station; Minaj Holdings and Gateway Electricity.

    There are 19 others in category five that are “not in operation and are not submitting quarterly reports to the commission.”

    They would be required to, within 30 days provide justification for their licences or get them revoked.

    The commission, in its notice, said: “Licensees listed in category two are notified of the intention of the commission to commence the process for the cancellation of their licences on the grounds that the licensees have ceased operations.”

    Those in categories four and five were “notified of the intention of the commission to commence the process for the withdrawal of their licences on the grounds that these companies have failed to commission their licensed generating power station within three years from the date of their licences”.

    Licensees in category two would only be notified of the commission’s intention to cancel their licences, while those in category four and five have 30 days moratorium to convince the commission not to withdraw their licences. Firms in category three have 12 months moratorium to start construction.

    Clause 18 of the NERC Application for licensees (Generation, Transmission, System Operations, Distribution and Trading) Regulations 2009 stipulates six conditions for withdrawal of a licence, which include “misrepresentation or non-disclosure of material fact.”

    Other conditions are “wilful or unreasonable contravention of provisions of the Electric Power Sector Reform Act 2005 and other regulations governing the industry; failure to comply with milestones; contravention of licensing conditions; insolvency or bankruptcy and failure to commission licensed generation station within three years”.

  • GENCOs: Three banks under probe over N50b in escrow accounts

    GENCOs: Three banks under probe over N50b in escrow accounts

    The Presidency is probing three banks for short-changing the Federal Government in the management of the N50 billion escrow accounts interest yield for seven Electric Power Generation Companies (EPGC).

    The row over the escrow accounts was referred to President Muhammadu Buhari following the loss of over N10 billion interest yielded in the last two years.

    The companies are: Afam Power Plc; Egbin Power Plc; Geregu Power Plc; Kainji Hydro-Electric Plc; Sapele Power Plc; Shiroro Hydro-Electric Plc; and Ughelli Power Plc.

    Each of the generation companies (sellers), pursuant to the provisions of the Electric Power Sector Reform Act No. 6 of 2005, were mandated to take over generation and related businesses of the Power Holding Company of Nigeria (PHCN).

    Safety escrow accounts were established to protect the stake of private investors in the seven generation firms.

    The Bureau of Public Enterprises (BPE) and the Nigerian Bulk Electricity Trading Plc (NBET) in 2013 entered into an agreement with three banks to manage the N50 billion.

    The said N50 billion was sourced from the proceeds of the privatisation of Egbin Power Plc. But, contrary to the guidelines of the Central Bank of Nigeria (CBN), the banks have not been paying “the required interest on the escrow accounts”.

    It was gathered that instead of paying 10 per cent interest on the N50billion as applicable to other funds being managed by NBET, the banks had been remitting only 0.02 per cent interest per annum.

    It was also gathered that Clause 7.1 (Compensation) of the agreement that the interest on the escrow accounts be compounded monthly together with the balances in the Escrow Accounts”

    The agreement reads in part: “The Escrowed Funds in the escrow accounts shall bear interest at such rate as shall be agreed between BPE and the Escrow Agents from time to time (“the Interest’’). The Interest shall, subject to Clause 7.1 (Compensation), be compounded monthly together with the balances in the escrow accounts pending distribution in accordance with Clause 5 (Distribution of Escrowed Funds) of this Agreement.”

    Sequel to the earlier petition, it was learnt NBET’s efforts to persuade the banks to adopt CBN’s guidelines on the escrow accounts have failed in the past one month.

    In a letter to the banks, NBET said the interest rate was no longer acceptable.

    The letter said: “Pursuant to the commencement of TEM, NBET is now poised for an active management of the escrows.

    “A myriad of events have altered the fundamentals of the macro economy. The surge in inflation coupled with decisions made by the Monetary Policy Committee of the apex bank(CBN) that included a review of the CRR have necessitated NBET to call for a meeting with the lead escrow bank.

    “The meeting will serve as an avenue to review the management of the Escrow and consider strategies to maximise returns on the funds more efficiently.”

    “Further to the meeting held between ourselves and all three escrow banks, while working on amending the Egbin escrow agreement, we wish to request for an increase in interest rate earned on our credit balances

    “As discussed, this is in line with market realities, especially with the recent increase in CRR and with a bid to maximise returns on the funds more efficiently.”

  • Hard times await power firms with TEM implementation

    The privatised electricity generation  (GENCOs) and distribution companies (DISCOs) are inundated with challenges from the Transitional Stage Electricity Market (TEM).

    The TEM, which started this month, has put the power firms in financial difficulty as they struggle to meet their contractual obligations.

    A source told The Nation that the DISCOs are the most affected in the electricity supply chain in terms of executing their responsibilities and meeting their contractual obligations.

    It said with the TEM, there is strict enforcement of obligation and the implication is that any DISCO that buys power, must make 100 per cent remittance,  as failure to do so would attract sanction from the regulator, the Nigerian Electricity Regulatory Commission (NERC).

