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Gencos running out of funds, debts surge, nationwide darkness looms

The reason for the growing light outs in parts of the country has emerged.

The members of Association of Power Generation Companies of Nigeria (APGCN), have said they can no longer sustain their operations, due to high outstanding debts. They noted that currently, members are operating at a loss; as the percentage of revenues received does not cover their operating costs.

Another contributory factor to the woes of the group is the growing unreliability of the power Grid System which has been the reason behind incessant blackouts

This has compelled the association to appeal to the Transmission Company of Nigeria (TCN), to improve the reliability of the power Grid System, work on incidences of deemed capacity (stranded generation); and maintain grid-acceptable frequency limits of between 49.5Hz and 50.5Hz at all times.

Already paucity of fund for Gencos might soon cripple the companies as funds to maintain their generation capacities, and also to produce the much-needed energy for the nation are tied down as debts in the hands of government agencies and some big private companies that are too big to touch.

The Executive Secretary of APGCN, Joy Ogaji, recalled that “History has shown in the past three decades how generating plants were run right to the ground by the defunct National Electric Power Authority /Power Holding Company of Nigeria, without paying attention to scheduled maintenance and overhaul.”

“This new breed of determined operators has continued to maintain standards by increasing their national generation capacity without being paid rightly for their services.”

According to her, generation companies are calling on all relevant government agencies to, as a matter of urgency; facilitate the payment of the outstanding invoices.The association maintained that “the total outstanding invoice on deemed capacity must be added to market revenue gap for payment,” as the legacy GenCos were yet to be paid the deemed capacity since taking over the assets in November 2013.

She said payments for deemed capacity over this period have run into billions of naira that would have been used in maintaining the generating plants, and paying for already purchased/contracted gas and services.

Although the Gencos can increase their available capacity effectively, Ogaji said the System Operator has the grid right to instruct any Genco to reduce or cut down on its nominated capacity. She added that System Operator is justified to issue such instructions to safeguard the grid from partial or total system collapse.

She said “When there are restrictions on the grid either due to load rejection on the part of the DisCos or congestions on the transmission network to evacuate available capacity, the System Operator instructs the GenCo to ramp down on its nominated capacity and the GenCo must comply.

“In global electricity markets, compelling a generating station to reduce its generation in order to maintain the power grid attracts financial costs, as contained in power purchase agreements (PPAs). It is not different in the Nigeria electricity market, which clearly says in the Transitional Electricity Market (TEM) Order No. NERC/14/0008, Section 16B paragraph 1 & 2 of 2014 that a generator will be paid for the generation capacity utilised to deliver electrical energy, plus deemed capacity. Where “deemed capacity’’ is capacity that would have been delivered but for the System Operator instruction to the said generator to de-rate or reduce its capacity to achieve grid balance and stability.”

She however pointed out that compelling a generator to ramp up and ramp down at unscheduled time affects it equivalent operating hours, and stresses the internal parts of the machine thereby reducing the plants’ lifespan.

In his remarks, the interim Managing Director and Chief Executive Officer of Transmission Company of Nigeria (TCN), Usman Gur Mohammed, however said there are plans to embark on projects that would improve the capability of the transmission network.

He said that that plans are on ground to improve the voltage profile to the North East, with the construction of 330kV Transmission Substation in Bauchi State, 330kV Transmission Substation in Jalingo, Taraba State and completion of the ongoing  330kV Substation in Maiduguri, Borno State.

Since this month, many parts of Lagos and Abuja that had been enjoying relative steady light have started observing longer periods of outages.

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