Trouble looms in power sector over activation of PPA

Trouble looms in power sector over activation of PPA

Concerns were raised yesterday, as the Nigerian Electricity Regulatory Commission (NERC) moves to enforce Power Purchase Agreement (PPA) between Nigerian Bulk Electricity Trading Company Plc (NBET) and players in the power sector.

THECONSCIENCENG reports that the power generation companies have also insisted that raising electricity generation to 5,000 megawatts as ordered by NERC may remain unattainable.

According to a letter yesterday, which was sent to one of the Generation Companies (GenCos) by NERC’s Secretary, Ada Ozoemena, showed that the PPA would be signed tomorrow (Tuesday).

The PPA creates a long-term contract with conditions for the purchase of electricity. NERC, in the invitation letter, wrote: “Please find attached Activation Agreement to be executed between thermal GenCos and NBET for the activation of contracts in Nigeria Electricity Supply Industry (NESI) and note that an Activation Agreement Execution Event at which the MDs personal presence is required shall hold as follows: Date: 28 June 2022 at 9:00a.m. prompt.”

With power supply through the national grid showing no sign of improving, the Federal Government’s plan to ditch the ‘best endeavour’ approach for a contract-based Nigerian Electricity Supply Market may not yield the 5,000MW target, the power generation companies have said, adding that for the 5,000MW supply to happen, the government has to guarantee gas supply to the power plants and also pay up debts owed to them to facilitate the repairs of units in the power plants.

Most of the GenCos, who aired their view on the issue, insisted that the development might remain a mirage, insisting that over N1.64 trillion debts is still being owed them under the previous agreement.

The development, according to them, may further worsen existing electricity situation in the country, adding that the PPA will not function without compliance to interrelated agreements as well as gas-related issues.

Recall that after privatisation of the power sector in 2013, the six legacy GenCos were given template PPA with the mind that they would renegotiate and sign PPA as soon as NBET gets on stream but the agency was not in place until 2015.

There were issues with letters of credit as the DisCos had gone to court, delaying the PPA through an injunction before the contract was finally signed in 2016. At that, the power firms said guarantee for 100 per cent was never meant even as the trustee, United Capital, could not release fund to them.

The Association of Power Generation Companies (APGC) said GenCos’ investors had spent heavily in generation assets, going as far as obtaining loans to fulfill their obligations on the assurance of 100 per cent payment of monthly market invoice upon fulfillment of their obligations.

While mismatch in the previous PPA had cost the Federal Government over N701 billion in payment to gas suppliers, the companies noted that rest of the debt has been on their account, adding that gas suppliers have already appointed debt collectors who are hounding them daily.