    This also applies to the GENCOs, as they are compelled to meet their contractual obligation when buying gas, as failure to pay for the commodity would equally attract penalties. Gas suppliers are not left out of the new regulations, as failure to deliver without making an alternative provision, would provide a ground for punishment.

    The source however explained  that the impact of TEM would be determined at the end of the month since the technical and commercial losses in existence are made worse by vandalism in the sector.

    He noted that the GENCOs are the most affected because they depend on the DISCOs. The DISCOs interact with consumers and are the last in the chain; therefore, their remittances go down from transmission to generation and to the gas suppliers, he said.

    The TEM took off on February 1, this year to give teeth to the Nigerian Electricity Supply Industry (NESI), making wholesale buying and selling of power to be based on contractual and regulatory rules with little or no government intervention.

    NERC Chairman, Dr. Sam Amadi said: “With this TEM, a greater degree of business and investment certainty has been introduced into the country’s electricity market, with the welcome result of setting an even firmer basis for increasing the amount of electricity available to Nigerians.

    “Conditions precedent set out in the market rules and subsequently agreed to be necessary for effective TEM have been satisfactorily fulfilled,’’ he said, adding that this would ensure better discipline, corporate governance, guarantee recovery on investment, as well as give certainty for a sustainable and growing electricity market that would serve the need of Nigerians.

  • The gas supply nightmare

    The gas supply nightmare

    One year after the privatisation of the power sector, Nigerians are yet to enjoy stable electricity due largely to inadequate gas supply. Experts say that unless a sound policy framework is put in place to ensure optimal production and delivery of gas to power Generation Companies (GENCOs), the nation’s target of 20,000 Megawatts (Mw) of electricity by 2020 would not be met, writes AKINOLA AJIBADE.

    With an estimated 187 trillion proven gas reserves, and 600trillion unproven gas reserves, Nigeria, ordinarily, should not be agonising over shortage of gas to power her turbines and guarantee steady supply of electricity to her citizens. In fact, experts say that Nigeria has enough gas to power the whole of Africa. They said the gas that is flared daily can generate enough electricity for the country.

    Besides, countries that do not have gas are not having electricity problems. For instance, as President, Liquefied Petroleum Gas Association of Nigeria (LPGAN), Mr. Dapo Adesina, noted, South Africa, with 55 million population, generates about 40,000 Megawatts (Mw) of electricity despite not having gas in abundance. In the absence of gas, Isreal also uses coal to generate electricity, ditto Rwanda that generates 350 megawatts of electricity through renewable energy sources.

    But Nigeria, despite her quantum of proven gas reserves, has not been able to ensure a fairly stable supply of electricity either through the use of gas, hydro or renewable energy sources such as coal, wind, solar or bio-mass. Rather than do so, The Nation learnt that a combination of the activities of pipeline vandals, infrastructural decay, long distance between the locations of the power plants and the gas pipelines, and inadequate incentives for investors who invest in gas plants, conspired to frustrate efforts at achieving uninterrupted gas supply to the power plants.

    For instance, rising incidents of outright sabotage of some crucial gas pipelines is blamed for the recent drop in gas supply to the power sector. The Nigerian National Petroleum Corporation (NNPC)’s reported that saboteurs were responsible for the destruction of Escravos gas pipeline in 2013. The Corporation said the Escravos-Warri stretch of the Escravos Lagos Pipeline System (ELPS), and the Trans Forcados crude pipeline, were destroyed, adding that investigations conducted by the Nigerian Gas Company (NGC), its subsidiary, revealed that the pipelines were punctured.

    The NNPC said 20 ruptured pipelines have been identified at the last count, all due to deliberate sabotage. “The cumulative effect of the above interruptions is a real degradation of power supply to Nigerians. The Ministry of Petroleum Resources (DPR) and NNPC would continue to make efforts to ensure gas supply in a difficult situation,” the NNPC explained.

    The challenge of gas supply, which has become a torn in the flesh of the new core investors in the power sector, government and electricity consumers in general, may have been accentuated by the dynamics of the nation’s power sector. Gas- powered plants require huge volume of gas to generate electricity. For instance, as the President, Petroleum and Technology Association of Nigeria (PETAN), Emeke Ene, noted, Nigeria’s power sector operates on 80 per cent turbines and 20 per cent hydro, which means that the power plants need an uninterrupted gas supply to guarantee steady electricity supply.

    Ene said the power sector uses more than 70 per cent of the domestic gas production, while the remaining percentage is shared among the petrochemical and fertiliser companies.“The capacities of the turbines are different, ditto the volume of gas required to generate power. The turbines are designed to meet certain production targets. The plants can only meet their targets when they access gas regularly. For Nigeria to increase power generation from 5,000 Mw  to 10,000 Mw gas must be supplied regularly to the sector.” Ene explained.

