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Published On: Tue, Feb 25th, 2020

Power: No funding plans by NERC for N1.7trn shortfall -GenCos

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By Etuka Sunday

The electricity Generation Companies (GenCos) yesterday alleged that the Federal Government has no plans in place to pay for the N1.7trillion shortfall in the industry.
Executive Director, Association of Power Generation Companies (APGC), Barrister Joy Ogaji, who raised the alarm in a statement alleged that was no plans either in the annual budget or in the 2015 Multi Year Tariff Order (MYTO).
She however, urged the government to mention its funding initiative for the shortfall.
The spokesperson of the GenCos said that “Generation companies have raised concerns regarding the tariff review, scheduled to be effective on the 1st of April, 2020. The GenCos concerns relates to the fact that NERC has not captured all the ‘changes’ in the relevant macroeconomic variables and available generation capacity in updating the operating MYTO-2015 in line with the provisions of the MYTO Methodology.
“The seeming gaps are shown through the four parameters considered in the minor review namely: inflation, interest rates, exchange rates and generation capacity as it affects or impacts our business.
“Dealing with Market shortfall holistically: We are concerned about the financing of the shortfalls, given that there is no provision in the 2019 or 2020 budget. What is the PSRP financing initiative?
“What is not clear is who will take charge of the financing plan. Do these plans and facilities even exist? If so, what are the terms under which they were created, if not in existence, right now, who is working to create them and when would they be ready?”
Recall, NERC had revealed its plans to stop the payment of any form of tariff support except for the less privileged in the sector by 2021.
In its memo titled “ Consultation paper on the proposed extra -ordinary tariff review of the MYTO -2015 Tariff Order for the Nigerian Electricity Supply Industry (NESI)”, NERC said that it had intervened in shortfall payment of N701billion in 2017 and 2018 and another N600billion approved between 2019 and 2020, totaling N1.7trillion support for the sector since 2015.
The commission however submitted in the memo that “While the intervention so far represents an unsustainable fiscal burden on the Nigerian treasury, the total tariff-related revenue shortfall for all market participants for the period 2015 – 2019 is in the sum of ₦1.72trillion.”
But Mrs. Ogaji yesterday asked the NERC to explain how it arrived at the MYTO review that refused to capture the shortfalls in the sector.
She was worried about the inequitabable manner of the remittances requirements of the review tariff order.
According to her, whereas the tariff review makes provision for Gencos to receive 36 percent of their revenue requirement, the DisCos are to receive 100 percent of theirs.
Ogaji said that “Equitability: DisCos Remittance Water fall for year 2020 of the minor review indicates that GenCos on average will receive 36% of their revenue requirement while DisCos will receive 100% if they fulfil their obligations.
Why this difference? What’s the justification behind GenCos getting 36% of their revenue requirement, while the DisCos receives a 100% if it just manages to make the minimum remittance which from our investigation Discos have not adhered to?”
The GenCos also asked the commission to address the issue of previous failed reviews and state how to make a difference in the current review.
She said that “Framework for monitoring and enforcement: The regulator needs to address the issue of previous failed reviews and how this review will be different in terms of effectiveness/implementation. The GenCos will further appreciate if the regulator can critically look into the following:

“The issue of the requirement for DisCo revolving letter of credit to NBET. Is any modality in place to ensure that the DisCos provide the required three months revolving letter of credit? If not, this review is as good as the rest!

“There has to be an effective mechanism for the payment of revenue shortfalls outside the current best endeavour conjecture. Payment delayed is payment denied, and the cost of such delays should serve as an input to the tariff in the form of cost to the GenCos (considering the time value of money).

“Are there back-to-back data from the DisCos, including trend analysis, to support the ability to distribute such levels of energy? Relative to:

Proof of DisCos investments in capacity improvements tied to such levels of energy delivery improvements.”

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