VOLUME 3, ISSUE 01 ASSESSING THE CHALLENGES IN OPERATING A GENCO, GIVEN CURRENT MARKET CONSIDERATION
The Menace of Grid Collapses Developing A Viable Risk Matrix: Electricity Distribution Franchising And the Fate of the Gencos Panacea To Sector Problems In Nigeria POEM: Heart-Cry Of GenCos By Muyiwa Kolade Ÿ Arise, O, compatriot, Nigeria calls REVENGE…but they don't understand our challenges Ÿ We are ready to rush and yield to the call but Ÿ We have the capability of meeting every of your power somehow……stucked needs but the MEANS THROUGH WHICH THIS WILL Ÿ For the channel through which we were meant to pass BE IS PRIMITIVE was DARK Ÿ The blackout is not our fault but who are we to Ÿ We needed a SPARK as like a LIGHTENING but all we QUESTION THE AUTHORITY? got was SCAR from FALLING Ÿ Power cannot be stored, yet our load is being Ÿ Someone must pick us up from this pit, else we SINK rejected…WHO DO WE TELL OUR STORIES? Ÿ Dated back to the ceremonial proposal between the Ÿ Our expression may not be physical like some “organized southern and northern protectorate that births our body” that will always go on STRIKE….but considering parent nation our wastages, we also cry in silence Ÿ The ofciating minister has pronounced them, husband Ÿ Our product is not a WASTE but rather an HOTCAKE and wife…but in an attempt for the couple to kiss, their yet you're making us run on SHORTAGE noses kept coming in-between their lips Ÿ Stop RESTRICTING our INSTINCT, 'coz in no time we Ÿ As children, we kept growing with this ordeal and each may go into EXTINCT-ion time we make an attempt to speak, the structure restrain Ÿ The POWER we have may not be to RULE but it surely us from expressing our grief does feed the GRASSROOT and the CRUDE with their Ÿ We only read that there is freedom of speech, but the DAILY FOOD much more than you COULD DO aftermath of the speech…..no one can guarantee Ÿ If all our MESSES were to be WRITTEN AS TEXTS, even Ÿ 14 rulers across different spheres and yet the STABILITY the pen will leave our grip to REST OF BENJAMIN FRANKLIN'S DISCOVERY is still an Ÿ For how long will HOSPITAL OPERATION not be ILLUSION in our society completed because of CONSISTENT OUTAGE? Ÿ And in response, they listen to our YARNING and Ÿ They keep encouraging us to THINK and ACT like PACKAGED POWER for us like we are BEGGING ENTREPRENEUR but where is the POWER to be used in Ÿ Hung on the ceiling yet with an inscription, NEVER our SHOPS? EXPECT POWER ALWAYS (NEPA) Ÿ STOP treating us like election result coz we still don't Ÿ It was up and so we learn to raise our heads up to know why OUR AGREEMENT IS INCONCLUSIVE!!!! register its strike Ÿ We are the LIFEBLOOD of the NATION'S ECONOMY Ÿ And at every SPARK once in a while, we shout UP and yet we are BEING TREATED LIKE WE DON'T NEPA…..so we found ourselves here, but how long are MEAN A THING we gonna keep our head up, hoping for a SPARK when Ÿ For the record, we have an installed capacity of over the documents to be signed are down on the table? 12,500MW and available capacity of over Ÿ They told us there shall be NO MORE BLACK OUT and 7,500MW……but how do you FORCE AN ELEPHANT even ascertained it with a deadline THROUGH THE DOOR THAT IS MADE FOR AN ANT? Ÿ And happy as we were, we documented it in our log Ÿ Owed over half a trillion but on daily basis we still book for reference…DATED 1986 function Ÿ 32 years after, our nights are still darker than the Ÿ OUR SUITS STILL LAY STRAIGHT, and OUR SHOES continent of Africa in herself STILL SPARKLES in spite all the DABBLES…..WE PAY Ÿ Then the scientic OSMOSIS is not a workable THEORY OUR RENTS and still not complain about OUR DENTS for this STORY…..so we are SORRY Ÿ All we are saying is…..DO YOUR PART AND CHECK Ÿ Fast track to 2005, this body (NEPA) was unbundled and OUT OUR OWN RESULT WITH TIME there was an enchanting hope for something better than Ÿ Whether it's EGBIN or PACIFIC or GEREGU or AFAM or a CANDLE TRANSCORP……injury to one is injury to all Ÿ 8 years after, we got christened and came by the name Ÿ We are a transparent market where everybody gets its GENCO….saddled with responsibility but deprived of just due….and our core value remain: INTEGRITY, reliability OPEN COMMUNICATION, MUTUAL RESPECT, Ÿ Though we are different from what used to be in the past MEMBER PARTICIPATION and INTELLECTUAL but the operation won't make the consumers feel our EXACTITUDE impact Ÿ PAY OUR DUES and UPGRADE TO OUR Ÿ You can't be doing the same thing the same way and STREAM…..and as compatriot, we shall all serve our expect a different result father land with LOVE, and STRENGTH and FAITH…. Ÿ Ÿ After all, the voice and yarning of the consumers reach to Then there shall be UNINTERRUPTED LIGHT again and us every minute like the blood of ABEL CALLING FOR A we shall all walk freely GENCOS HEARTBEAT TABLE OF CONTENT
PAGE 1. Poem: Heart-Cry Of GenCos ...... Inner Front Page
2. From The Executive Secretary...... 2
3. The Menace Of Grid Collapses And The Fate Of The GENCOS...... 3
4. Assessing The Challenges In Operating A GENCO, Given Current Market Consideration...... 6
5. Developing a Viable Risk Matrix: Panacea to Sector Problems...... 13
6. Transcorp Power Limited Appoints Two Non-Executive Directors...... 17
7. Consumers: NERC Forum Ofces...... 18
8. Opinion: Electricity Distribution Franchising In Nigeria: A Bird's Eye View For A Concerned Electricity Consumer...... 20
9. GENCOS Photo Gallery...... 23
10. Health Watch: The Health Benets Of Cucumber...... Inner Back Page
EDITORIAL TEAM
EDITOR-IN CHIEF Dr. (Mrs.) Joy Ogaji Executive Secretary, Association of Power Generation Companies (APGC)
Victory Onwusor Technical Assistant, Association of Power Generation Companies (APGC)
Joseph Elijah Accountant/Admin, Association of Power Generation Companies (APGC)
Ifeyinwa Akwiwu Researcher/ Media Assistant, Association of Power Generation Companies (APGC)
CONTRIBUTORS Albert Chris Puja, Esq
Muyiwa Kolade 1 GENCOS HEARTBEAT Executive Secretary’s Note he Elections have come and gone, a shift in challenges faced by the GENCOS, it has become political agenda from change to next level still imperative that new investments and business Tunder the same political administration has opportunities be explored. Interestingly, the just been inaugurated. The Generation Companies GENCOS are also delving into renewable means of (GENCOS) as well as the various stakeholders in the generation. To that effect, tidal energy would also be Power Sector are understandably pensive about discussed to ascertain if it is complimentary or what lies in wait in the next four years specically in disruptive to on-grid electricity Generation and how the face of the daunting challenges bedeviling the it can be harnessed. NESI. For the GENCOS, the suspense is particularly nerve wrecking. For the New Government, the As you all know, this publication comes biannually hope is that there would be better reforms as well as and exciting prospect will always be discussed implementations in the pregnant administration. towards the growth of the power sector. Undoubtedly, the Power Sector has an integral role to play in the success of the incoming administration. The last four years have recorded some key policy reforms, initiatives as well as increased private sector participation. It has also chronicled various scal, liquidity and regulatory challenges. For the GENCOS, the declaration of the Eligible Customer Regime by the outgoing administration, could not have come at a better time. However with the stoppage of the Payment Assurance Guarantee (PAG) the survival of the Generation Companies have become critical especially as the liquidity challenges still loom large and the DISCOS remittance has not improved. This edition is focused on exploring viable ways for which the GENCOS can thrive in the incoming administration which is presently foggy. The edition will further scrutinize the medium through which developing a viable risk matrix in the sector can enhance efciency to tackle the lingering challenges. The world is a beehive of technologies both existing and emerging all targeted at achieving better services. Nigeria as a country will benet immensely from joining the band wagon. With the increasing demands for electricity and the accompanying Dr. Mrs. Joy Ogaji Tel: 08130922398 | Email: [email protected]
2 GENCOS HEARTBEAT
The Menace of Grid Collapses And the Fate of the Gencos By Dr. (Mrs.) Joy Ogaji
