GenCos accuse NERC of crippling power sector

Damilola Shittu – Abuja

Executive Secretary of the Association of Power Generation Companies (APGC), Dr Joy Ogaji, on Tuesday, in Abuja said the investment made by operators, especially power generation firms, was under threat.

This, she, said was due to a regulation introduced by the Nigerian Electricity Regulatory Commission (NERC) to favour electricity distribution companies (DisCos).

She cited a publication to the effect that DisCos are lamenting that they are being over billed on available generation capacity as captured in the Multi Year Tariff Order (MYTO).Ogaji said the situation forced NERC to adopt actual generation capacity against available generation, warning that the development could undermine the growth of the sector.

MYTO is a tariff model developed in 2008 by the NERC, pursuant to Section 32 (d) and 76 of the Electric Power Sector Reform (EPSR) Act, 2005. The aim is to ensure that prices charged by licensees are fair to customers and sufficient to allow them to finance their activities and obtain reasonable profit for the efficient operator.

“In lay man terms, this redefinition of capacity by NERC means that if a GenCo declares 500MW as available on any day and the grid or TCN only nominates to take 100MW, which, to a large extent, is based on what the DisCos want to take and distribute, that GenCo will only be paid energy and the capacity equivalent of 100MW. The GenCo is left to bear the capacity cost of making available the remaining 400MW.”

Ogaji said “no country can grow its power base on this flawed and lopsided regulation that penalises/punishes a generator for investing to increase its available capacity.

“This lopsided regulation inadvertently provides support for any DisCo to decide and take less and less power that is available and still crave/lobby for a higher tariff.

“This is a clear anomaly in the market and a cheating on GenCos. It should be noted that GenCos are up to date on the records of such losses as a serious regulatory risk for eventual claim in due course,” Ogaji said.

According to her, available capacities are backed up by committed fuel, manpower, insurance, service contracts and all the necessary resources, and declared to the System Operator (SO) on day-ahead basis.

According to the executive secretary, the state of the market, where a generation company is short-changed for the benefit of other market participant negates the tenets of the Multi-Year Tariff Order (MYTO).

“The tariff model for incentive-based regulation that seeks to reward performance above certain benchmarks reduces technical and non-technical/commercial losses.”