GENCOs operating at a loss —APGCN

By Energy Worth with Agency Report

The Association of Power Generation Companies of Nigeria (APGCN), has said that its members are operating at a loss, as the percentage of revenues received do not cover their operating costs.

As a result, the generating plants can no longer sustain their operations, due to high outstanding debts.Besides, the association appealed to the Transmission Company of Nigeria (TCN), to improve the reliability of the power Grid System to avoid incessant blackouts, and incidences of deemed capacity (stranded generation); and maintain grid-acceptable frequency limits of between 49.5Hz and 50.5Hz at all times.

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

If adequate measures are not taken soon to mitigate the crisis, the generation companies (GenCos), warned that they might soon run out of funds to maintain their generation capacities, and also to produce the much-needed energy for the nation.

The Executive Secretary of the Association, 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.”

However, she said in a statement last week that: “This new breed of determined operators has continued to maintain standards by increasing their national generation capacity without being paid rightly for their services.”

She said 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.

Ogaji noted that 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.

She further noted that although the GenCos can increase their available capacity effectively, but 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.

Ogaji noted that for a GenCo to nominate any capacity, it means effective commitments has been made as per gas for thermal plants and other equivalent necessary overhead costs which applies to both thermal and hydro plants.

According to her, costs associated with deemed capacity are legitimate cost that must be recovered. “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.

She said: “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.

Mohammed 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.