igerians are now used to the incessant grid Research has shown that Outages/grid collapses occur collapses in the power sector occurring when there are system disturbances along the Nmostly over the weekend, and public holidays transmission grid. Such disturbances could include a with no clear explanation as to the causes. Arguably, massive drop of load from a sub-station that would electricity forms an indispensable part of modern life cause the grid to become unstable. This could be especially in the weekends when families try to catch solved in most cases with adequate spinning reserve in up and relax. place. Experts have advised that the Nigerian grid requires up to 400 MW of spinning reserve to be stable. The nation is thrown into relative chaos during these The reality is, there is no spinning reserve procured periods with the attendant monetary setbacks as currently in the market notwithstanding TCN's hospitals, airports, train stations etc. all grounded into a constant reminders to the regulator (NERC) to halt. The volatility of the national grid portend serious procure about 260MW which though below the risk for the Legacy Generating plants, NIPP plants and estimated gure, could be a starting point. other IPPs operating in the sector. The actual reasons which trigger the incessant grid collapse is unknown One of the main causes of grid instability is frequency and we believe can only be established if a thorough roaming engendered by either load rejection or technical investigation is conducted and made public to uninstructed generation/overload. While the rst stage ascertain if it was human error, negligence or other solution is compulsory for all Gencos, i.e. operating on factors. “Free Governor Mode (FGM) in accordance with the grid code specication” to enable effective control of Undoubtedly, the transmission network constitutes the frequency accordingly, the second Stage solution is the vital channels of the entire power value chain. It calling up of “Spinning Reserve” from the incentivized goes without saying that the “growth of the power providers. sector is contingent to development of a robust and a non-collapsible transmission network”. The current The non-responsiveness of the regulator to this critical transmission network is characterised by factors such issue is worth exploring by Nigerians given the as aging network, obsolete substation equipment, technical, commercial and economic effects of the overloading of certain transmission corridors, poor frequent grid collapses in a regulated market such as operations and maintenance etc. which clearly the Nigerian Electricity Supply Industry (NESI). portends a network plagued with huge infrastructural challenges. 3 GENCOS HEARTBEAT technical, commercial and economic effects of the vanes are always responding to the signal from the frequent grid collapses in a regulated market such as governor. Below is an example of the frequency the Nigerian Electricity Supply Industry (NESI). deviations in January 2019.
TECHNICAL AND MECHANICAL EFFECTS OF System Performance 19/01/2019 GRID COLLAPSE Highest Frequency 54.19 Hz Frequency deviations out of tolerable zones are not Lowest Frequency 47.13 Hz only damaging the units but also are increasing Peak Generation 4,107.40 MW considerably, the maintenance costs close to three Lowest Generation 37.80 MW times the normal maintenance costs. The following are Total Energy Sent Out 77,573.46 MWH some of the effects: Ÿ The intervals between mandatory maintenance will Most of these service interruptions and high frequency decrease and will need longer time for completion. allegations are attributed by TCN to the inability of DisCos to take load in that they cause system Ÿ The downtime of the generating units will be imbalance which hurt power generators/producers to greater. a grave extent, by depriving them of the ability to sell Ÿ Damaged units will need extra investment without the output of their plants. From Gencos point of view, increasing the power plant capacity investing to increase the capacity of their power plants Ÿ It causes creep of compressor and turbine blades, in the Nigerian Electricity Market (NEM), translates to Ÿ Cracks on exhaust sleeves more risks in terms of machine breakdown, maintenance and repair costs. Ÿ Irregular heating and cooling cycles of hot gas path components that is T H E fatigue damage, One of the main causes of COMMERCIAL/ECONO Ÿ Cracks in ceramic tiles of M I C A L I M PA C T O F the combustion chamber, grid instability is frequency GRID INSTABILITY Ÿ Defective gas control The August 14, 2003 North valves due to wear and roaming engendered by either American Partial Blackout tear, load rejection or uninstructed started shortly after 4 PM Ÿ D e f e c t i v e EDT and resulted in the loss instrumentation devices generation/overload of 61,800 MW of electric w h i c h i n c l u d e load that served more than thermocouples, RTD's, pressure transmitters 50 million people. which necessitates purchases in foreign currencies of replacement parts from OEM and Anderson Economic Group (AEG) estimates the likely total cost to be between $4.5 and $8.2 billion with a Ÿ Accumulation of large Equivalent Operating Hour mid-point of $6.4 billion. This includes $4.2 billion in (EOH) with corresponding low actual operating lost income to workers and investors, $15 to $100 hours, which shortens the time to inspection million in extra costs to government agencies (e.g., due without actually having generated enough income to overtime and emergency service costs), $1 to $2 from the gas turbine. billion in costs to the affected utilities, and between Ÿ Resultant wear and tear in the machines mechanical $380 and $940 million in costs associated with lost or rotating parts. spoiled commodities. Ÿ Malfunctioning of Electrical controls and protective relays. The U.S. Department of Energy (DOE) also published Ÿ Burnt coils, motor contactors, electric motors are a total cost estimate of about $6 billion. This number is observed in the plant. the most frequently cited cost estimate in press The damaging effects is experienced on Steam Turbine coverage of the blackout. Blades, Hydro and Combustion Turbines, as well as on other Power System Equipment on Active Power Juxtaposing the Nigerian case on the Nigerian power ows. system shows the following data: Ÿ 2016 recorded a total of 28 grid collapse from the For a Kaplan hydro unit control, guide vanes regulate month of March, April, May, June, July, September, the ow of water delivered by the penstock. The guide October, November and December. 4 GENCOS HEARTBEAT TECHNICAL AND MECHANICAL EFFECTS OF Most of these service interruptions and high frequency GRID COLLAPSE allegations are attributed by TCN to the inability of Frequency deviations out of tolerable zones are not DisCos to take load in that they cause system only damaging the units but also are increasing imbalance which hurt power generators/producers to considerably, the maintenance costs close to three a grave extent, by depriving them of the ability to sell times the normal maintenance costs. The following are the output of their plants. From Gencos point of view, some of the effects: investing to increase the capacity of their power plants Ÿ The intervals between mandatory maintenance will in the Nigerian Electricity Market (NEM), translates to decrease and will need longer time for completion. more risks in terms of machine breakdown, Ÿ The downtime of the generating units will be maintenance and repair costs. greater. THE COMMERCIAL/ECONOMICAL IMPACT OF Ÿ Damaged units will need extra investment without GRID INSTABILITY increasing the power plant capacity The August 14, 2003 North American Partial Blackout Ÿ It causes creep of compressor and turbine blades, started shortly after 4 PM EDT and resulted in the loss of 61,800 MW of electric load that served more than 50 Ÿ Cracks on exhaust sleeves million people. Ÿ Irregular heating and cooling cycles of hot gas path components that is fatigue damage, Anderson Economic Group (AEG) estimates the likely Ÿ Cracks in ceramic tiles of the combustion chamber, total cost to be between $4.5 and $8.2 billion with a Ÿ Defective gas control valves due to wear and tear, mid-point of $6.4 billion. This includes $4.2 billion in lost income to workers and investors, $15 to $100 Ÿ Defective instrumentation devices which include million in extra costs to government agencies (e.g., due thermocouples, RTD's, pressure transmitters to overtime and emergency service costs), $1 to $2 which necessitates purchases in foreign currencies billion in costs to the affected utilities, and between of replacement parts from OEM and $380 and $940 million in costs associated with lost or Ÿ Accumulation of large Equivalent Operating Hour spoiled commodities. (EOH) with corresponding low actual operating hours, which shortens the time to inspection The U.S. Department of Energy (DOE) also published without actually having generated enough income a total cost estimate of about $6 billion. This number is from the gas turbine. the most frequently cited cost estimate in press Ÿ Resultant wear and tear in the machines mechanical coverage of the blackout. rotating parts. Juxtaposing the Nigerian case on the Nigerian power Ÿ Malfunctioning of Electrical controls and protective system shows the following data: relays. Ÿ 2016 recorded a total of 28 grid collapse from the Ÿ Burnt coils, motor contactors, electric motors are month of March, April, May, June, July, September, observed in the