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DISTRESSING DEVELOPMENT Power Sector Loses N2.016trn In 4 Years

DISTRESSING DEVELOPMENT Power Sector Loses N2.016trn In 4 Years


Nigeria’s power sector lost a total of N2,016,695,000,000, in the last four years as a result of distribution and transmission constraints, as well as a shortage of gas to the generating plants, the operational records of the sector obtained from the Office of the Vice President, Prof. Yemi Osinbajo, have shown.

According to the records from the Advisory Power Team in the vice president’s office, over N2.016 trillion could not be earned by the sector from May 29, 2015, to May 4, 2019, just about 25 days to the May 29 take-off of the second term of the present administration. This is coming as the power generation companies (gencos) under the aegis of the Association of Power Generation Companies (APGC), have revealed that some gencos have been forced by the chronic financial challenges of the sector to file force majeure to the Bureau of Public Enterprises (BPE).

Image result for power sector in nigeriaSource: Pulse

Nigeria is endowed with large oil, gas, hydro and solar resource, and it already has the potential to generate 12,522 megawatts (MW) of electric power from existing plants, but most days is only able to generate around 4,000 MW, which is insufficient. In the power sector, a force majeure is filed by companies or operators to free themselves of any legal actions when they are not able to meet their contractual obligations as a result of some natural and unnatural circumstances beyond their control.

The Minister of Power, Works and Housing, Mr Babatunde Fashola, last Monday declared that the power sector had fared well since May 29, 2015. But delivering the presidential speech at this year’s Workers’ Day last Wednesday, the Vice President had acknowledged that despite years of its privatisation, the power sector had remained handicapped in the delivery of required services to various homes and businesses.

Image result for power sector in nigeriaSource: The Guardian Nigeria

Though power generation was 4,500 megawatts on April 3, 2015, it crashed to an all-time low of 1,327 megawatts on May 22, 2015, exactly a week before the take-off of this present administration, due to the shutdown of key gas plants as a result of the strike action by the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), and the Nigerian Union of Petroleum and Natural Gas workers (NUPENG). With the resolution of the labour issues, power generation hit an all-time high of 5,074MW on February 2, 2016, and a new high of 5,375MW on February 7, 2019. But the records from Osinbajo’s office showed that within the period under consideration, average power generated and distributed daily to Nigerians was 3,611 megawatts (MW), while the volume of power that could not be generated and supplied daily due to these constraints was 2,930MW.

The records showed that the peak generation, that Nigeria ever attained was 5,375MW which was achieved on February 7, 2019. The records further stated for instance that between May 29 and December 31 2015, the sector supplied an average of 3,790MW daily but could not supply 2,413MW, resulted to the loss of N246,662,000,000 (N247 billion). Similarly, between January and December 2016, an average of 3,211MW was supplied daily while 3,546MW was lost, resulting in a loss of N622, 926,000,000. Also from January to December 2017, the records showed that 3,559MW was supplied daily, while 2,420MW was lost, translating to a loss of N425, 193,000,000. The records also showed that from January to December 2018, the daily supply averaged 3,807MW while 3,039MW was lost, translating to a loss of N532,426,000,000. Between January 1 and May 4, 2019, the average generation was 4,066MW, 3,183MW could not be generated, representing a loss of N189, 478,000,000, by the sector.

Image result for Mega wattsSource: Advanced Energy Economy

Meanwhile, a document obtained from the gencos revealed that the financial losses by the sector forced them to file force majeure notices to the BPE. “Every month Gencos are being owed an average 71.28 per cent of their invoice. In the absence of Power Assurance Guarantee (PAG), Gencos cannot survive with this. Most Gencos find it difficult to meet their performance agreement obligations with BPE and have applied for force majeure,” said the document from APGC,” the gencos said, according to the document.

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It further stated: “Due to high market liquidity squeeze, Gencos (thermal and hydros) lack the necessary funding for their operations, acquiring spare parts and equipment and meeting other obligations for the power generation stations. Unless the challenges in the power chain are tackled, power output will continue to be poor. The generation companies are ready and willing to generate power that will sustain the country on a daily basis but they are being constrained by factors beyond their control,” the document added.

Image result for power sector in nigeriaSource: The Guardian Nigeria

To address these challenges, APGC also called for strict regulation of activities of the transmission and distribution segments of the market, saying this could be the best way to record stable improvements. The association alleged that the power sector is being operated against the principles of standard electricity markets. It explained: “The reason for this liquidity squeeze we feel in the sector is that the sector is working against the established principles of electricity supply value chain.

“The first principle is that energy flows from the left to the right – via the fuel (gas or water) supplier to the fuel transporter (NGPTC), to the power generator (Gencos), to the power transmitter (TCN), to the power distributor (Discos) or distribution companies and then to our homes or industry/commercial enterprises. The payment/money for the energy is expected to move from right to the left. That is, from consumers to the distribution companies – statutorily empowered to collect and account for customer payments, on behalf of the value chain. This, unfortunately, is not happening as the Gencos are having a current market invoice shortfall of over 75 per cent. The question is which business can survive on a 25 per cent monthly invoice payment?” the gencos queried.

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