    The Chief Executive officer, Niger Delta Exploration and Production Company (NDEPC), Lai Fatona, agrees with him, noting that turbines require millions of standard cubic feet of gas per day for optimum performance. Fatona said 200,635 standard cubic feet of gas per day is needed to produce 1,000 megawatts, while 2.635 million standard cubic feet of gas per day would give the country 10,000 megawatts of electricity. Giving a breakdown, Fatona said while 10,031 standard cubit feet of gas per day will produce 50 megawatts, 20,063 standard cubit feet of gas per day will provide 100 megawatts.

    Similarly, the NNPC said power firms need millions of metric tonnes of gas per day to generate electricity and attain optimal level. Also,the Special Adviser to Minister of Power on Investments, Finance and Donor Relations, Olajuwon Olaleye, said power and oil and gas sector needs each other for growth. Olaleye said failure to develop one affects the other, arguing that the two should be developed if Nigeria’s power situation would improve like that of United States, Germany, and other developed economies.

    Power supply in Nigeria has been dropping for a long time now. At present, Nigeria survives on less than 5,000 Mw of electricity, a level considered a far cry from the 20, 000 Mw of electricity the nation targets to realise the much-trumpeted Vision 20: 2020. Between July to September 2014 alone, power supply dropped below 3, 500 Mw, the lowest this year. According to analysts, this means that the impact of the privatisation of the power sector, which saw the assets of the now defunct Power Holding Company of Nigeria (PHCN) sold to fifteen new private investors, is far from being felt one year down the line.

    The expectation was that the sale of the assets would bring succour to Nigerians most of who have been groping in darkness for long, but this has not been the case, as there has not been much improvement in electricity supply even as consumers daily complain of estimated bills.  Experts blame this on government’s inability to wheel enough gas to the sector for the purpose of generating electricity. The occasional drop in the water level of the hydro power plants also contributed to the poor power supply in the country.

    And as the Chief Executive officer, Frontier Oil Limited, Dada Thomas puts it: “There is no adequate infrastructure in place to ensure speedy and uninterrupted supply of gas to the power plants. This has a cumulative effect on the operation of the power sector, which relies on gas for sustenance. There is the need to explore opportunities in the marginal oil fields across the country. Some oil wells have huge gas reserves. The  Uquo Marginal Oil Field in Eket, Akwa-Ibom State is one of the wells that boasts huge gas reserves. Frontier Oil Limited and Seven Energy International partnered to develop the field. Now, the field has the capacity to supply millions of metric tonnes of gas power plants to areas in the South -South region.’’

    However, government says it is making efforts to address the gas supply challenge. Speaking during the recent third edition of the Worldstage Power Conference in Lagos, Olaleye said government is making frantic efforts to produce 20, 000 Mw by 2020 as part of on-going plans to become one of the biggest economies in the world. He assured that with the construction of the 10 National Independent Power Plants (NIPPs), and the decision of the government to provide gas to the plants to enable them meet their target of 5,000 megawatts of electricity, as well as plans to increase hydro power projects, among other initiatives, power generation would improve soon.

    He said power plays important role in achieving meaningful development, arguing that no country can achieve growth without a robust energy programme. Hear him: “Nobody can underestimate the importance of gas to the power sector. Globally, the bulk of electricity is generated through turbines. Though many counties are exploring opportunities  in the off-grid electricity, gas helps in generating electricity sufficient to grow the economy. Based on this, the Federal Government has put in place machineries to solve the gas problem, one of which is the recent increase in the price of gas  from $1.5 per 1,000 standard cubit feet of gas to $2.5 per 1,000 standard cubit of gas.”

    Olaleye explained that the aim of increasing the price of gas  was to encourage more investment in gas in order to fast-track the growth of the power sector. He said another effort aimed at addressing gas shortage is the on-going collaboration between the Ministry of Petroleum Resources, the Ministry of Power, the Nigerian National Petroleum Corporation(NNPC), and the Nigerian Electricity Regulatory Commission (NERC), among other stakeholders to provide modalities on how to make gas available to the power firms to improve electricity generation.

    While stating that the problems in the sector are nearing solution, Olaleye said government is advocating the adoption of energy mix in the country. According to him, government sees energy mix as a platform to improve electricity supply in the country. The Commissioner for Energy in Lagos State, Taofiq Ajibade, also said that energy mix is the only option through which Nigeria can overcome its electricity challenges. He said the issue of combining various sources of generating electricity is vital to the growth of the economy, urging the federal and state governments to embrace the idea

    According to the commissioner, Lagos receives 930 Mw of electricity from the grid, which is not enough to meet the needs of its population. That is why the state government set up Independent Power Plants (IPPs) and invested in solar energy, among other projects to compliment whatever it is getting from the grid,” he added.

    The Minister of Power, Professor Chinedu Nebo, said the government is set to inject additional 4, 000 Mw of electricity to the current power capacity with new renewable energy contracts for 14 hydro power projects. He said the government is planning to provide a renewable energy policy that would set the guidelines for the use of solar and coal for power generation, adding that the country is blessed with natural resources that can be used to generate power.