…threaten to declare force majeure
By Etuka Sunday
Generation Companies under the auspices of Association of Power Generation Companies (APGC) have rejected the 0.75% unregulated administrative charge by the Nigerian Bulk Electricity Trading Plc (NBET).
The companies have also threatened to declare force majeure if the directive by NBET to them on the charge is not reversed.
Addressing newsmen in Abuja at the weekend, the Executive Secretary, APGC, Dr. Joy Ogaji said, if the issue is not “addressed quickly, the time may just be right for GenCos to declare force majeure and release themselves of all market obligations, for which we (GenCos) cannot be held accountable.”
Dr. Ogaji said, 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%.
She said, the letter gave each GenCo three (3) working days ultimatum to respond with the board resolution i.e. September 13 to 18, 2019 or face non-payment of energy invoices.
She 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 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,” she said.
According to her, “NBET claims that thermal GenCos have not been making pro-rata payments for gas from monthly invoices paid by the market. For example, from the paltry 15% of the June 2019 energy invoice paid to each GenCo, NBET expects each Thermal GenCo to make pro-rata payments of 15% of the gas invoice to gas suppliers and transporters.
“Given that a Thermal GenCos’s gas bill is between 50% and 70% of their total monthly revenue (depending on their efficiency and tariff), the implications of carrying out NBET’s directive of pro-rata payments is that a thermal Genco with about 60% of its total revenue as gas cost, will be left with about 6% [15% – (0.6*15%)] of such total energy invoice to operate the power plant! This is because of the 15% received from the market, about 9% must be allocated to gas as pro-rata payment.
“This is certainly not sustainable as it is unfathomable that any going concern gets paid only 15% of its invoices and yet be expected to perform within the requirement of the performance and other relevant market agreements entered into.
“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 costs, not to talk of having the resources to procure basic spare parts that the machines require to keep them in operation,” she said.
The APGC Secretary said, it was “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.
“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 N2.7billion 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.
“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 relevant stakeholder engagement and regulatory (NERC) approval.
“NBET therefore needs to come out clean and make known where and when stakeholders’ meetings 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,” she said.
She pointed out that “the GenCos are worried that if NBET is allowed to carry on with this shenanigan for services that amount to nothing more than being a “delivery truck”, since the Market Operator (MO) does the major work of preparing 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.
“NBET does not have the moral right to receive 100% of its service charge from the Market Operator (MO) while it does virtually nothing to enable GenCos receive their invoices in full.
“Probably, the monthly payment gap of GenCos market invoice is an incentive for NBET’s continued stay in the market to adjudicate any government intervention facility.
“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 create a gaping HOLE in their limited finances,” she said.