Transparency and visibility of market funds: Panacea to NESI efficiency
As the Holy Bible says “money answers all things.” With the dwindling commercial performance in the Nigeria Electricity Supply Industry (NESI) and the inability of some stakeholders in the power sector to meet infrastructure performance targets due to the decline of market funds and its attendant increased debt profile in the entire value chain of the power sector, the recent development by the Nigerian Electricity Regulatory Commission (NERC)—the sector regulator— to escrow the account of the distribution companies is not just a welcome development but also a wake-up call to all participants in the electricity market.
It would be recalled that Nigeria Bulk Electricity Trading Plc. (NBET) repeatedly published that the Distribution Companies (Discos) remitted only 30 per cent of their monthly energy invoices in 2016.
Last October at a market participants’ workshop in Abuja, Mr. Moshood Saleeman, the Market Operator, which is an arm of the Transmission Company of Nigeria (TCN), pointed out that if poor collection by the Discos continued, the Discos accounts may be escrowed.
About a fortnight ago, the Association of Nigerian Electricity Distributors (ANED) likened such move to centralise their revenue accounts to nationalisation of the Discos. The electricity sector is a value-chain, which needs to be remunerated as applicable covering the cost of generation, transmission and distribution. The Generation Companies (GenCos) are entitled to 60% of market remittance as they not just generate power but also pay for gas supply and gas transportation. Transmission charge cost 11%, distribution gets 25% while the remaining 4% is meant for regulatory charges and NBET. The revenue referred to by the distribution companies are not their personal revenue but market funds to which they were made trustees to collect and remit.
The poor remittance of market funds by the DisCos has prevented the rest of the electricity value-chain from meeting up with their operations and also service their liabilities, which includes gas payments.
GenCos, the supply sector of the industry, can no longer perform required and scheduled maintenance as well as pay for gas supply. The need to monitor the flow of market funds has become necessary as this will enable transparency in the market and also give the regulator the ability to identify issues that will progress the sector and act accordingly in advising the government and stakeholders where funds actually needs to be plunged into in order to bring about self-sustenance and competitiveness.
This very act and stance of NERC and the Federal Government will definitely send positive and promising signals to potential investors as well as generation licensed investors, who are yet to commence construction of generation plants that the current administration is ready to make the sector viable and sees the power sector as its top priority and a strategic route to the newly inaugurated economic recovery plan.
The issue of everyone crying wolf should be fast gone. There have been blame games being played by the various players in the sector; it does not matter whose voice is loudest. The truth is, the generation companies have in keeping to the terms of their contract, generated power, which has been sold by NBET to the distribution companies. What the generation companies want is to be paid fully for power received and sold. If one claims electricity consumers are not paying, let us see the payments transparently.
If centralising the payment system is tantamount to nationalising, the question that comes to mind is: what does selling the electricity and keeping the money all to oneself mean? If Discos claim they are not collecting enough, then they should open their books to make it plain for all to see and confirm their story. “He who asserts must prove”.
The move by the regulator to bring about transparency in the market and also the plans to declare eligible customers would bring about better performance in the electricity value chain which in turn would raise sustainable cash flow for all market participants and reduced tariffs due to competitiveness.
Eligibility would bring about the following:
• Introduce competition on the demand side and complete the liberalization of NESI and improve efficiency;
• Promote national economic development through: supplying electricity to the productive sector of the economy, support economies of scale through bulk purchase of electricity;
• Reduce technical and non-technical losses for bulk High Voltage supply;
• Increased customer attention to consumers;
• Stimulate investment in the sector as generators can sign long term contracts;
• Sends a powerful signal that the electricity sector is evolving towards full retail competition; and
• Allow greater variety of suppliers to find innovative ways of discovering and providing what different groups of consumers want in economical ways.
We, the Generation Companies, see a rapidly changing and maturing Nigeria, with an evolving commercial environment increasingly suitable for investment and related activities.
• Dr. Ogaji is the Executive Secretary, Association of Power Generation Companies
No Comments yet