Energy Bills: Pressure on Indebted Foreign Customers Yielding Fruit
Nigeria has recovered about $65 million of the electricity debt owed by West African neighbours, Niger and Benin. Considering that monies owed by both countries for electricity supplied to them contributed substantially to the financial troubles Nigeria’s
Recent meetings between Nigerian authorities and those of the West African countries of Benin and Niger to evaluate and pay off millions of dollars in energy debt owed Nigeria’s electricity market have begun to yield some results. About $65 million out of the over $100 million electricity debt has been recovered so far from the debtor international customers. Speaking at the last power sector operators’meeting in Asaba, the capital of Delta State, recently, Minister of Power, Works and Housing, Mr. Babatunde Fashola, stated that the country’s power sector had made some significant progress in its attempt to recover the millions of dollars owed it by Benin and Niger republics, for electricity supplied to them. Fashola, explained that the Nigerian Bulk Electricity Trading Plc had received $64.6 million out of about $115.91 million owed operators by both countries.
He noted that disbursements of the recovered funds to beneficiaries by the NBET would shortly commence, and that eligible beneficiaries would get their monies.
Good News
Fashola said in his opening remarks at the meeting, “To those of you businessmen, I have good news for you. We have recovered payments from power that we sold to Benin and Niger Republic. People wonder why we sell power to them; but it is a product of treaties and agreements and they also help our own economy.
“So, we have a total of $64.630,055.00 million that had been recovered, and NBET will work out the modalities for its distribution and, hopefully, by next month you should be able to report that you have received alert.”
Path to Recovery
Sector operators told THISDAY that the impressive debt recovery effort was made possible by the prioritisation of the debt issues in meetings between the federal government and the Communauté Électrique du Bénin (CEB), an international electricity firm co-owned by the governments of Bénin and Togo, and NIGELEC of Niger Republic.
It was gathered that in each of the meetings, Nigeria was clear and unambiguous on its request for prompt payment of the outstanding debts to its electricity market. Also, at one of the meetings to resolve the accumulated debts, THISDAY gathered that the federal government requested the CEB and NIGELEC to settle the outstanding bills to avoid possible service cut off. It also impressed it on the utilities that they had the obligation of meeting up with their payments for services rendered by the market considering that it was now run on contracts with private operators.
To best appreciate the debt profile, the NBET in August disclosed that the international customers owed Nigeria about $115.91 million. It pointed out that the CEB of Benin Republic owed $101.46 million, while NIGELEC of Niger Republic owed $14.45 million.
Political, Economic Motivation
Though the basis for Nigeria’s supply of electricity to its neighbours while it has very little for domestic use has been questioned, the truth is that the supply arrangement is both economically and politically motivated.
Politically, under an international treaty, the country is obliged to supply power to the two countries through the NBET and Transmission Company of Nigeria but at a price.
As part of the existing treaty, industry experts explained that for Nigeria to continually have the large body of water that flow into the reservoirs of its two major hydropower dams in Kainji and Jebba from the Fouta Djallon region uninterrupted, it had to sign the power supply agreement with the countries on the river route when it constructed the hydro dams.
The Fouta Djallon region serves as the watershed for some of western Africa’s greatest rivers, including the Niger River. However, if countries like Niger, which is farther up on its route, decided to dam the River Niger at Fouta Djallon to generate its electricity, Nigeria’s two hydro plants, which rely on its waters to generate electricity, would be affected.
From the economic point of view, Nigeria supplies up to 300 megawatts of electricity to CEB countries of Togo and Benin, as well as Niger Republic’s NIGELEC, and gets paid in dollars for this, Nigeria gets some good earnings from the international power customers.
While the CEB countries have 200MW of power from the supply loop, the balance of 100MW is reserved for Niger Republic, and each is expected to promptly pay for the supplies.
Normalising the Supply Deal
Following the completion of Nigeria’s power sector privatisation, and the need to continue to trade with its international customers in line with the terms of the contracts in the privately-run electricity market, the country transferred its bilateral power supply deal with CEB and NIGELEC to the Nigeria Bulk Electricity Trading Plc. The transfer would regularise the agreements into power purchase agreements and guarantee prompt payments for service delivered. At a recent meeting involving the TCN and West African Power Pool, where this was discussed, the permanent secretary in the ministry of power, Mr. Louis Edozien, stated that the country would migrate the supply pact to PPAs. He noted that the migration to PPAs would protect the countries from supplies disruptions.
Edozien said, “Concerning proper contracts for electricity consumption by CEB and Nigelec, current policy is to migrate the current supply to power purchase agreements with Nigerian Bulk Electricity Trading, while encouraging bilateral contracts with available generators and wheeling contracts with TCN for expanded supply.
“Contracts protect you from negligent or incompetent default in supply from your contracted generator. Contracts also protect your contracted generator from payment default.”
He also spoke on the need for Benin and Niger Republic to clear their electricity debts to Nigeria’s electricity market, in addition to having an efficient payment mechanism that would encourage non-stop supplies.
According to Edozien, “As the power sector in Nigeria progresses, we are disposed to wheeling more electricity to our international customers. Our primary obligation, however, is to serve Nigerians; we therefore, have to be able to justify our continued supply to international customers to continue to export power, and it is very difficult to persuade our countrymen when the international customers we want to supply have not been paying their bills for electricity supply.
“It is, therefore, necessary that all outstanding bills are paid immediately, and payment mechanisms are quickly put in place to ensure bills are paid as and when due.”
Edozien noted that debts owed by international customers were an impediment to further investments in expansion of transmission facilities to the regional market, adding that they must be ready to pay to support the market to continue to meet its obligations to them.
“Generally, as Discos are making efforts to expand, TCN and Gencos are also expanding to stay ahead of the requirement. This is where the regional market comes in. We may need the regional market to sustain our expansion drive.
“Now that TCN and Gencos are ahead of Discos, we will ensure that it becomes a norm. For the power supply value chain to be sustained, the trading arrangement must be respected and adhered to,“he noted.
According to him,“For TCN, the only way it can continue to stay ahead financially is that the trading arrangements are viable so if WAPP/TCN builds the second Ikeja West-Sekete 330kV DC and other WAPP backbones, they must be paid for wheeling the power, promptly.
“The generators must also be paid for generating power. That is the only way the trading arrangement would work. Trading arrangements are already captured in our laws and regulations, which is periodically reviewed to accommodate technological advancement, new policies and institutional corporations like WAPP. Moving forward they must be effectively operationalised.”