A Review of the Nigerian Energy Industry

Power privatisation: Operators raise concern over MYTO2 compliance

electric-meters03 December 2013, Lagos – There are serious indications that the power sector privatisation exercise is experiencing some hiccups following alarms raised by some core investors in Distribution and Generation of electricity Companies over the insistence on strict compliance on Multi Year Tariff Order, MYTO 2.

These developments emerged at a general meeting with the new owners of all successor companies, organised by Nigerian Electricity Regulatory Commission, NERC, in Abuja to apparently weigh the initial problems of the Discos and Gencos and craft interventions that will address such challenges.

Many stakeholders, who spoke at the meeting lamented the non-functionality of the MYTO2 following the prevailing realities which they insist make compliance difficult, urging the NERC to review the realities on ground rather than hold them with their business plan.

In his remarks, the Managing Director/CEO of Kano DISCO, Dr. Jamil Gwamna, express grief that his company is not getting the required power allocation as stated in the MYTO which has drastically led to short fall in revenue generation.

Jamil Gwamna explained that the company received less than two percent of the designated eight percent distribution allocations to it as provided in the guidelines in non-compliance to the MYTO2 model.

“It is not a hidden thing. Every DISCO knows that if you generate for example X capacity, every DISCO will get a certain percentage of that generation. It is there in the MYTO model. And the MYTO model is like the Bible of this industry. That is what we work with. But that is not happening. It is not happening in my DISCO.”

He further stated, “We are supposed to have eight percent of our generation and we are getting less than two percent. In fact, in the last few days, we have been getting less than 40MW, and Kano has a special issue, the issue is that, it is like a pass through allocation. We have to give Niger Republic 30MW. We are not allowed to touch that power. We can only touch what is meant for us.”

In his response, the Chairman and Chief Executive of NERC, Dr. Sam Amadi, attributed the shortfall in power supply to problems relating to transmission.

According to him, “Some of them are based on transmission issues while some are based on capacity received. So for us, it implies looking at the commercial framework. How do we ensure that the concerned DISCO that received insufficient power is able to also have the revenue to service their operation?

“And the MYTO provides for what we call balance in settlement so that the company that receives more power that the distributor there is a framework for settling that person. “So this calls us to now go back and review it. So this is not a new problem because before the sales, there were issues about power allocation. So, we intend to deal with the issue.

On the interim rule, Amadi explained that the new owners raised concern over the rule, which would temporarily suspend the operations of the PPAs.

“They are wondering that if they have signed gas supply agreement with the gas companies, and interim rule concept, how will the interim rule would cover that gap. The answer is that the interim rule will provide a settlement of all the obligations.

“The issue raised is vital but we are saying that they should go by the interim rule which will also advise us on how to pay for those gases because if the gas is not patronised, it is going to send the power producers out of business,” he stated.

Amadi also said the attitude of some new owners of the Generation and Distribution Companies for failing to attend crucial meetings with the regulatory agency would no longer be tolerated.

He said the commission would device stringent and stiffer conditions against some of the CEOs of the companies that fail to attend subsequent meetings with it just as he threatened to suspend the first scheduled meeting after take-over of the power generation and distribution plants with the companies in Abuja.

Amadi, who was visibly angry with the absent of CEOs of some of the new companies said, “This high level meeting is mandatory that CEOs come and when they cannot come for any good reason, they are expected to write to the commission informing us of their inability to attend because we want to have discussions at the high level on issues on the regulatory intervention.

“NERC requires that the Chief Executives of the GENCOs and the DISCOs are in attendance because it is very important that they attend this meeting personally and in company of their relevant technical persons.

“This meeting is very important to us because we do not want any licensee to have cause to disagree with us on any issue. We want to get their inputs on issues that affect the market, and we want to get their necessary inputs on all issues that affect the market. So, we should learn to take the meeting very seriously”, Amadi warned.

Amadi threatened that the meeting would have been called off but because of the number of persons in attendance, ‘we have to go ahead.
*Chris Ochayi, Vanguard

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