The Electricity Generating Companies in Nigeria (GENCOs) has expressed frustration over the continued failure of the Nigerian Electricity Bulk Trading Company (NBET) to commit to the Power Purchase Agreements (PPA) reached between them.
NBET was incorporated on July 29, 2010, with a mandate to engage in the purchase and resale of electric power and ancillary services from independent power producers and from the successor generation companies.
NBET discharges its duties by entering into PPA with generation companies and resells power to distribution companies (Discos) through the vesting contracts.
To fulfil its mandate and drive investment into Nigeria’s power sector, NBET is positioned as credit-worthy counterparts for current and future generation projects.
NBET was capitalised to the tune of 800 million dollars by the Federal Government on Oct 2014. Power Purchase Agreement (PPA) is a contract between two parties, one which generates electricity (the seller) and one which is looking to purchase electricity (the buyer).
The PPA defines all of the commercial terms for the sale of electricity between the two parties, with details on commercial operation, the schedule for delivery of electricity, penalties for under delivery as well as payment terms.
In a communiqué by the Head, Research and Development, Independent Energy Watch Initiative, Mr Ogbonna Onwumere, in Abuja, stated that the GENCOS expressed their frustration at the end of the meeting of the association.
It said that the Nigerian electricity market had faced liquidity crisis since it was handed over to private owners. It said that liquidity in the electricity market as at privatisation was at about 65 percent but had progressively declined to less than 20 percent.
The communique said the GenCos were currently receiving less than 20 percent of their invoices paid by NBET.
The role of NBET is to give incentives to investors who have liquidity issues in the market. It said the liquidity issue was on the increase, adding that it was caused by the inability of NBET to meet its contractual agreement.
The communique further said that the GenCos should not be made to suffer for liquidity issues that were not their creation.
“The worsening market liquidity has culminated to a state of bankruptcy for the GenCos as they lack funds to carry out their operations and even to pay their workers.
“Some GenCos have not been able to pay salaries for upwards of three months,“ it said.
According to the document, some of the identified issues confronting the operation of the GenCos include poor payment of their invoices by NBET, non-evacuation of stranded power occasioned by load rejection by the DisCos or congestion in the grid network.
Other challenges include lack of implementation of the PPA with NBET, domiciliation of cost of gas in dollars and the associated take or pay obligations.
It said the Gencos had unanimously resolved to use all available dispute resolution channels, including litigation, to compel NBET to comply with the terms of the agreement. It further said the GenCos also agreed to take advantage of the provisions of the Electric Power Sector Reform Act (EPSRA) 2005 to further pursue its case.
This according to the communiqué, will enable the Discos to bypass the wholesale electricity market and enter bilateral contracts with any willing eligible customer. It said the generation companies expressed determination to ensure payment of all debts owned to them. The Discos expressed their desire to sell a designated amount of the power produced directly to eligible customers.