Nigeria: Electricity Generation Firms Reject N2.7bn Charge By Nigeria's Bulk Trader

24 September 2019

A disruption of electricity supply may be looming as generation companies (GENCOs) on Friday threatened to withdraw from the Nigerian Electricity Supply Industry over a disputed N2.7billion administrative charge on their gas supply and carrier invoices by the Nigerian Bulk Electricity Trading Plc (NBET).

NBET is a public liability company established by the Federal Government as a credit worthy off-taker of generated electricity in support of private sector investment in the NESI.

The support, in the form of bearing the off-take market and default risks such as liquidity/payment risks, was the incentive GENCOs required to invest in the transition electricity market.

However, the GENCOs have said NBET's failure to discharge its mandate resulted in their undertaking additional investments that have worsened their high capital cost and increased debt.

As part of efforts to reduce the burden, the Federal Government recently intervened by providing about N600 billion short term support to pay GENCOs for electricity generated and delivered.

The support was to enable the GENCOs to meet their obligations to gas suppliers and avoid the disruption of electricity supply in the country as a result of unsettled gas supply invoices.

APGC dismisses NBET's directive as arbitrary

But, the GENCOs accuse NBET of unilaterally and arbitrarily imposing a 0.75 per cent (totaling about N2.7billion) administrative charge for "helping to collate and submit our gas and transportation cost invoices to the Central Bank of Nigeria (CBN) for payment."

The Executive Secretary, Association of Power Generation Companies, Joy Ogaji, said NBET in a September 13 letter directed all thermal GENCos to, as a matter of urgency, comply by submitting their respective board approvals or resolutions affirming commitment to pay the fee.

Mrs Ogaji said NBET gave a three-day ultimatum to the GENCOs to comply or risk non-submission of their invoices to the CBN for payment. The deadline for compliance has since expired.

She said NBET claimed it received the approval of the Presidency to take over the processing of GENCos' gas payment and impose the charge as a compulsory pre-condition for accessing the N600billion support fund.

Describing NBET directive as "extortionist" and "illegal", the APGC Executive Secretary said as a licensee of the Nigerian Electricity Regulatory Commission (NERC) like other participants in the Nigerian electricity market, there is no evidence of regulatory approval of the imposed charges.

"Every expense/cost must be backed by regulatory approval for effective computation of the market tariffs," Mrs Ogaji said.

"The generation companies are not aware that such approvals have been issued by NERC, nor is there any policy directive to this effect."

The APGC faulted NBET's alleged imposition, arguing that the burden of failure by the Thermal GENCos to meet their contractual obligations to pay their gas suppliers should remain with them and taken over by any agency.

NBET's demand not sustainable

On NBET demand for GENCos to make pro-rata payments of 15 per cent of their monthly gas invoices to gas suppliers and transporters, Mrs Ogaji said this was not sustainable.

"Given that a Thermal GENCos's gas bill is between 50 and 70 per cent of their total monthly revenue, the implications of carrying out NBET's directive of pro-rata payments is that a thermal GENCo with about 60 per cent of its total revenue as gas cost, will be left with about 6 percent of such total energy invoice to operate the power plant," she said.

"This is certainly not sustainable as it is unfathomable that any going concern gets paid only 15% of its invoices and yet be expected to perform within the requirement of the performance and other relevant market agreements entered into," she added.

Considering that the GENCos are already paying 2.5 per cent of their total market payments to NBET for its role in the Nigerian electricity market, Mrs Ogaji said as the obligor for the GENCos, NBET should strategize to make them "WHOLE and not to create a gaping HOLE in their limited finances."

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"If the relationship between the GENCos and other markets participants and agencies of government, which is progressively becoming a master-slave or master-servant relationship is not addressed quickly, the time may just be right for GENCos to declare force majeure and release themselves of all market obligations, for which we (GenCos) cannot be held accountable," Mrs Ogaji said.

NBET reacts

The Managing Director/Chief Executive of NBET, Marilyn Amobi, told PREMIUM TIMES in a telephone chat on Monday all that the APGC said through its Executive Secretary were "unfounded lies".

"The NBET does not have any contract with Joy Ogaji or the APGC. I am not obligated to respond to all what they said. The NBET has contracts with the individual GENCOs. The GENCOs have said they did not authorise her to do what she did. All that Joy Ogaji said about NBET are not true.

"When I hear all these things, it is shocking that someone can call a meeting to say all these things. What point is she trying to make? Does she have evidence to show the Presidency did not give the approval to do what we did? They said NBET collects 2.5 percent of market money. We don't even collect one and a half percent.

"We have been charging fees for third party payments. The claim that we want to take over payment for gas. That too is a big lie, because why that is happening is because they have been collecting money and don't pay their gas suppliers.

"On approval from NERC, we do not need NERC approval to do what we are doing. This is not a regulatory issue or a tariff. The 0.75 per cent fee is a service charge. It is not a tariff," Mrs Amobi said.

When our reporter contacted NERC for its reaction, neither the spokesperson, Usman Arabi, nor the Chairman, James Momoh, answered calls to their telephones on Monday.

The presidential spokesperson, Garba Shehu, said in a response to a text message on Monday said he was in New York on official assignment with the president. He directed our reporter to contact the Minister for Information, Lai Mohammed. But, the Minister did not pick his call.

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