• Gas accounts for 40% of electricity tariff
The Federal Government underpays power generation companies (GenCos) by over 70 per cent (about N30billion) for their services, thereby compounding their financial woes, The Nation has learnt.
The Executive Secretary, Association of Power Generation Companies (APGC), Dr. Joy Ogaji, told The Nation that the best and urgent step the government should take to make the power sector efficient, is to substantially improve liquidity in the sector by paying the debts owed the sector, especially GenCos by government’s ministries, departments and agencies (MDAs).
She said the government should ensure that debts were paid, stressing that future payments should be made promptly to enable the power sector improve services substantially.
“The government should ensure that there is payment guarantee, no more shortfalls in payment. It is imperative to state here that the investment on generation is at the instance of the off-taker (Nigerian Bulk Electricity Trading Plc, NBET) a Federal Government’s owned public liability company.
“Due to high market liquidity squeeze, GenCos including the thermal and hydro plants lack the necessary funding for their operations, acquiring spare parts and equipment and meeting other obligations for the power generation stations.
“Market payment statistics shows that on a monthly basis, generation companies’ invoices amount to about N35 billion to N40billion, out of which only about N7billion is paid. The implication is that the debt profile of the GenCos is about N30billion per month with no plans in place to clear these and put a sustainable solution for the sector.
“We have been given unfulfilled promises of ‘government is working out a solution’ without a timeline and fulfillment. We are all on life support and could be dead any moment from now, she said.”
For her, what the GenCos are asking for are needed for transparency in market funds and remittance, and declaration of eligible customers to enable them have some form of relief, she said, saying government should give a special concession to the GenCos in sourcing for foreign exchange.
“There is need for full payment of CBN-Nigeria Electricity Market Stabilisation Facility (NEMSF), NBET, Market Operator (MO) and all owing market participants to pay immediately all money owed the GenCos,” adding that a forex stabilisation fund be created to avoid tariff hikes.
“Electricity market should be run as a contract based market with penalties fully enforced,” she said, adding that the cost of gas constitutes about 40 per cent of wholesale electricity tariffs in Nigeria.
The Executive Director, Research and Advocacy, Association of Nigerian Electricity Distributors (ANED), Sunday Oduntan, said the illiquidity in the power sector rose from N1 trillion last November to N1.1trillion by this January.