Blackout looms as power firms become broke

The power sector may be heading for a total collapse if the current paucity of funds in the industry is not addressed quickly, officials of the Federal Ministry of Power, Works and Housing, Nigerian Bulk Electricity Trading Company and the Nigerian Electricity Regulatory Commission have said.

According to them, the sector is presently suffering from acute shortage of funds as both power generation and distribution companies are finding it difficult to meet their various obligations to NBET, gas suppliers and other service providers.

It was learnt on Saturday that the inability of NBET, popularly referred to as the bulk trader, to pay about N156bn owed the generation firms was primarily because the distribution companies were not paying for the power delivered to them by the generating companies through the Transmission Company of Nigeria.
The power sector was officially privatised in November 2013 when the successor companies of the defunct Power Holding Company of Nigeria were split into generation and distribution firms.

The Gencos and Discos were handed over to private investors who had promised to revamp the ailing companies as they progressed.

But the Gencos on Wednesday threatened in a statement to shut down power supplies unless the government settled the longstanding N156bn it owed them and improves gas supplies, as they were finding it difficult to operate.

The Gencos get their payment from the bulk trader, while NBET makes the payment from the remittances it receives from the Discos.

Our correspondent gathered in Abuja that the Discos had continued to fail in making the required remittances to the bulk trader, a development that had resulted in the inability of NBET to settle the claims of the Gencos.

When asked to react to the threat by the Gencos with respect to cutting of power supply, the General Manager/Head, Power Procurement and Power Contract, NBET, Mr. Yesufu Alonge, said, “The truth is that participants in the sector are having challenges. Now, the Gencos generate power, which we buy and sell to the Discos.

“The Discos are supposed to pay us fully so that we can pay the Gencos, but they don’t pay. What they pay most times is maybe around 30 per cent of what they are supposed to pay. So, we don’t have enough to pay the Gencos. The truth, however, is that the Gencos are really undergoing serious challenge.”

On why failed NBET failed to settle the Gencos pending when the Discos would find their feet with respect to revenue generation and adequate remittances to the bulk trader, Yesufu said that the funds of the agency were not meant to be used as subsidy for the power generating companies.

He said, “The money in our possession is taxpayers’ money. That money is not to be used as subsidy. So, if we go ahead to fully pay the Gencos and the problem in the sector is not resolved, what do you think will happen?

“The only time NBET can use this money is when, for instance, the sector is working very well and the Discos are making the required remittances. And maybe suddenly they encounter some challenges and can’t remit, say about 20 per cent of what they need to remit. We may decide to step in, knowing that in a short while they will clear the debt; they are not even remitting up to 30 per cent of what is required of them.”

The power distribution companies have repeatedly complained that they are not meeting their obligations because of the huge debts owed them by electricity consumers, particularly the historical debts owed by the Ministries, Departments and Agencies of the government.

The Executive Director, Association of National Electricity Distributors, an umbrella body for the Discos, Mr. Sunday Oduntan, told our correspondent that the distribution companies were owed about N100bn as of July this year by the MDAs alone.

This, according to him, is impacting negatively on the operations of the Discos and has limited their ability to make the required remittances to NBET.

Similarly, officials at NERC and the Power ministry told our correspondent that it was high time the government intervened in the sector in order to avert an imminent collapse.

“There is a problem in this sector and that problem is paucity of funds to run the various businesses in it. Power consumers don’t want to pay increased tariff; Discos don’t have money to remit to NBET and NBET can’t pay the Gencos. This is the time for the government to intervene before we regret privatising this sector,” a senior official at NERC, who spoke to our correspondent in confidence, said.


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