plant. October, November and December. The damaging effects is experienced on Steam Turbine Ÿ January 2017 – over six Grid collapses occurred Blades, Hydro and Combustion Turbines, as well as on (15th, 16th, 18th, 25th, 26th, 27th, and 28th. other Power System Equipment on Active Power Ÿ January 2018 – 6 Grid collapse (2nd, 3rd, 5th, 6th, ows. 7th, 8th) Ÿ January 2019 – 4 grid collapses (3rd, 18th, 19th For a Kaplan hydro unit control, guide vanes regulate 25th). the ow of water delivered by the penstock. The guide Ÿ February – 1 collapse on the 20th Ÿ vanes are always responding to the signal from the March - nil Ÿ April – 1 grid collapse on the 15th governor. Below is an example of the frequency Ÿ May- two collapses so far, 8th & 9th deviations in January 2019. Ÿ According to Punch of 28th May 2019, to date, there has been a total of eight transmission grid System Performance 19/01/2019 collapses – ve times in January, once in April and Highest Frequency 54.19 Hz twice in May. It asserted that post-privatisation has Lowest Frequency 47.13 Hz experienced over 100 system collapses. Peak Generation 4,107.40 MW Lowest Generation 37.80 MW The above gures present a disturbing scene with no Total Energy Sent Out 77,573.46 MWH plan on dealing with the frequency of the collapses. Reason being that the risks/burden technically, 5 GENCOS HEARTBEAT Assessing The Challenges In Operating A GenCo, Given Current Market Consideration By Dr. (Mrs.) Joy Ogaji here has been continuous call from well- association with the above FGN objective, kept to the meaning Nigerians to reverse the privatisation terms of the industry agreements they entered into Tof the electricity sector-DisCos and GenCos, it with the Bureau of Public Enterprises (BPE) which is imperative for Nigerians to have their facts right and denes the relationship between the privatised be able to make decision from an informed companies and the government (Represented by BPE perspective. Below is the position of the generation and Ministry of Finance incorporated (MOFI) with a ve companies in Nigeria. year period to recover lost capacities. Records from BPE shows that as at the takeover date, in November The Power sector is made up of three mutually 2013, available generation capacity was 4500. Also, exclusive, but necessary parts – generation, Installed generation capacity currently stands at transmission, and distribution. An analogy to an electric 13496MW as against 12500MW at take over. GenCos generator will be appropriate. In every home that has engaged on a massive capacity recovery plan with their an electricity generating set, three parts will be obvious acquired asset and achieved in no time lost capacities – the generator itself (generation), an electrical cable or increasing available capacity to 7913MW. Generation wire (transmission) that connects the generator to a companies have not just increased their capacities; they control panel or fuse box through which the generated have also improved in operational performance in the power is distributed (distribution). area of human resource management, Quality, Health Safety & environment standards and community The privatization programme was to allow service responsibilities which are all components of government to transfer public assets in the power their agreement. sector to private hands, for efciency and cost- effectiveness. ''Today, the Bureau for Public Enterprises (BPE) conrms that most of the GENCOs have exceeded Through privatization of these assets, the expectation their contractual obligations. For instance, Ughelli was that fresh capital would be injected by private Transcorp at takeover date had generation capacity of investors, to bring new value into the assets to increase 160 MW and has increased to over 701MW which they the country's privately-held capital base of the power achieved in 2017. Similarly, Egbin at takeover in sector. November 2013, averaged generation of below 300- MW due to the dismal operational state of its six units. At inception, the GENCOs were contractually “At its lowest point, only two of the six units were obligated to ramp up electricity generation capacity by partially operational”. Egbin currently has ramped up about 5,000 megawatts (MW) over a ve year period. capacity to generate 1320 MW subject to gas Modernization of existing plants is necessary but will availability. On the other hand the Hydros like Shiroro require signicant capital investment, some of the at takeover had 450mw with some of the units not GenCos have taken heavy loans to overhaul their plants operating optimally, they have overhauled the units and (Egbin, Ughelli, Geregu 1, Shiroro, Transcorp, Shiroro now generates 600mw which was the stalled Mainstream just to mention but a few.) capacity. Mainstream Energy Solutions Limited has increased the combined Generating Capacity of Kainji Generation Companies despite the stern challenges and Jebba Power Plants from 582MW as at takeover to they are faced with from inception till date, have in 6 GENCOS HEARTBEAT here has been continuous call from well- an electricity generating set, three parts will be obvious meaning Nigerians to reverse the privatisation – the generator itself (generation), an electrical cable or Tof the electricity sector-DisCos and GenCos, it wire (transmission) that connects the generator to a is imperative for Nigerians to have their facts right and control panel or fuse box through which the generated be able to make decision from an informed power is distributed (distribution). perspective. Below is the position of the generation companies in Nigeria. The privatization programme was to allow government to transfer public assets in the power The Power sector is made up of three mutually sector to private hands, for efciency and cost- exclusive, but necessary parts – generation, effectiveness. transmission, and distribution. An analogy to an electric generator will be appropriate. In every home that has Through privatization of these assets, the expectation
Historical Generation Data 1st November 2013 to December 2018
FIGURE 1A Historical Genera on Data 2013 MONTH Available Genera on Average Genera on Stranded Genera on Capability (MW) (MW) (MW) November 4,110.94 3,063.13 1,047.81 December 4,317.70 3,303.90 1,013.80 Average 4,214.32 3,183.51 1,030.80
FIGURE 1B Historical Genera on Data 2014 MONTH Available Genera on Averag e Genera on Stranded Genera on Capability (MW) (MW) (MW)
January 4,301.68 3,199.31 1,102.37 February 6,554.98 3,706.49 2,848.49
March 6,581.13 3,233.52 3,347.61
April 6,699.73 3,261.21 3,438.52
May 6,697.42 3,600.67 3,096.75
June 6,310.57 3,201.42 3,109.14
July 6,022.88 3,150.62 2,872.27
August 6,495.02 3,535.29 2,959.72
September 6,405.14 3,348.71 3,056.43 October 5,993.32 3,546.20 2,447.12 November 5,952.66 3,681.24 2,271.42 December 5,834.02 3,564.52 2,269.50 Average 6,154.05 3,419.10 2,734.94
7 GENCOS HEARTBEAT
FIGURE 1C Historical Genera on Data 2015 MONTH Available Genera on Average Genera on Stranded Genera on Capability (MW) (MW) (MW) Januar y 6,266.46 3,549.61 2,716.85 Februar y 6,112.39 3,475.18 2,637.21 March 6,374.29 3,411.96 2,962.33
April 6,813.43 3,192.37 3,621.06
May 6,851.82 2,573.06 4,278.75
June 6,991.73 3,441.95 3,549.79
July 6,933.06 3,830.11 3,102.95
August 6,631.70 3,976.75 2,654.95
September 7,008.10 4,007.21 3,000.89 October 6,351.72 3,859.53 2,492.18 November 6,393.65 4,070.53 2,323.12 December 6,667.05 3,884.29 2,782.76 Average 6,616.28 3,606.05 3,010.24
FIGURE 1D Historical Genera on Data 2016
MONTH Available Genera on Average Gener a on Stranded Gener a on Capability (MW) (MW) (MW) January 6,677.10 4,104.83 2,572.28 Februar y 6,403.15 3,953.59 2,449.55 March 6,537.09 3,484.43 3,052.65 April 6,988.82 3,140.13 3,848.69
May 7,200.24 2,611.20 4,589.04
June 6,893.05 2,193.23 4,699.82
July 7,304.57 2,842.54 4,462.03
August 7,771.74 3,262.18 4,509.57
September 7,561.48 3,391.39 4,170.10 October 7,744.93 3,509.92 4,235.01 November 7,870.08 3,418.06 4,452.02 December 7,250.76 3,289.94 3,960.82 Average 7,183.59 3,266.79 3,916.80
8 GENCOS HEARTBEAT FIGURE 1E Historical Genera on Data 2017
MONTH Available Genera on Average Stranded Genera on Capability (MW) Genera on (MW) (MW) Januar y 6,139.30 3,000.76 3,138.54 February 6,370.70 3,716.05 2,654.65
March 6,950.01 3,831.67 3,118.34
April 6,889.54 3,568.09 3,321.45
May 7,082.69 3,642.97 3,439.72
June 7,146.24 3,514.63 3,631.61
July 7,345.17 3,496.88 3,848.29
August 7,262.83 3,402.66 3,860.17
September 6,735.00 3,483.59 3,251.41 October 7,336.27 3,764.95 3,571.32 November 7,140.77 3,920.73 3,220.04 December 7,545.87 4,128.72 3,417.15 Average 6,995.37 3,622.64 3,372.72
FIGURE 1F Historical Genera on Data 2018
MONTH Available Genera on Average Gener a on Stranded Gener a on Capability (MW) (MW) (MW) January 7,689.04 3,733.01 3,956.03 February 7,584.46 4,001.33 3,583.13 March 7,306.39 4,097.62 3,208.77 April 7,484.88 4,051.99 3,432.89
May 7,907.73 3,827.32 4,080.42
June 7,261.12 3,643.09 3,618.03
