5 February 2013

Nigeria: Power Minister's Projection Opposes MYTO-2 Benchmark

There are indications that the recent 10,000 megawatts (MW) power generation projection which the Minister of State for Power, Mrs. Zainab Kuchi made to the Presidential Action Committee on Power (PACP) is in opposition with the benchmark generation projection earmarked in the Multi Year Tariff Order (MYTO-2).

THISDAY gathered from the content of the presentation made by Kuchi in Abuja that the power generation projection of 10,000MW is part of the work plan and goals set by the ministry as its thematic objective for 2013. The generation projection is expected to be attained by the fourth quarter (Q4) of 2013.

But an industry source explained to the paper that the projection was unrealistic following the objective MYTO-2 generation benchmark which the Nigerian Electricity Regulatory Commission (NERC) has pegged on available on-grid generation of 7000MW.

According to Kuchi in the presentation, the government plans to achieve the 10,000MW target by diversifying Nigeria's energy mix to include other renewable sources of energy, although the Chief Executive Officer (CEO) of Egbin Power Plant, Mr. Mike Uzoigwe had at a performance signing agreement with Kuchi early in December 2012 disclosed that power generation in the country will peak at 6873MW by the end of 2013.

Uzoigwe had then disclosed that the various successor generation companies of the Power Holding Company of Nigeria (PHCN) as well as incoming plants of the National Integrated Power Projects (NIPPs) will collectively generate 6873MW by the end of 2013 with PHCN generating 3,879MW while NIPPs will produce the extra 2500MW to bring available capacity on the national grid to 6873MW by the close of 2013.

He had stated then that the target was part of the outcome of the meeting between Kuchi, the Presidential Task Force on Power (PTFP) and CEOs of PHCN successor companies which reviewed the capability and performance of all generation stations.

However, the MYTO-2 generation benchmark indicated that 7000MW plan was a realistic projection that evolved from sustained consultation with stakeholders in the generation aspect of Nigeria's Electricity Supply Industry (NESI).

Parts of the MYTO-2 projection stated inter alia: "This is a significant variable in tariff determination. Under MYTO-1, projected generation capacity was put at 4000MW for 2008; 6000MW for 2009; 10,000MW for 2010 and 16,000MW for 2011. However, none of the projections were ever achieved causing additional major disequilibrium in the market and contributing very significantly to the suboptimal performance of MYTO.

Therefore, having consulted with key generation stakeholders, the new MYTO will be based on the following conservative but realistic daily generation capacities: 2012:30,715 Gigawatt per hour (Gwh), 2013: 41,884Gwh, 2014: 50,601Gwh, 2015: 56,242Gwh and 2016: 59,034Gwa.

This projection assumes that improvements in the generation capacity are solely from the successor Gencos and based on realistic expectations for improvements in efficiency and the refurbishment and expansion of facilities and the completion of ongoing NIPP projects. These figures will be reviewed bi-annually."

The source further noted that the ongoing privatisation of the sector could well drag into the third quarter of 2013 when the eventual preferred bidders could assume responsibility and management of the privatised assets.

He said: "Even if preferred bidders of the Gencos take over the plants within the third quarters, that is not even a guarantee that they will begin to churn out power to make up the 10,000MW; they will have to settle down before even attempting to increase their capacity, so I really don't know where the 10000MW will come."

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