30 August 2015, Abuja – The continued flouting of the contractual demands of the Transitional Electricity Market by power distribution companies is a clear indication that the firms are not prepared for the take-off of TEM, which was declared in February this year, the Transmission Company of Nigeria has said.
Through the declaration of TEM, the Federal Government had opened up the power market to competition as participants commenced full trading by contracts, just as the institutional and normative structures of a competitive and efficient electricity market was put in place.
Early this year, the Federal Government had told investors that it would not accept any excuse for not being able to provide Nigerians with uninterrupted power supply as a soon as TEM was declared.
But the Executive Director, Operator of the Nigerian Electricity Market, which is an arm of the TCN that also oversees systems operation of the power sector, Mrs. Ngozi Osuhor, told our correspondent that the recurrent misdemeanors of the power firms, particularly the Discos, as regards the contractual terms of TEM, showed that the companies were still not ready for the transitional phase of the market.
She said, “I was a Disco CEO up until that time (when TEM was declared) before I became a market operator, and I noticed that it was not actually the right time to declare TEM. At the time the Discos were sold, most of the buyers did not have the opportunity to see what they were buying.
“The labour unions prevented the buyers from seeing the facilities because the government, at that time, had not resolved the labour issues.
“But now, TEM has been declared and this means we are now in a commercial market; so, if I give you any quantum of energy, you should pay me for it. But the irony is that we are not able to do that.
“So, for some commentators, which included me, we were not ready for TEM at the time it was declared. But it has been declared. And you see government policies, once you get there, you are there, and you cannot go back. Everyone thought the declaration would arouse competition and harass everybody and make them bring the money. But this has not happened.”
The successor power generation and distribution firms of the defunct Power Holding Company of Nigeria were officially handed over to their various private owners during an elaborate event held at the Presidential Villa, Abuja in November 2013.
The private investors/owners of the unbundled power firms were allowed to run their respective businesses and understand the market for over a year before TEM was declared in February 2015.
Despite the over 14 months period given to the firms before TEM was declared, the investors, particularly the Discos, are still not living up to the expectation of TEM.
For instance, they have reportedly failed to uphold the contractual agreement of making remittances to the government as well as meter all electricity consumers.
Osuhor said, “In the scheme of things, every energy sold should be paid for and that is when it will become a commercial market. For us to run a competitive market, every energy must be paid for. But considering the stage of the market we are in now, it is impossible. They are not paying because they cannot pay for they do not even have the capacity to pay.
“The issues are many, from the quantum of energy being generated to the infrastructure that the Discos didn’t know was not there; but they paid and bought the firms, all kinds of policy speculations and a lot of other issues. So, for now the market is not running.”
She noted that during the interim period before TEM was declared, the market participants were also not paying as expected, adding that they were only able to pay a little in order to sustain the market.
Osuhor, however, noted that despite the constraints faced by the power firms, the problems in the sector were still glaring and needed concerted efforts to address as required by TEM.
“Now, they (power firms) have bought it (PHCN) and now they cannot cope. However, the truth is that the problems are there and cannot be wished away. So, we have to look at how to move forward. This calls for open discussion so that people can bring their perspectives and we will know how to address these issues,” she said.