‘GenCos sell cheap power to neighbouring countries’

‘GenCos sell cheap power to neighbouring countries’

Some electricity Generating Companies (GenCos)  sell electricity to neighbouring countries at a  lower cost than the Distribution Companies (DisCos) in Nigeria, a document obtained at the weekend by The Nation has shown.

Although the document did not show the price differentials, it said the errant GenCos were carrying “unregulated sales or secret deals” to earn foreign exchange at all cost”  and in defiance of an existing  Federal Government directive.

The GenCos are also said to be sidelining the Nigerian Bulk Electricity Trading Plc (NBET), a government agency in charge of the novation of international agreements. There are 24 registered GenCos in the country.

The Federal Government has been losing revenue from the sales of electricity to the neighbouring, it was learnt.

According to the document, in Q2 and Q4 of 2022, about $16.92 million in invoices were exchanged between GenCos and international customers in Niger, Benin  Republics and Togo.

Investigation showed the breaches by the few GenCos include the violation of the transfer Order made pursuant to Section 10 of the Electric Power Sector Reform Act (EPSRA) by the National Council on Privatisation (NCP).

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Worried by non-adherence to International Power Sale Agreement (IPSA), the administration of ex-President Muhammadu Buhari waded in to guide the GenCos.

In a memo dated  July 12, 2019, the Presidency directed   NBET  to oversee IPSA.

An industry source, who spoke on the development, called on President Bola Tinubu to  take  ”a serious look at the breaches being committed by the  GenCos on international power sales“

The source, who declined to be named, said:  ”What has been happening is the sidelining of NBET. Electricity is now being sold to neighbouring countries in an unregulated way.

“Buhari had directed that all international sales and purchase agreements must be negotiated directly with  NBET  unless otherwise approved by him ( ex-President).

“The directive became necessary in order to align with the configuration of the Nigerian electricity industry after privatisation. But this is not the case.

“The sales of electricity to foreign countries  were  backed up by international cooperation agreements between   Nigeria on the one hand and the Republic of Benin and Togo   for CEB (Communaute Electrique Du Benin) and   Niger Republic for NIGELEC (Societe Nigerine D’electricite)

“As a matter of fact, wheeling of electricity to these countries was being channelled through the network of the Transmission Company of Nigeria(TCN) as there is no dedicated network between the private generating companies and the foreign countries.

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“Prior to these directives and upon the commencement of the Transitional Electricity Market in February 2015, the TCN that received the proceeds of the sale of electricity to international customers began crediting the international customers’ receipts to the account of NBET for payment to GenCos while NBET in turn shares among all the GenCos in a transparent process and in accordance with the approved waterfall.

“The former President’s directive reinforced the earlier directive from the Federal Ministry of Power, Works and Housing to the TCN vide a letter referenced FMP/OPS/360/I dated September 7, 2016, but, despite these, Nigerians were made to purchase expensive energy by selling the cheapest ones to the foreign countries.”

Another source privy to the “secret deals”   said: “The quarterly reports released by the    Nigerian Electricity Regulatory Commission for 2022   reveal how a  few generating companies under the disguise of selling electricity to the international customers are milking Forex at the expense of other GenCos.

“The sales by the few GenCos are without any transparent procurement process known to any Nigerian Law.

“In 2022, Q 2 alone, the errant GenCos reaped in $7.98 million while $8.94 million invoice was exchanged between them for Q 4 of 2022.

“Part of the energy being sold to the international customers by Nigeria came from the Hydro Electric Generating Companies which is the cheapest cost of energy in Nigeria when compared with the thermal generating plants. The cost of energy from the latter is about six times the cost of the former.

“Prior to when the few GenCos cornered the forex from the international customers, inflows from such transactions were always shared among the entire GenCos in the portfolio of NBET to ameliorate the challenges   faced by them   in sourcing for foreign exchange.”

‘GenCos sell cheap power to neighbouring countries’

The Nation