July 7,485.65 3,684.27 3,801.39
August 7,966.87 3,701.24 4,265.63
September 7,736.53 3,570.67 4,165.86
October 7,691.37 3,810.74 3,880.63 November 7,244.88 4,099.57 3,145.31 December 5,252.26 4,148.94 1,103.31
Average 7,384.27 3,864.15 3,520.12
9 GENCOS HEARTBEAT DEDUCTIONS FROM THE HISTORICAL the Federal Government through its agency called the GENERATION DATA Nigerian Electricity Trading Company. The promise Deduction from the historical generation data for the provoked some additional investments by GenCos period 1st November 2013 to 31st December, 2018 with its attendant high cost of capital. Increased shows that there has been 75% increment in the Regulatory Risk. Increased debt prole. The TEM Available Generation Capability amounting to about Promise of 100% GenCo invoice settlement by NBET 3169.95MW (4214.32 in 2013 – 7384.27MW in 2018) failed, placing a big nancial burden on the GenCos. within this period. It can also be logically concluded that The GenCos were made to bear the brunt of this lack- GenCos Available Generation Capability has doubled luster performance on the part of NBET. The impact of over this period. Thus, it can be said that GenCos have the foregoing are: kept to their industry agreement with the Bureau of Ÿ Poor credit rating currently hampering our ability to Public Enterprise (BPE). In a Country with acute power obtain loans and procure essential goods on credit shortage, average Generation should grow along with in the future, in running a thriving business. Available generation capability. Ÿ Poor business viability image to investors who Ÿ It is however sad to know that increase in Available would review our nancial statements to evaluate Generation Capability has met stagnation of Actual the nancial health of the company. generation, i.e. GenCos were increasingly not fully The issue is now an emergency as some of the GenCos dispatched. cannot sustain their businesses with heavy debt burden Ÿ Case in Point: In April 2018, out of 7384.27MW daily running into over 500bn naira. available generation capability, GenCos were only allowed to generate 3864.15MW, thus GenCos lost WEAK NETWORKS about 3,520.12MW daily. No Compensation for The existing transmission network is also inadequate, this!!! fragile and not reliable. The grid cannot conveniently Ÿ There has been an increase in stranded generation, take over 4500MW without rejecting load. Generation p e a k i n g i n 2 0 1 6 w h e r e a b o u t 5 4 . 5 2 % above 5,000 MW may either be lost or rejected. TCN (3,916.80MW) of GenCos Available Generation constantly rejects load with reports its due to DisCos. Capability was stranded daily and not paid for! Effects of Ramping up and down, non-payment for Ÿ Thus, GenCos increased Available Generation ancillary services and faulty transmission lines amongst Capability was not translated to corresponding others. increase in power supply to consumers, so consumers in their generalization believe that the Regular and continued load rejection and its attendant entire system has failed. impact on the machine with no room for compensation. The grid code demands that all network GENCOS BEARING THE BRUNT OF A users including the GenCos should as a matter of rule LACKLUSTRE PERFORMANCE FROM obey any instruction from the system operator (SO). SECTOR Therefore, despite the GenCos efforts to increase Pursuant to NERC's Order No. 136 dated 30th January their available capacity effectively nominating same on 2015, TEM was declared on the basis that the condition a daily basis, the SO has the grid right to instruct any Precedents (CPs) set out in Appendix 2 of the Market GenCo to reduce or cut down on its nominated Rules for the operation of the Transitional Electricity Market (TEM) have been satised. TEM is dened as the Nigerian Electricity Market Stage when all Transactions are driven by contract and competition.
T h e i n v e s t m e n t o n Generation is at the instance of the Off-taker (the buyer of the power generated). GenCos were promised 100% payment of all they are capable of generating by 10 GENCOS HEARTBEAT capacity. It should also be noted that for a GenCo to You must take cognizance of the fact that these are two nominate any capacity, it means effective major players in an industry that is complex, diverse commitments have been made as per gas and the and directly sensitive to both the economy and the equivalent necessary overhead cost. This is a legitimate people of Nigeria. And for that matter, they are at two cost that must be recovered. When the grid frequency extremes; generation and distribution/ consumption. goes very high either due to load rejection on the part NERC through its regulations have earmarked clearly of the DisCos or transmission service provider what each of the players are entitled to. The onus lies inabilities (Line cuts, Transformer faults etc.) to on NERC, the regulator to play its role as the impartial evacuate available capacity, the SO instructs the umpire to monitor and ensure efciency. The issue of GenCo to ramp down on its nominated capacity, the everyone crying wolf should be fast gone. There have GenCo complies. been blame games being played by the various players in the sector, it does not matter whose voice is loudest. All electrical appliances have set conditions under which they function at optimum levels. Any The truth is, the generation companies have in keeping uctuations in these conditions can cause the to the terms of their contract, generated power which appliances to run at a lower efciency. Power has been sold by the distribution companies, what we generators are no exception to this. Thermal power want is pay us our money. We do not have any contract plants, like the gas turbines (GTs) are designed to with the DisCo yet, to ask them to pay us, rather we operate optimally and efciently at base load. have a contract with NBET who is the wholesaler in Operations of these gas turbines at operating points, this market with a guarantee to pay us 100%, if DisCos far away from their base loads imply a reduction in who have contract with NBET have refused/unable to efciency or in other words an increase in pay for electricity taken and sold, by the principle of consumption of gas by as privity of contract, we are much as 15-20%! not parties hence we Gas cost constitutes over cannot be debt collectors. Apart from the huge fatigue NBET should put a rm and damage leading to higher 40% of wholesale electricity default proof mechanism O&M cost meted out on to make the DisCos pay or turbines from ramping up tariffs in Nigeria. declare itself bankrupt. and down over wide temperature swings, Gencos are faced with additional GAS CONSTRAINTS cost burdens from having to operate its Gas Turbines Thermal power from gas and steam turbines accounts far from the base load settings. It is common for about 80% of Nigeria's power generation. Gas knowledge that GenCo power stations have been used unavailability greatly hinders power generation in by TCN, via its subsidiary SO/NCC to stabilise the Power Plants. Its availability therefore is critical to national grid achieving improved electricity supply provided payment is guaranteed through regular payments. Gas Compelling a generator to ramp up and ramp down at cost constitutes over 50% of wholesale electricity unscheduled time affects it equivalent operating hours tariffs in Nigeria. What goes on in gas sector has huge and also stresses the internals of the machine thereby implications for the NESI. Hence Government should reducing the plants lifespan. Generating plants can no ensure that adequate gas pricing framework is put in longer sustain themselves as the percentage of their place; in addition, the Government needs to take a revenue received does not cover their operating costs. concerted effort to resolve and put a stop to the gas The solutions are: pipeline vandalism. Ÿ Facilitate the payment of the outstanding deemed capacity invoice. Power plants are part of the infrastructure of modern Ÿ Again, TCN should maintain the reliability of the society and it is essential that these power plant electrical Grid System to avoid incessant blackouts facilities are maintained as necessary to achieve a high and incidences of deemed capacity. level of reliability, high performance and ensure lower Ÿ Maintain grid acceptable frequency limits of cost for end user consumers. Systematic maintenance between 49.5Hz and 50.5Hz at all times. of the equipment is also essential for a long life Ÿ The total outstanding invoice on deemed capacity expectancy of the electric power equipment. But must be added to market revenue gap for payment. interestingly, most engineering facilities in power
11 GENCOS HEARTBEAT options to optimize the power generation operations. The Capacity payments as captured in the PPA are generally set at a level designed to recover xed and long-term variable costs such as debt service, xed O&M costs and other xed costs/charges and equity return.
