…FG to inject another N600 bn
Federal government is processing release of another N600 billion to help resolve over one trillion Naira debt disputes that currently threaten fresh investments in the gas-to-power programme.
However, it is not clear whether the intervention would be enough to resolve the mounting debts across the full industry supply relay involving gas suppliers, power producers, electricity transporters and supply brokers in the chain.
It is also not clear how the fund injection would improve supply of electricity in the sector where key issues revolve around capacity and efficiency in electricity distribution, and revenue collection for cost and margin recovery from the market.
The current N600 billion, though not yet visible to stakeholders that play in the industry, would be the third in the routine interventions to resolve debt impasse that arose from over N1.0 trillion unpaid power supply invoices.
According to the spokesman of power generating companies, Mrs Joy Ogaji, even the highly hyped fund intervention remains a rumour as, she said, there is no government document or policy statement notifying players in the industry about fund intervention.
The Oracle Today reports that government had in the past infused some N213 billion and subsequently another N800 billion intervention funds to enable the Nigerian Bulk Electricity Trading Company (NBET) attend to piling invoices from power generation companies.
The earlier interventions did not however address critical issues of operations commerciality in the sector where gas players and generating companies call for market liberalization, and distribution companies demand tariff correction.
Enquiries by The Oracle Today showed that the generating companies jointly push a monthly power invoice of N55 billion or annual invoice N660 billion to NBET for power supplied to the distribution companies. In response to the invoices, they get paltry N13.2 billion monthly or N158.4 billion annually, representing mere 24 percent cash back on verified invoices.
Mrs Ogaji said the consistent payment shortfalls have built existing debts in the industry to over N1.2 trillion, pointing out that even the uncertain N600 billion intervention from government would be inadequate to defray significant portion of unpaid invoices in the system.
Gas suppliers who decry huge debts by generating companies are also worried about the accounting inefficiency and regulatory impotence in the sector, wondering why the regulators have failed to enforce compliance to payment commitments in the market.
The Oracle Today reports that the power sector takes about 80 percent of total domestic gas supply in the country where upstream petroleum producers are required by regulation to meet allocated supply obligations under a defined tariff system.
Whereas the investors in gas gathering, processing and transportation have no qualms with the commercial arrangements and tariff structure that govern commercial gas supply to the domestic market, lack of physical cash returns from the power sector has remained a nightmare.
Mrs Ogaji said that about 60 percent of the total invoices from generating companies actually belong to gas suppliers, adding that remittances to the gas suppliers has also remained proportionate to returns from the distribution companies.
Thus, N720 billion of the N1.2 trillion power sector debt is actually owed the gas suppliers.
President of Nigerian Gas Association, Mrs Audrey Ez’igbo, could not be reached for comments but the group had earlier proposed commercial liberalization of the sector so that individual suppliers could enter separate commercial arrangements with their customers.
“All we want is ‘willing buyer-willing seller’ arrangement,” erstwhile President of the group, Mr. Dada Thomas, told The Oracle Today in an earlier interview.
Our findings show that revenue collection disputes arising from estimated billing mainly account for high collection losses declared by distribution companies, and pressure from all quarters including the Ministry of Power on the distribution companies to resolve billing disputes with prepayment metering has failed to yield results.
Inside sources revealed to our correspondents that the distribution companies had stalled implementation of complete metering coverage across their networks after pilot projects showed that whereas billing disputes were efficiently resolved in the areas, revenue drastically dropped due to low power supply.
He said the distribution companies now rely on vast number of vulnerable communities without prepayment meters to maximize revenue through estimated billing.
“How do you expect them to make money if they don’t supply you with power? If you implement the full metering coverage under the prevailing tariff structure, the entire commercial chain will collapse and government will return to subsidy.
“There two things that must happen before the total metering coverage would come. One is cost reflective tariff structure. The other is a law that compels government agencies, including the security forces to pay their electricity bills. The worst debtors to the power sector are not the DISCOs, they are the military, police, customs, and other government agencies that you cannot prosecute or disconnect.
“Another alternative is for government to examine the annual power supply budget of these agencies and remit the funds to either NBET or NERC for easy settlement of their bills. Even as we speak, the Eligible Customer declaration by the minister makes it easy for some of the maximum demand government agencies to enter into service contracts directly with the generating companies. That will eliminate the distribution agents,” a source who provides consultancy to some of the distribution companies said on conditions of anonymity.
Spokesman of the Association of Nigeria Electricity Distribution Companies (ANED), Mr. Sunday Odutan, could not be reached for comments on the current fund intervention, but he had earlier stated that government must revert to full implementation of the agreements on privatization which, according to him, outline clear steps towards achieving commerciality, efficiency and growth in the power sector.
He had warned that debts in the power sector might continue to rise until a cost reflective tariff system is enthroned to confer commercial viability on investments made by different players across the value chain.
Thus, the commercial outlook for the sector remains gloomy as key issues of building capacity in the distribution end of the commercial relay are now drowned in festering debt quarrels among all players in the industry. And at the root of the entire commercial issues that translate to rising debts is the inefficient reliance on estimated billing which provides no verifiable basis for distribution companies to place payment demand on their consumers.