The Nigerian Electricity Regulatory Commission (NERC) has reported that the major constraints experienced in the country’s electricity sector in the first quarter (Q1) of 2018, is due largely to gas supply shortfall to power generation companies (Gencos).
In its just published Q1 2018 quarterly report of activities in the sector, the Commission stated that 74 percent of the operational constraints of the market during the quarter in review the period was from shortage of gas, while 18 percent; three percent; and five percent of the constraints were attributed to distribution; transmission and water management issues respectively.
According to the commission, addressing these constraints have remained its priority, hence its decision to begin implementing actionable items in its strategic plan for the sector.
The NERC stated: “As stated in the 2017-Q4 report, resolving these constraints remains as a top priority of the commission. On its part, the commission has started executing the actionable items identified in its 2017-2020 strategic plan towards addressing constraints in transmission and distribution networks.
“The commission has initiated a process for thorough technical assessment of Discos’ utilisation of capital expenditure allowances for relevance and cost efficiency. The commission is also planning a tariff reset that adequately provides for revenue requirement necessary for TCN and Discos’ optimal performance.
“Similarly, to resolve the issue related to gas supply shortage, the government has started the implementation of gas payment assurance facility for power generation to enable Gencos fulfil their payment obligations to gas suppliers”, it added.
On the state of the transmission networks, the NERC reported that though there was no partial system collapse in the quarter under review, the total system collapse however worsened, increasing from one recorded in the last quarter of 2017 to six in the first quarter of this year.
According to the commission, five of the system collapse incidents occurred in January while one occurred in February due to lack of generation by Egbin, Olorunsogo and Omotosho power plants as well as gas constraints which resulted from the breakdown in the Escravos gas pipeline, amongst other factors.
It stated further: “This incident confirms the concern that the commission expressed in the previous reports, on how sudden operational disruption in some plants could affect grid stability given the share of the industry output contributed by those plants.
“Second, the system collapse incident was also partly attributable to lack of adequate ancillary services which the System Operator could have used to offset the impact on the grid of the plant(s) that suddenly shut down their operation”, the NERC added.
The commission hinted that it was working with the Transmission Company of Nigeria (TCN) on procurement of adequate ancillary capacity in order to forestall frequent system collapses.
On the commercial performance of the sector in Q1, 2018, it disclosed that financial illiquidity remained the most significant challenge affecting the industry’s sustainability.
NERC clarified: “This serious liquidity challenge is partly attributed to non-cost-reflective tariffs, and high technical and commercial losses aggravated by consumers’ apathy to payment arising from estimated billing and poor quality of supply in most load centres.
“Out of the N171.1 billion billed to customers in the first quarter of 2018, only N106.6 billion was recovered, representing 62.3 per cent collection efficiency.
“Therefore, out of every N10 worth of electricity sold during the quarter under review, N3.8 is uncollected. The liquidity challenge in NESI was further reflected in the Discos’ remittances relative to NBET’s and MO’s invoices.
“In the first quarter of 2018, whereas Discos were issued a total invoice of N163.1 billion for energy received from NBET and for the service charge by MO, only N51.2billion – 31.4 per cent, was settled by Discos, creating a huge shortfall of N112.0 billion”, it added.