The Available Capacities backed up by committed fuel, labour and all other necessary resources are declared to the System Operator (SO) on day-ahead basis. The SO conrms same, instructs GenCos on dispatch based on generation companies have been decient due to lack availability of the grid. In most cases, due to grid of funds to propel machines. From Gencos point of related issues, the Gencos are dispatched far less than view, investing to increase the capacity of their power their declared available Capacities. This gap between plants will mean the need to invest even more in the the Gencos declared capacities and the SO dispatched maintenance and the repair. capacities are components of Deemed Capacity. Yet, the dispatched capacities suffer a secondary reduction The chase and focus on Renewable Energy- prompted by the SO's ramp-down or de-load Notwithstanding the fact that Renewable energy is instructions prompted, probably, by Discos load environmentally friendly, its challenges such as costs, rejection which leads to soaring of the operating stability and siting restriction must be properly frequency. analysed to prevent consumer restiveness when the challenges ensue. There is no perfect energy option- The current practice of not recognising and paying for Natural gas is attracting with relative excellence in the Gencos available capacity tends to put the Gencos supply stability and cleanliness but if not adequately on a very disadvantaged side of the Electricity Market monitored with rm policies on ground, though while favouring the Discos with a reduced monthly Nigeria has abundance of Natural gas its associated Market invoice. By this regulatory risk, the aims and cost will make it unattractive. objectives of the privatization of the Electricity industry are obviously defeated. It does not only The electric power sector reform is predicated on discourage and restricts potential investors but also limiting government's involvement in the power prejudices efcient operation while the GenCos ability generation and distribution sub-sectors by leveraging to meet their nancial obligations becomes very on private sector investments for efcient difcult. performance and optimal service delivery. The expected service delivery can only be guaranteed if the It is the intention of the GenCos to submit that, for a Nigerian Electricity Market (NEM) is strictly Regulator desirous of achieving a very efcient and administered by the extant ruling documents as done sustainable electricity service delivery, it must ensure in other developed Markets. Optimal delivery cannot that investors are attracted with a conducive thrive in view of indiscriminate redenitions of regulatory environment which will in turn guarantee standard processes already dened in the ruling reasonable return on investment. documents like the Electricity Act, Grid Code, Market Rules and all other approved Operating Procedures. GenCos have outlined their achievements in the privatisation in terms of generation capacity which Investment in Generation Capacity should, in all intents points to the gains of the privatisation. GenCos are not and purposes, attract equivalent returns for the Capex regretting investing in our country. GenCos are and Opex. In Electricity Market all over the world, patriotic citizens with patriotic zeal and are willing to Capacity payment (charges /fees paid to ensure build the nation together with the government. A availability of electricity whenever the utility is needed country that is ready to grow economically will invest or required for use is guaranteed while Energy in its energy sector and Nigeria, which has a vision to payment is dictated by the amount of energy be among the top 20 nations economically by 2020, produced. This principle is a global norm, critical to should focus more on the power sector as the present securing and sustaining the debts and equity nancing state of the power sector is deplorable.
12 GENCOS HEARTBEAT DEVELOPING A VIABLE RISK MATRIX: Panacea To Sector Problems.
By Dr. (Mrs.) Joy Ogaji
BACKGROUND: consumers. This anomaly presents a serious risk to the isks are inherent in the electricity sector and are market, especially in developing a comprehensive critical element in the sector/value chain as they framework for determining the industry pricing Rcan fundamentally alter the cost structure of structure with a view to delivering a viable and robust projects. Ensuring that every risk is recognised, tariff policy for the Nigerian Electricity Supply Industry managed and allocated to the party best suited to bear, (NESI). This has become a big challenge and an is one of the fast routes to unmasking the conundrum inhibitor to the NESI, defeating the effort of the in the Sector. Since privatization of the Nigerian power GenCos in recovering unavailable capacities, sector, the market has been submerged in risks ranging considering the massive xed charges incurred to keep from nancial to regulatory risks much of which is such units available. borne by the generating companies (GenCos). The Commercial and Technical fall out of volumetric The Nigerian Electricity Supply Industry has been risk known to practice risk avoidance by throwing it The current NESI payments to Gencos as managed by around like a bridal bouquet. Risk allocation is usually in NBET do not pay most GenCos for its tested or favour of the stronger party which leaves such risks at deemed capacity. This clearly contravenes the tenets the GenCos who are viewed to be the most compliant of section 76 (2) of the EPSRA 2005 which allows a and patriotic to bear. The party with more power may reasonable return on capital invested by the operator, seek to transfer risks to the weaker party. The as well as serves as a critical incentive for continued imperative of developing an efcient risk management improvement in technical capacity as well as quality of framework in solving what experts called “the hydra- service. The generation companies in keeping with the headed economic, technical and institutional terms of their licence, performance contract, business electrication challenges in the Nigeria Power sector plans and PPA have ramped up capacity from the requires innovative insights”. Some of the risks borne takeover date of 1st November, 2013 to date. The by the Generating companies in Nigeria are: risks in the market is even more for the legacy and NIPP GenCos, who are not paid for CAPACITY that is Volumetric Risk available but not utilised/dispatched. One of the indices of the MYTO is available generation capacity, which is as globally practiced, the capacity All Thermal and Hydro power plants are designed to that has been declared, tested and deemed available. operate optimally and efciently at base load. To the transmission company of Nigeria (TCN) and the Operating these plants outside base load conditions is distribution Companies (DisCos), this could mean leading to a reduction in efciency with implications for what TCN can dispatch and what DisCos distribute to an increase in consumption of gas for thermal plants by
13 GENCOS HEARTBEAT as much as 15-20% (extra cost not recognized by the entire power sector is huge. The GENCOs can NBET nor captured in the MYTO). Power Generation only pay the Gas Suppliers if the debts owed the Companies are increasingly facing lower capacity GENCOs are paid by the federal government (FG), utilization as about 50% of total available power and its relevant agencies. capacity is currently stranded and the rest is running at 53% utilization. The month of April, 2018 for instance, In addition, the Gas Supply Agreements (GSA) as well GenCos had an average available capacity of 7484.88 as its counterpart, the Gas Transmission Agreement MW, TCN could transmit an average of 3985.15MW (GTA) have clauses that allow for an annual escalation which is just about 53% of the available capacity. It of the gas price in line with agreed computation of should also be noted that for a GenCo to nominate any consumer price index. On an annual basis, this cost is capacity, it means effective commitments has been being added to the gas and transportation prices paid made as per gas and the equivalent necessary overhead by the GenCos but not reected in the Tariff review. cost. This is a legitimate cost that must be recovered. This is an abnormally that needs to be corrected by Grid instability which leads to high frequency when the NERC since the Power Purchase agreement which grid frequency goes very high either due to load should have ordinarily taken care of this is not effective. rejection on the part of the DisCos or transmission service provider inabilities (TSP) due to line cuts, Forex Risks transformer faults to evacuate available capacity, the SO instructs the GenCo to ramp down on its nominated capacity. The damaging effects is experienced on Steam Turbine Blades, Hydro and Combustion Turbines, as well as on Other Power System Equipment on Active Power ows.
