Power generation companies (Gencos) yesterday put the volume of constrained power in the sector at 4,000 megawatts (MW) and warned that this would result in expensive retail tariffs.
Executive Secretary of the Gencos trade association – the Association of Power Generation Companies (APGC), Dr. Joy Ogaji, told newsmen that currently, the volume of electricity power distributions companies (Discos) take from the national grid has further dropped to about 3,500MW.
Ogaji said the drop in Discos’ distribution capacities pushed the idle capacity of the Gencos to 4,000MW.
She added that such reduction in Gencos’ capacity would mean an increase in Discos tariffs because economically, lower supplies result in higher costs.
It was recently reported that average power supply from the grid to homes and offices in the country had dropped to 3,876MW over the last eight months of 2019 – that is from January to August, and four months into the second term of President Muhammadu Buhari.
Reacting to this development in the market, Ogaji stated that while Gencos could produce up to 7,500MW , the Discos would only be able to distribute 3,500MW while the Transmission Company of Nigeria (TCN) would be able to transmit up to 5,500MW.
“With a total available generation capacity of more than 7,500MW and maximum wheeling capacity of not more than 5,500MW, there will always be a recurring instance of about 2,000MW idle generation. Idle generation represents capital investment not able to yield revenue that will hence impact the ability of the Gencos to support efficient operations and service loans used in developing the power plants.
“Out of the meagre 5,500MW of transmission wheeling capacity, the Discos have not proven to be able to distribute more than 4,500MW continuously leaving yet another 1,000MW of generation capacity unutilised. In total, due to the combined technical incapacitation of TCN and the Discos, the Gencos are unable to deploy a total of 3,000MW of capacity that would ensure sustainable profitable operations. If one considers the fact that the Discos have in the recent past been operating around 3,500MW or below, this figure escalates to 4,000MW of idle capacity,” said Ogaji.
According to her, the Discos’ capacity decline is abnormal and hurting the Gencos and the electricity market.
Beside, the Discos do not remit as much as 75 per cent of their monthly revenue to the Nigerian Bulk Electricity Trading Plc (NBET).
She said: “Nigerians need to know that the lower the capacity, the higher the tariffs. So, Discos can continue to take less capacity with no consequence. The lame excuse of TCN not sending power where the Discos want it is deceitful. The tariff is based on weighted average. So, sending power to high paying customers is tantamount to over recovery.
“Section 76(1a) of the EPSR Act provides that utilities shall be given the opportunity to recover its efficient operating costs and a reasonable return on investment.
“The market currently practices using energy wheeled to work-back the generation capacity that generated that energy and using same to represent available capacity is an aberration. This practice of variabilising generation capacity is punitive on Gencos as it discountenances idle capacity and serves as an incentive on non-performance for other sector players such as the Transmission Company of Nigeria (TCN) and the various distribution companies.
“Technical and operational inefficiencies by these operators negatively impact the Gencos in different ways. In addition to the issues of incapacity as outlined above, the Discos are also unable to account for up to 75 per cent of the power they have distributed to end users in terms of revenue remitted to the bulk electricity trader – NBET.”