TCN’s bottlenecks, DisCos load rejection slow generation expansion
Five years after the Federal Government introduced an eligible customer policy to address the dismal state of electricity supply in the country, stakeholders have insisted that the policy remained a mirage amid repeated grid collapse and load rejection.
Considering infrastructure bottlenecks to wheel electricity to consumers, energy stakeholders tasked the Nigerian Electricity Regulatory Commission (NERC) to hasten approval process and strengthen the policy to improve power supply across the country.
The stakeholders are also worried over stranded electricity, as over 9,000 megawatts installed capacity is not evacuated due to transmission and distribution bottlenecks.
Coming at a time that states are looking to venture into independent power generation, they raised the need to leverage the existing stranded 3,000MW available through the Niger Delta Power Holding Company (NDPHC), an intervention company owned by the states and Federal Government.
Although Nigeria has about 13,000MW generation capacity, bottlenecks at the Transmission Company of Nigeria (TCN) meant it could only dispatch about 4,000MW, leaving out over 9,000MW. The development is coming amid load rejection by some distribution companies (DisCos) due to infrastructural loopholes.
The Eligible Customer regulation introduced in 2017 permits electricity generation companies (GenCos) and Independent Power Producers (IPPs) to by-pass the Nigerian Bulk Electricity Trading Plc (NBET)) and DisCos to sell electricity directly to classified consumers.
Expectations were that the plan would facilitate competition in supply of electricity, promote rapid expansion of generation capacity, as well as create opportunity for improvement in quality of supply. It was also thought that it would encourage third party access to transmission and distribution infrastructure as a precursor to full retail competition in the Nigerian electricity market, allow licensed GenCos with un-contracted capacity to access un-served and underserved customers, thus improving the financial liquidity of the electricity industry. Sadly, the projected gains have remained dismal.
While government had spent billions of naira in developing National Integrated Power Project (NIPP) to stabilise the electricity supply system, just as the private-sector-led structure of the Electric Power Sector Reform Act (EPSRA) of 2005 took effect, the inability to dispatch power generated, according to stakeholders, remained worrisome and counter-productive.
Decrying the level of waste amid power supply gaps across the country, the stakeholders noted that there was need to fast-track approval to enable NIPP connect electricity directly to stimulate the nation’s economy.
At a time when the country is borrowing to finance projects, the industry experts said deploying capacity would take shorter time to supply electricity than building new plants, while government would be able to deploy scarce resources to other productive areas.
Energy stakeholder, Adetayo Adegbemle, noted that the Eligible Customers policy, like the DisCos franchising regulation, is a brilliant policy that could have helped GenCos recoup some money, but has been bungled by politics.
“There have been reports that customers who got on the policy have been forced to revert when the DisCos kicked,” Adegbemle said.
He stated that the expansion of generation capacity may not be the critical issue in the sector but the fact that some DisCos were not taking up available load.
Adegbemle said: “Electricity is an instantaneous product that must be evacuated and utilised on production. So, if TCN and DisCos that are supposed to evacuate and distribute do not, there’s little GenCos can do.”
Adegbemle stated that there was an urgent need to ensure that NDPHC becomes commercially viable, even if that would include taking a careful look at sub-franchising of DisCos.
“It is only then that more power generation, either by the states, or existing IPPs, will make commercial sense,” he noted.
Partner, Energy Utilities and Resources, PwC, Habeeb Jaiyeola, stated that all efforts have to be made to ensure the currently installed and available capacity of GenCos are fully operational and dispatched. Calling for adequate transmission infrastructure, he said the Eligible Customer policy has been a positive one since its introduction.
“This has led to direct negotiation between groups of consumers with GenCos, DisCos or both, to secure constant reliable electricity at a premium,” he said.
Stressing that an application that involves the DisCo, GenCo and TCN might be most sustainable for the Eligible Customer policy, he said additional infrastructure development and urgent need for investment in infrastructure of the DisCos must also become a priority to increase power supply to consumers.
Managing Director of Mainstream Energy, Lamu Audu, told The Guardian that government needs to liberalise and allow generation companies to sell power directly because eligible customers pay on time and pay 100 per cent.
Audu said the initiative remained the only leeway to addressing the growing liquidity crisis that bedevil the sector.
“That’s how the market should be. The Power Purchase Agreements (PPAs) are backed by bank guarantee but we have paused the bank guarantee, otherwise, if you don’t pay me, I will move to the bank. If we free the market, liquidity crisis will disappear,” he said.
Energy professor at the University of Lagos, Yemi Oke, said the policy has suffered regulatory and policy inconsistency due to DisCos’ kick back.
Calling for the policy to be repackaged and placed above the frustration and lobby by DisCos to halt its operation, Oke said loopholes in the policy are forcing high-end customers to focus on captive generation.
According to him, weak distribution and transmission infrastructure would continue to frustrate efforts of NDPHC, as the 3,000MW may remain stranded unless something is urgently done.