N701bn assurance fails to lift power
THE N701 BILLION PAYMENT ASSURANCE guarantee scheme created by the Federal Government to ensure the steady payments of gas invoices is clearly not achieving its major purpose as inadequate gas supply was responsible for over 70 percent of the stranded electricity capacity in the first quarter of 2018.
THE N701 BIL LION PAY MENT ASSUR ANCE guarantee scheme created by the Federal Government to ensure the steady payments of gas invoices is clearly not achieving its major purpose as inadequate gas supply was responsible for over 70 percent of the stranded electricity capacity in the first quarter of 2018.
Nigeria’s electricity regulatory body, Nigerian Electricity Regulatory Commission ( NERC) in its recently released financial report for Q1 2018 showed that the total electricity generated was 8,511,481 megawatts per hour ( MWh), two percent less than the generation recorded in the last quarter of 2017, despite the increase in available generation units.
The blame of low gas supply doesn’t lie with the government alone, as the electricity distribution companies (DisCos) remitted only N51.2 billion (31.4 percent), after receiving a total invoice of 163.1 billion for energy received from Nigerian Bulk Electricity Trading (NBET) Plc and for the service charge by market operators. This created a huge shortfall of N112.0 billion.
The payment assurance scheme was initiated to prevent the current dilemma faced by the industry as inadequate gas supply hin- dered the generating companies (GenCos). Under the scheme, NBET via the CBN, pays power generating companies and the gas suppliers their gas invoices starting January 2017 till December 2018.
However, gas suppliers have spoken out and said that the scheme was months behind payments and un- paid gas invoices were piling up.
Dada Thomas, managing director of Frontier Oil and president of Nigerian Gas Association (NGA) who spoke with business a.m. in February, said “the payment assurance guaranty scheme by NBET and CBN has only paid up to August 2017, so there are seven months of unpaid invoices, while interest is piling up. It is not a sustainable model.”
According to Thomas, “For a 2-year period, the federal government decided to make sure that gas suppliers are paid, but they are not addressing the debt before that, and interest is piling on that, so how will that be paid?”
He had also asked that “once that scheme ends in December 2018, what would happen in January 2019, would the power sector issues have been resolved such that electricity tariff is market-reflective?”
However, there was good news in the report with regards revenue collection efficiency by DisCos, which has improved from 55 percent in the third quarter of 2017 to 62.3 percent in the first quarter of 2018.
The NERC report revealed that out of the N171.1 billion billed to customers N106.6 billion was recovered. “Therefore, out of every N10 worth of electricity sold during the quarter under review, N3.8 is uncollected,” the report said.
NERC accused the DisCos of keeping their fair share of the collected revenue thereby capping their remittance to the rest of the value chain but admitted that low collection and existing tariff shortfall were also responsible for the low returns.
The sector has been described as financially illiquid due to non-cost/market reflective tariffs, and high technical and commercial losses coupled with consumers’ lack of interest in payment arising from “crazy” estimated billing and poor quality of supply in most load centres, amongst others.
Thomas added that the power sector is sick because the privatization has not been implemented properly as a result of the DisCos’ inability to supply enough power and collect enough revenue efficiently.
The payment assurance scheme was initiated to prevent the current dilemma faced by the industry as inadequate gas supply hindered the generating companies