Frequency deviations out of tolerable zones are not only damaging the units but also are increasing considerably, the maintenance costs close to three times the normal maintenance costs which completely distorts the wholesale price especially as it is not taking GENCOs have been under the heavy yoke of repaying care of by the MYTO. the foreign-currency denominated acquisition loans with which they acquired their respective power Gas Purchase and Transportation Risk generation plants. GenCos have also continued to bear huge foreign exchange losses and default as a result of failure of FG to meet its payment obligations to GENCOs. We must emphasize that GENCOs obtained these loans when the exchange rate was N155 to $1. Apart from the fact that their income is in Naira, it is a notorious fact that foreign exchange rates at some point rose to about N500 to $1 and is currently about N360 to $1. GenCos access dollars in parallel market at the current rate of 360 to $1 as against the CBN approved rate of 306 to $1. GenCos The state of the market in Nigeria is such that thermal are then saddled with the burden of the difference. Gencos are required to assume take-or-pay risk for fuel supply under their gas sale and purchase Liquidity Risk arrangements. GENCOS are substantially indebted to The government in his plan to privatise the generation their gas suppliers and transporters (“Gas Suppliers”). assets intended to put in place an effective payment Recently, the Gas Suppliers issued written threats to security and guarantees through a World Bank Partial cut supplies to GENCOs due to the outstanding Risk Guarantees supported by the Sovereign indebtedness of GENCOs to them. The Gas Suppliers Guarantee of Nigeria for GENCOs' exposure to the have also demanded the posting of effective letters of market. These were to ensure that the GENCOs and credit as payment security for the GENCOs' debt. by extension their gas suppliers, lenders and nanciers They have now gone ahead to appoint debt recovery get paid as and when due, as well as take care of certain agents to recover the debts owed them by GENCOs. risks to which the GENCOs and their investors are The negative implication of these for the GENCOs and exposed, thereby stabilizing and making the market 14 GENCOS HEARTBEAT viable. If the need for payment securities and private entities and leaves the government agencies guarantees were identied then, it has even become such as NBET and TCN is unhealthy for the sector. more inevitable now that the obvious negative impact Assessing and measuring risks involve consideration of of the absence of such critical instruments and the sources of risk, the magnitude of their safeguards, are staring the market in the face. Effective consequences, and the likelihood that those payment security and sovereign guarantee is inevitable consequences may occur. Existing controls are then to stabilize the Nigerian Electricity Supply Industry taken into consideration. The sector should develop or (NESI), given (a) the current developmental stage of devise risk response strategies such as transferring the electricity market; (b) the default rate of GENCOs risks to parties more suited to mitigate or accept them, in respect of their loan repayment obligations to their or developing crisis management and disaster lenders. recovery capabilities to lower the severity of the impacts in the event of a risk occurrence. When Without such instruments and the required sovereign devising a risk response strategy, it is important to backing, it becomes impossible for any bank or understand the full spectrum of risk factors and nancial institution to provide any funding or credit consequences. Risk mitigation measures are usually accommodation to any GENCO, yet there is an designed to either lower the probability or severity of a obvious need for substantial additional investments risk factor, risk, or consequence. and funding to develop the NESI and put the electricity market on the right growth trajectory. THE NIGERIAN POWER SECTOR GENCOS BUFFER / RISK BEARER Bankruptcy Risk In the Nigerian electricity Supply Industry (NESI), the appropriate party best suited and licensed to bear the liquidity and transmission risk is the Nigerian Bulk Electricity Trading Company (NBET), a licensee of the Nigerian electricity Regulatory Commission (NERC), who should be made to keep and honour the terms of its contract to the Gencos. The market was designed such that NBET's PPAs were to be backed by World Bank PRG (payment & regulatory risks) and Multilateral Investment Guarantee Agency (MIGA) political insurance. The Power Purchase Agreement (PPA) clearly delineates the terms of the business Given the huge and ever increasing debts on the relationship and expectations of the parties. balance sheet of the GenCos, and their incapacity to service and repay the loans and credit facilities foisted NBET was designed to help smoothen these on them by the huge outstanding debts owed them, relationships, removing the friction which may exist the absence of effective payment security and between Gencos and Discos so that even if Discos guarantee, the creditor banks to GENCOs are cannot accept the electricity, Gencos will not lose currently under pressure by Central Bank of Nigeria money badly. (CBN) to make provisions for power sector loans, whose performance are admittedly very poor. The The need for effective guarantee or buffer for the effect of such provisioning is a serious set-back for the GenCos was predicated in the understanding that market reset being targeted by the PSRP. GENCOs will decisions on investments in power generating capacity denitely come under additional pressures and be depend on expected returns and costs, and are exposed to the exercise of lenders' right against bad typically capital intensive, irreversible and dependent debtors and the fallout of the exercises. on other parts of the electricity chain.
Regulatory Risk NBET is in intermediary role to make sure that an Regulatory risk especially enforcement and equilibrium point is maintained and the market implementation is very high. Regulatory independence function well. This is because investment on is key to private sector condence in the power sector Generation is at the instance of the Off-taker (the and has a signicant effect on the ability of government buyer of the power generated NBET). to attract and sustain investments in the power sector. A situation when the regulator regulates only the Assets in the electricity industry have a high degree of
15 GENCOS HEARTBEAT specicity and investments have a long lead-time disclaimer (exculpatory) clauses and several versions resulting in uncertain future revenue streams. For of the quasi Power Purchase Agreement (PPA) given to instance, in deciding on the construction of a new the legacy plants via the security trust deed, the PPA power plant, the investor will keep a close eye on the activation agreements, and other addenda's present and anticipated infrastructure need for transferring its obligation to a third party to bear. transportation of both input (possibly gas) and output Rather than activate the PPA agreements, blames are (electricity). Long term contracts can give an indication traded by both NBET and Discos as to their inability to of the expected price (and thus of returns), Therefore, provide the needed guarantees for ve (5) years, electricity volume demands growth and development leaving the Gencos in limbo bearing all the associated of supply (including import and interconnector risks, since there is no risk management framework in capacity) are important indicators for an investor. the sector. The lack of adequate risk management Hence, price or payment uncertainty is a major mechanism implies that the problem of the sector challenge. continued unabated since the GenCos are unable to bear all the risks. In recognition of the foregoing, GenCos were promised 100% payment by NBET of all they are CONCLUSION capable of generating. The promise elicited some Optimum risk allocation ensures a mutually rewarding additional investments by GenCos with its attendant long term business relationship. An integrated as well high cost of capital, increased regulatory risk, as mandatory approach in identifying opportunities increased debt prole. Unfortunately, the TEM and managing risk in the face of this uncertainty is Promise of 100% GenCo invoice settlement by NBET needed to help provide regulatory certainty for failed, placing a big nancial burden on the GenCos. decision makers as the industry plans for signicant The GenCos were made to bear the brunt of this lack- growth in demand. Given the short cycle of lustre performance on the part of NBET, leading to the governments and the way in which politics works, it is foregoing impacts: important at the outset to make sure the provisions of Ÿ Poor credit rating which is a poor viability image offtake agreements are fair and reasonable and adhere issue currently hampering GenCos ability to obtain to international best practice loans and procure essential assets/infrastructure on credit in the future in running a thriving business. Reducing risks or proper risk allocation requires an Ÿ Poor business viability image to investors who understanding of where the risks occur, what would review their nancial statements to evaluate arrangements sustain them, and which systems and the nancial health of the companies. stakeholders can be strengthened to create an effective, systemic movement toward accountability The issue is now an emergency as some of the GenCos and integrity in the sector. cannot sustain their businesses with heavy debt burden running into over billions of naira. This is not good for both investors even as regulatory change causes uncertainty, leading to downgrades and NBET as a means of insulating itself from the higher spreads, which are of great concern to all obligations it was saddled with above, came up with nanciers.
16 GENCOS HEARTBEAT
Transcorp Power Limited Appoints Two Non-Executive Directors The Board of Directors of Transcorp Power Limited recently appointed Chris Ezeafulukwe and Sam Nwanze as Non-Executive Directors with effect from March 14, 2019.
Christopher Ezeafulukwe holds an LL. B. Sam Nwanze holds an MSc. degree in Finance degree from the University of Lagos, a B.L (Second and Management from Craneld University in the UK, Class Upper division) from the Nigerian Law School, an where he won awards as the best graduating student LL. M from the University of Lagos and another LL. M in and a prestigious Annual Award for Academic Energy, Environmental & Natural Resources Law from Excellence. the University of Houston, Texas. He is a member of the Nigerian Bar Association (NBA), Institute of Chartered He has led several green and browneld Secretaries & Administrators of Nigeria (ICSAN), investments/projects covering oil & gas, power, Association of International Petroleum Negotiators agriculture, real estate, hospitality, healthcare, (AIPN), and until recently, a member of the Executive technology, nancial services and impact investing. Council of the Association of Power Generation Most of his works have been done in various African Companies. markets, but he has been involved in other projects in the United States, United Kingdom and India. Chris started his legal career with the law rm of Paul Nwanze's key achievements include being the rst Usoro & Co. He was the Company Secretary of Bank African nominated to the board of the Global Impact PHB Plc (now Keystone Bank Limited) and also served Investing Network (GIIN). Sam Nwanze also serves as the Head, Legal Services and Company Secretary of as the Director of Finance and Investments at Heirs Platinum Bank Plc. Following his stint in the banking Holdings. profession, he joined Transnational Corporation of Nigeria Plc (Transcorp) in 2012 as the Legal Adviser & Company Secretary and is currently an Executive Director at Transcorp. He is responsible for Business Development and Legal, with a focus on deepening Transcorp's power business and developing its oil and gas assets.
