Nationwide blackout is looming as the electricity Generation Companies, GENCOs, have threatened to declare force majure over moves by the Nigerian Bulk Electricity Trading, NBET, to unilaterally take over the responsibility for payment of gas and transportation from them.
The GENCOs said NBET had arbitrarily approved to apply 0.75% as administrative charges or cost on payment to gas suppliers to the thermal power stations.
The generation companies also revealed that NBET stands to rake in N2. 7 billion from the 0.75 percent administrative charges for just service of collating and submitting gas payments invoices to the Central Bank of Nigeria, CBN.
Meanwhile, the GENCOs, have recommended to the government and other key stakeholders that their administration and finances be reverted back to the Market Operator, MO, while NBET focuses on engagements with new entrants or intending power project developers.
Addressing newsmen weekend in Abuja, the Executive Secretary of Association of Power Generation Companies, APGC, Dr. Joy Ogaji, warned that the power generation companies would declare force majeure and release themselves of all market obligations if urgent step was not taken to stop NBET.
Dr. Ogaji said the management of NBET told the GENCOs at interactive session that the said 0.75% administrative charge was compulsory as it is a Condition Precedent (CP) for GENCOs to access the N600 billion approved for immediate payment to gas suppliers and GENCOs by the Federal Government.
She said, “Introducing an additional burden of 0.75% to GENCOs gas invoices payments implies that NBET is looking to rake in a windfall of not less than N2.7bn as its administrative fees for a service of only collating and submitting invoices to the Central Bank of Nigeria, CBN, who in effect makes the payment to GENCOs and the gas parties.”
Dr. Ogaji said NBET was denying the GENCOs the opportunity to assess the N600 billion approved by the Federal Government as a short term intervention to pay for energy generated and delivered.
She said, “To assess this fund, again, GENCOs are faced with a bullish behaviour from an agency that is supposed to be representing/protecting their interest.
“In previous situations, there were threatened to sign various obnoxious agreements (Security Trust Deed and PPA Activation agreements or such documents) before they are paid.”
“As if that was not enough, NBET is at it again, this time mandatorily issuing arbitrary and unilateral decision, which should not be possible for a market licensee.”
According to her, “NBET, on 13th September 2019 issued a letter to individual thermal GENCOs directing them to obtain, as a matter of urgency, their respective board approvals or resolutions, bequeathing responsibility for payment of gas and transportation to the respective supply companies for an administrative charge of 0.75%.
“The letter gave each GENCO three working days ultimatum to respond with the board resolution i.e. September 18, 2019 or face non-payment of energy invoices.
“It should be noted that NBET like other market participants, is a licensee of NERC and as such is expected to understand that in a regulated market, every expense/cost must be backed by a regulatory approval for effective computation of the market tariffs.
“The generation companies are not aware that such approvals have been issued by NERC nor is there any policy directive to this effect.
“The fact that NBET is placing the extortionist 0.75% “administrative charge” on GENCOs who are already convulsing, in the NESI is an aberration on the duty of care placed on NBET.
“In addition, going by the principle of privity of contracts, Thermal GENCOs have contractual obligations to pay their gas suppliers. If they do not pay, that burden remains with them.
“Given that a GENCO requires 20% to 30% of its total revenue to meet the direct operating cost of keeping the plants running on a monthly basis, gas exclusive.
“If NBET’s directive on pro-rata payments is carried out, the 6% that will be left for the GENCOs cannot even cater for staff cost not to talk of having the resource to procure basic spare parts that the machines require to keep them in operation.”
Ogaji revealed that, “It is curious to note that during a face to face meeting between NBET management and the GENCOs, NBET claimed that:
“It was directed by the Presidency to take over the processing of gas payment on behalf of the GENCOs
“It had approval to apply 0.75% as administrative charges or cost on payment to gas suppliers.
“The said 0.75% administrative charge is compulsory as it is a Condition Precedent (CP) for GENCOs to access the N600bn the Federal Government has approved for immediate payment to gas suppliers and GENCOs.
“NBET therefore needs to come out clean and make known where and when a stakeholders meeting, involving all parties such as the Regulator, NERC, NBET, Gas suppliers and GENCOs held to discuss and explore the intricacies of such multi-party transaction before issuing such a directive.
“The GENCOs are worried that, if NBET is allowed to carry on with this shenanigan, for services that is nothing more than being a “delivery truck” since Market Operator (MO) does the major work of preparing the invoices and settlement statement for NBET to pass same to CBN for payment.
“It should also be noted that NBET, acting only as a “conveyor belt” or “agent” of GENCOs funds, is currently paid 2.5% of the total market payments.
“What is expected of NBET, as the Obligor for the GENCOs is to come up with viable strategies to make the GENCOs WHOLE and not to be creating a gaping HOLE in their limited finances.
“In addition, If NBET gets its way in executing its planned action, it will set in motion a significant precedent that any entity can take up the role of a regulator in the NESI, giving directive without the relevant stakeholder engagement and regulatory, NERC, approval.
“Unfortunately, as it stands, the relationship between the GENCOs and other markets participants and agencies of government is progressively becoming a master-slave or master-servant relationship. GENCOs being the slaves or servants.
“It is unfathomable that any ongoing concern gets paid only 15% of its invoices and yet expected to perform within the requirement of the performance and other relevant market agreements entered into.
“The time may just be right for GENCOs to declare force majeure and release themselves of all market obligations. Surely, GENCOs will remain blameless for taking such actions.”