FG owes gencos N400bn
The Association of Power Generation Companies (APGC) said recently that the Federal Government owes gencos N400 billion, a three-year old debt dating back to November 2013. APGC’s executive secretary Mrs. Joy Ogaji said Egbin Power Plc is being owed N93 billion; Niger Delta Power Holding Company (NDPHC) is owed N105 billion; Ughelli Power Company N50 […]
The Association of Power Generation Companies (APGC) said recently that the Federal Government owes gencos N400 billion, a three-year old debt dating back to November 2013. APGC’s executive secretary Mrs. Joy Ogaji said Egbin Power Plc is being owed N93 billion; Niger Delta Power Holding Company (NDPHC) is owed N105 billion; Ughelli Power Company N50 billion; Geregu Power Plant N80billion while the three hydropower stations in Niger State, namely Kainji, Jebba and Shiroro are jointly being owed N30billion. She also said the N400 billion did not include amounts being owed to Olorunsogo and Omotosho power plants.
These huge debts are obviously hindering the gencos’ operations including paying their workers, settlement of contractors and purchase of gas to power the plants. Mrs. Ogaji further said, “The generation companies can no longer pay salaries. They can’t even pay for gas and the gas companies are no longer selling the product to them as a result of the debts. Banks are not ready to advance credit to the gencos again.”
This is serious because listed among the adverse outcomes of this lack of payment is that contractors would withdraw their services and there is lack no money to maintain equipment. As a direct consequence of improper maintenance, the gencos could pack up and Nigeria would be completely undone.
The chain of transaction in the sector appears simple enough. Gencos sell electricity to Nigeria Bulk Electricity Trader (NBET) which sells the energy to the distributing companies or discos. Discos then sell it to consumers. The money collected by discos is then shared among the players according to this formula: gencos 57%; discos 24%; Transmission Company of Nigeria [TCN] 11%; CBN 4%; NERC, NBET and others 4%. So what went wrong? Gencos and the consumers blame discos on account of their inability to meter their customers. This is not without valid reasons. First, the discos interface with the customers and bear the responsibility of collecting revenues to be shared by other players in the industry, a responsibility with which they are struggling.
There maybe two reasons for this. One, the crazy and contentious estimated billings are transferred to the customers when they are eventually supplied with meters. So the discos don’t have an incentive to supply the meters urgently. Even though, according to NERC, estimated billing should be based on the energy consumption of the metered neighbours in the community, this doesn’t appear to be the case. Secondly, it would seem the discos do not have the wherewithal to meter their customers. For example, Abuja Electricity Distribution Company recently visited the Minister of Power, Works and Housing Babatunde Fashola, seeking help to meet the letter of credit (LC) to the Nigeria Bulk Electricity Trading Plc (NBET) and to qualify for support fund from CBN.
It’s instructive that out of Abuja Disco’s 876,820 customers, only 360,000 or 41% have been metered. This shows that discos’ inability or unwillingness to meter customers leaves a lot of money on the table and a good deal of room for corruption. Yet, it would be unfair to throw the entire blame at the discos when they are being owed so much. For example, the military, the Police and other agencies of government owe discos N132 billion. This debt dates back to September 2013.
The foregoing validates the long-held belief that something is fundamentally wrong with our electricity industry. We therefore commend the move by Babatunde Fashola calling on the Debt Management Office to help the industry to verify the debts and fashion out an appropriate solution for this mess. Right now, things appear to be worse than before the government invited private entities into the business. This is also the reason why people like Aliko Dangote have called for the cancelation of the privatization of the electricity companies and NERC is mulling the creation of a separate entity in charge of metering. We believe that even without such drastic measures, the problem can still be solved if everyone discharges their responsibility.