He has over 20 years' experience in legal and transaction advisory, company secretarial and related practices as well as business development amongst others in a career spanning several industries.
17 GENCOS HEARTBEAT Consumers: NERC FORUM OFFICES Culled from NERC Website he NERC Forum is a body set up by the 2. One representative of Commercial Customers to Commission in exercise of its powers under the be nominated by the Nigerian Association of TEPSR Act 2005 to entertain appeals from Chambers of Commerce, Industry, Mining and decisions of Customer Complaints Unit (CCU) of Agriculture. Electricity Distribution Companies (DisCos). 3. One representative of Household Customers to be nominated by the Consumer Protection Council. Customers who are not satised with the resolution of the complaints by CCUs or experience delay in the 4. One representative of an NGO based in the resolution of complaints should escalate the complaint Distribution Licensee's operating area nominated to the Forum for resolution. by the Commission. 5. One nominee based in the Distribution Licensee's The Forum is established in the operational area of the operating area who has an electrical engineering DisCos. Membership of the Forum include: background nominated by the Commission. 1. One representative of Industrial Customers to be nominated by the Manufacturers' Association of Nigeria.
VARIOUS FORUM OFFICE LOCATION IN NIGERIA Abakaliki Forum Ofce Birnin Kebbi Forum Ofce No. 3 Ezekuna Crescent, Off Nsugbe Street, No 8 Ahmadu Bello Way, Opp. Kebbi State Abakaliki, Ebonyi State. Government House, Birnin Kebbi, Kebbi State Email address: [email protected] Email address: [email protected] Telephone No: 09037808590 Telephone: 09062863161
Abuja Forum Ofce Calabar Forum Ofce No.14, Road 131, Gwarinpa, Abuja. Plot 109, MCC Road by Ibok Street, Calabar Email address: [email protected] Cross River State Telephone No: 08146862225 Email address: [email protected] Telephone: 09062863165 Asaba Forum Ofce Dennis Osadebe Way, After Asaba Scan Center, Beside Eko Forum Ofce Mobil Filling Station, Opposite Nnpc Filling Station, No 61 Odunlami Street, Off Marina, Lagos Island Asaba Delta State Lagos State. Telephone No: 09062277247 Telephone No: 08106807261 Email address: [email protected] Email address: [email protected]
Awka Forum Ofce Enugu Forum Ofce Plot 80, Aroma Junction Layout, Awka – Onitsha John Anichukwu Close, Plot 7 Mkpokiti Pocket Layout. Express, Opposite CBN, Awka, Anambra State. Ogui New Layout Enugu, Enugu State. Email: [email protected] Telephone No: 08146862230 Telephone: 09037808594 Email address: [email protected]
Bauchi Forum Ofce Gombe Forum Ofce No 37 old Jos Road, GRA, Bauchi Government Layout GDP/2, Along Ministry of Telephone No: 09062924607 Education Road, Gombe, Gombe State. Email address: [email protected] Telephone: 08140440079 Email address: [email protected] Benin Forum Ofce No. 34, Akpakpava Street, Benin City, Edo State. Telephone No: 09037808592 Email address: [email protected]
18 GENCOS HEARTBEAT Gusau Forum Ofce Lokoja Forum Ofce No 2 Canteen Daji, J.B. Yakubu Road Gusau, Zamfara Hassan Katsina Road, Opposite State Civil Service State Commission Zone 8, Police Headquaters Lokoja, Kogi Email Address: [email protected] State Telephone No: 09062924601 Ibadan Forum Ofce Email address: [email protected] Jibowu Street, Opposite Magara Police Station, Iyaganku, G.R.A. Ibadan. Oyo State. Makurdi Forum Ofce Telephone No: 08146862252 Hepzibah Plaza, Atom Kpera Road, Opposite Makurdi Email address: [email protected] International School, Makurdi, Benue State Telephone No: 09062277249 Ikeja Forum Ofce Email: [email protected] Novel House, Plot 3, Block J, Otunda Jobifele Way Alausa CDA, Ikeja, Lagos State Osogbo Forum Ofce Telephone No: 08106807298 No.51 Isiaka Adeleke Way, Along Okea-Alkuwuodo Email address: [email protected] Road, Osogbo, Osun State Telephone No: 09062277249 Ilorin Forum Ofce Email address: [email protected] No. 30 Stadium Road, Off Taiwo Road Ilorin, Kwara State Owerri Forum Ofce Telephone No: 09062924603 No. 1 C.B Anyanwu Road, Housing Area B, Exclusive Email address: [email protected] Garden by Achike Udenwa Estate Owerri, Imo State Jigawa Forum Ofce Telephone No: 090622707245 Dutse GRA, Dutse, Jigawa State Email: [email protected] Telephone: 07031704827 Email: [email protected] Port-Harcourt Forum Ofce No.15 Okuru Road, Off Peter Odili road Adjacent Golf Jos Forum Ofce Estate , Off Ordinance Road, Port Harcourt, Rivers No. 5a Rayeld Road, Jos. Plateau State State Telephone No: 09037808597 Telephone No: 08146862223 Email address: [email protected] Email address: [email protected]
Kaduna Forum Ofce Sokoto Forum Ofce Wema Bank Building, No.13.Bida Road by high court, No. 1 Garba Duba Road, Sokoto, Sokoto State Kaduna State Email Address: [email protected] Telephone No: 08106807299 Telephone: 09062863157 Email address: [email protected] Umuahia Forum Ofce Kano Forum Ofce No 80 Aba Road, Umuahia, Abia State No.2, Miller Road, Bompai, Nassarawa G.R.A, Kano, Telephone No: 09062277251 Kano State. Email address: [email protected] Telephone No: 08146862222 Email address: [email protected] Uyo Forum Ofce No. 63 Osongama Road, Off Oron/Uyo Airport Road, Katsina Forum Ofce Uyo, Akwa Ibom State No. 7 Abuja Crescent, Off Hassan Usman Katsina Email Address: [email protected] Road, Katsina, Katsina State. Telephone: 07031704821 Yola Forum Ofce Email: [email protected] No. 5 Nguroje Street, Karewa Extention, Jimeta/Yola, Adamawa State. Laa Forum Ofce Telephone No: 09037808535 Nacwkye Street , Opposite Zenith International School Email address: [email protected] Off Shendam Road, Laa, Nassarawa State Telephone No: 09062924601 Email address: la[email protected]
19 GENCOS HEARTBEAT OPINION
Electricity Distribution Franchising In Nigeria: A Bird's Eye View for a Concerned Electricity Consumer By Albert Chris Puja, Esq. Email- [email protected]; Mobile +2348130770183
n 2013, the Federal Government of Nigeria to say that the Discos do not share a part of the blame. concluded the privatisation of the segmented Their failure to fully meter their customers, Ipower sector and unbundled generation companies discontinue crazy billing, and upgrade their largely (Gencos) and electricity distribution companies dilapidated distribution infrastructure have validated (Discos). This initiative, which borrowed considerably some of these criticisms. The instability of the grid has from the Indian power sector, is considered as one of also been attributed to the weak distribution network, the most globally celebrated power reform initiatives hence recommended to be rehabilated and expanded. in recent times. The primary objectives of the On the ipside, it has been argued in favour of the privatisation exercise which was birthed by the Discos and rightly so, that some of the highlighted National Electric Power Policy 2001 and guided by the problems cannot be resolved by the Discos given the Electric Power Sector Reform Act 2005 were extant electricity pricing regime which has been summarily; to eliminate the state-owned monopoly, variously identied as “non-cost reective”. Other National Electric Power Authority (NEPA), that was points argued include the pitiful funding constraints and unable to attend to the power needs of Nigerians and, enormous electricity debts owed to the Discos by create a competitive and efcient private-sector led Ministries, Departments and Agencies (MDAs). To electricity market in order to reverse the “dark-days” buttress this point, according to the Power Sector a s s o c i a t e d w i t h Recovery Programme NEPA. issued by the Federal No matter what the case may Government, the However, years after be, it is clear that the Discos need M D A s o n a n privatisation, although aggregate owe the the sector has fared to be recapitalised so that they can electricity industry an better than it did estimated NGN 26 under the NEPA days, attend to the investments required billion as at the end of the leap remains 2016. One can only negligible, as the of them in the power sector. imagine what the N i g e r i a n p o w e r gure stands as of sector is still marred by shortages and epileptic supply, today. No matter what the case may be, it is clear that constant grid collapses, decient and weak distribution the Discos need to be recapitalised so that they can infrastructure as well as high Aggregate Technical attend to the investments required of them in the Commercial & Collection (ATC & C) losses; coupled power sector. with non-payment, meter bypass and energy theft by end consumers. Some commendable “quick-win” initiatives and policy actions have been introduced and implemented in the Due to rampant liquidity crisis and tariff inadequacies, Nigerian Electricity Supply Industry (NESI) by the the entire value chain, comprising gas suppliers, power sector regulator, the Nigerian Electricity Gencos, Transmission Company of Nigeria (TCN) and Regulatory Commission (NERC) and other Discos, is on the verge of collapse and in a state, stakeholders, in a bid to address some of the challenges deserving the declaration of an emergency. being faced by the Discos and improve their operations. Unarguably, the most prominent of these In the writer's opinion, the Discos are the only segment initiatives is the Meter Asset Provider scheme of the electricity value chain that inherited the 'NEPA' introduced with the far-reaching objective of tag and its antecedent notoriety. However, this is not introducing third-party investors into the NESI, whom 20 GENCOS HEARTBEAT
The contractual relationship between the Discos and franchisees is to be documented in a Franchise Agreement which will amongst other things, make provisions on contract period, performance parameters, ownership of assets, investment plans, frequency and mode of payment, events of default and conditions for termination, etc.
