Home POWER SECTOR Nigeria Power Sector: Darkness Looms As Gencos Threaten Force Majeure

Nigeria Power Sector: Darkness Looms As Gencos Threaten Force Majeure


Chibisi Ohakah

The power sector in Nigeria may be heading for a major crisis if the Association of Power Generating Companies (APGC) makes real their threat last Saturday to shut down business, and declare a force majeure on their services.

They say they are miffed by the proposed 0.75% gas payment administrative charge by the Nigerian Bulk Electricity Trading Company (NBET) be implemented, describing the charge as unregulated and extortionist.

The association of power generating companies said at briefing in Abuja that they have difficulty complying with the directive because while NBET is equally a licensee of the Nigerian Electricity Regulatory Commission (NERC), they have usurped the powers of the latter as, according to them, the 0.75% gas payment administrative charge was never approved by NERC

The executive secretary of APGC, Mrs Joy Ogaji, explained that on September 13, 2019, NBET issued a letter to individual thermal GenCos directing them to obtain, as a matter of urgency, their respective board approvals or resolutions, bequeathing responsibility for payment of gas and transportation to the respective supply companies for an administrative charge of 0.75%, giving each GenCo 3 working days ultimatum to respond or face non-payment of energy invoices.

She warned that placing such a charge on already overburdened GenCos by an agency meant to ensure fair play is an aberration, and as such if the NBET is not stopped from having its way, there may be no better time than now for the GenCos to call for a force majeure.

“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 relieve themselves of all market obligations,” she said.

She argued that going by the principle of privity of contracts, thermal GenCos have contractual obligations to pay their gas suppliers or bear the burden. Ogaji also said the insistence by NBET that thermal GenCos make 15% pro-rata payment from their monthly invoices is not tenable.

“For example, from the paltry 15% of the June 2019 energy invoice paid to each GenCo, NBET expects each Thermal GenCo to make pro-rata payments of 15% of the gas invoice to gas suppliers and transporters. Given that a thermal GenCos’s gas bill is between 50% and 70% of their total monthly revenue (depending on their efficiency and tariff), the implications of carrying out NBET’s directive of pro-rata payments is that a thermal GenCo with about 60% of its total revenue as gas cost, will be left with about 6% to operate,” she said.

NBET had claimed that it was directed by the Presidency to take over the processing of gas payment on behalf of the GenCos and that the charge is a pre-condition for GenCos to access the central Bank of Nigeria (CBN) N600 billion intervention fund.

The association accused NBET of failing to fulfil its promise of 100% GenCos invoice settlement in line with the Transitional Electricity Market (TEM). And that the promise triggered some additional investments by GenCos with its attendant high cost of capital leading to increased debt profile.



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