Electricity generation companies (GenCos) in the country sold electricity worth N294.16bn between January and May this year to the Nigeria Bulk Electricity Trading Plc (NBET), the bulk purchaser of generated power, for subsequent sale to distribution companies (DisCos).
By the power sector regulatory regime, NBET, which is owned by the government, purchases electricity in bulk from GenCos through Power Purchase Agreements and sells through vesting contracts to the distribution companies for final supply to the consumers.
The official data provided by the NBET on the generated power during the review period, reflected that the bulk purchaser received a total invoice of N294.16bn from the Gencos but paid only N57.98bn, representing 19.71 per cent of the invoice.
For their supplies, the GenCos gave NBET an invoice of N51.85bn in January; N51.42bn in February; N52.82bn in March; N70.03bn in April, and N68.04bn in May. Out of the values of the invoices during the period, the bulk trader only paid N15.61bn (30.11 per cent) in January; N13.09bn (25.46 per cent) in February; N5.84bn (11.05 per cent) in March; N10.19bn in April, and N13.25bn in May.
According to bulk purchaser, payments by it to the GenCos are based on receipts from the DisCos which were contrary to the tariff order issued by the industry regulator – the Nigerian Electricity Regulatory Commission (NERC).
The regulator recently directed that “all the DisCos are obligated to settle their market invoices in full as adjusted and netted off by applicable tariff shortfall approved by the commission.”
The commission threatened that the DisCos would be liable to relevant penalties/sanctions for failure to fulfil their remittance obligations in any payment cycle in accordance with the terms of its respective contracts with the NBET and the Market Operator, an arm of the Transmission Company of Nigeria.
It further clarified: “Where it is established that the TCN is unable to deliver load allocation, the TCN shall be liable to pay for the associated capacity charge.”
According to the regulator, where a DisCo fails to take its entire load allocation due to constraints in its own network, it shall be liable to pay the capacity charge as allocated in its vesting contract, adding that “the average tariff for each Disco was determined considering the projected energy off-take of the company based on its percentage load allocation in the vesting contract.”