T h e C o n s u l t a t i o n Pa p e r species that while the MYTO Tariffs would still apply, a in their capacity as Meter Asset Providers (MAPs) surcharge (pre-approved by would assist to bridge the metering gap in the franchise NERC) may also apply where the franchisee makes areas of Discos through accelerated meter roll out and investments to provide additional power (to cover the provision of related metering services. supply shortfalls) at a premium cost which exceeds the expenditure threshold envisaged under MYTO. In similar fashion, more recently, NERC has sought further wisdom in the foregoing regard from the The Consultation Paper further proposes three reform-godfather, India, through the proposal of the franchising models which include: Ÿ introduction of electricity distribution franchising in franchising of metering, billing and collection (MBC) the distribution segment of the electricity value chain. operations; Ÿ franchising the total management of electricity Electricity Distribution Franchising Consultation distribution function; and Ÿ Paper franchising of energy procurement. NERC recently issued a consultation paper on the “Development of a Regulatory Framework for It is expected that the Consultation Paper together Electricity Distribution Franchising in Nigeria” (the with the comments received thereon, would form the “Consultation Paper ”) and further invited basis for a proposed Electricity Distribution stakeholders and the public to send in their reviews Franchising Regulations to guide franchising activities in and comments on the proposed franchising Discos' operations and coverage areas. framework. Prospects of Electricity Distribution Franchising The Consultation Paper sets out the electricity Generally, the introduction of electricity distribution distribution franchising business model being franchising model into the NESI as proposed under the proposed by NERC under which a Disco can appoint Consultation Paper is commendable and it backs the and authorise capable third-parties (franchisees) to commitment of NERC to grow the power sector from provide electricity utility distribution services on its where it presently is, to where every stakeholder and behalf in a particular area within the Disco's total concerned citizen wants it to be. However, for this franchised distribution area, with the aim of improving objective to be achieved, pragmatic and robust legal the quality of supply of electricity and other operations framework and implementation mechanisms must be including metering, billing, collection and network put in place. rehabilitation and expansion within the sub-franchised area. Taking into consideration the experiences in India, from where the electricity distribution franchising To ensure transparent procurement of franchisees by model has been tested and proven to deliver benets Discos, the Consultation Paper recommends that the particularly in relation to reduction of ATC & C losses, franchisees are to be engaged after the successful there are reasonable expectations that if the proposed completion of a competitive procurement process to franchising model is well structured and implemented be monitored by NERC. it, in addition, has the potential of improving the administrative efciency of Discos; especially for those 21 GENCOS HEARTBEAT Discos whose franchise area cover more than one considerably to the success of the franchising model. It state. The business model also has the potential of is recommended that NERC should have triing assisting Discos to score high on some performance control over the structuring and organisation of the indices such as metering, enhanced network, franchising arrangement especially as per determining increased power supply, efcient billing and collection the area to be franchised, the franchise period and as well as improved quality of service to end terms of engagement of the franchisees under the customers. Franchise Agreement while, Discos should be allowed to design and customize their franchise arrangements While expressing doubts that the franchising model in line with their business needs. would address the liquidity crisis in the power sector attributable to the non-existence of a cost-reective However, to ensure that only companies/organisations tariffs, it is hoped that it may improve the distribution with the requisite technical, managerial and nancial infrastructure shortfall. However, it is instructive to competence are allowed to participate as franchisees highlight that the extent to which the franchising in the business model, NERC should implement a pre- business model would assist to address the electricity qualication assessment, similar to what was done for distribution infrastructure gap would, to a large extent, interested MAPs. Also, NERC should devise a plan for depend on incentives which NERC is going to monitoring the performance and activities of the introduce and implement under the franchising franchisees particularly in relation to ensuring that they framework. are reducing ATC & C losses in their sub-franchised area. Further to the above, it is recommended that the “surcharge” and tariff regime under the proposed Conclusion franchising framework should be attractive to receive Undoubtedly, the proposed introduction of the the buy-in of investors and further strengthen the franchising model represents many advantages for bankability of the franchise projects. It is strongly Discos and the entire electricity value chain. An advocated that an entirely different tariff framework improvement in the network and operations of the should be developed for the franchising model. Discos has a far-reaching impact on the Nigerian Additionally, the licensing framework under the power sector. However, to unlock the opportunities proposed framework should be simplied to eliminate abound in the franchising model, issues in relation to bureaucratic bottlenecks that may slow the legal framework, tariffs, implementation and deployment of the scheme by Discos. administration need to be thought out carefully.
Already, some Discos have in place some In the meantime, all stakeholders and parties arrangements with third parties which are similar to concerned should extend their support to ensure that some of the franchising models being proposed under the Consultation Paper is transformed into a the Consultation Paper, especially in terms of secondary legislation having the force of law. outsourcing some of their distribution functions including revenue collection, meter inspection, repairs and maintenance, etc. In this regard, in order to avoid unfavourable disruptions to the existing operational setup, it may be advantageous if these a r r a n g e m e n t s a r e accommodated under the p r o p o s e d f r a n c h i s i n g framework.
The existence of an arm's l e n g t h c o n t r a c t u a l relationship, devoid of undue regulatory interferences, between the Discos and the f r a n c h i s e e s w o u l d a d d 22 GENCOS HEARTBEAT GENCOS Photo Gallery of 2018 End of Year Events
Engr. Dallas Peavey (Outgoing GenCos Chairman) Presenting L-R: Engr. Agha Ogbonnaya, Engr. Godwin Emmanuel, Engr. U.O Kalu, Gifts to a winner Mr. Frank Whyte, Engr.. Dallas Peavey
The Executive Secretary presenting an award to the outgoing Unveiling of the Fourth Edition of the GenCos HEARTBEAT GenCo Forum Chairman, Engr Dallas Peavey
Spoken words by Mr. Muyiwa Kolade Engr.. Dallas Peavey Presenting Gift to a Winner
Cross Section of Guest 23 GENCOS HEARTBEAT
Engr. Lamu Audu Presenting Gift to a Winner Dr. (Mrs.) Joy Ogaji Presenting Gift to a Winner in one of the games
Dr. (Mrs.) Joy Ogaji Presenting Gift to a Winner Dr. (Mrs.) Joy Ogaji Presenting gift to a Winner
Cutting of the End of Year Cake by Mr. Frank Whyte, MC (Mr. Muyiwa Kolade ) with the GENCOS Executives Engr.. Dallas Peavey, Dr. (Mrs.) Joy Ogaji, Engr. Lamu Audu (L-R)
TCN MD (Mr. Gur Mohammed) Felicitating with the GenCos
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