From David Onuoja, Abuja
The Association of Power Generation Companies (GenCos), has issued a press release to clarify misconceptions about capacity payments, Power Purchase Agreements (PPAs), and operational realities in Nigeria’s electricity sector.
According to GenCos Managing Director, Joy Ogaji, said, the current practice of only recognizing called-up capacity and ignoring available capacity is detrimental to the sector’s growth.
GenCos argued that they are being short-changed, as they are not being paid for the capacity they make available, which is estimated to be around 7,000MW of the 15,500-grid installed capacity.
This has led to a lack of investment in recovering mechanically unavailable capacity, resulting in a decline in power generation.
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The statement also highlighted on the challenges facing the sector, including the lack of active PPAs, which has made it impossible to secure gas supply agreements. GenCos claim that they are owed over ₦6.2 trillion, despite incurring high costs for gas supply, maintenance, and foreign exchange exposure.
GenCos equally emphasised that they have kept to industry agreements and PPAs since 2013, but have been rewarded with liquidity challenges and regulatory risks. They argued that the current market design does not incentivize performance or investment, leading to stagnant power generation.
It thereby, urged stakeholders to understand their business and the challenges they faced, maintaining that they are not beneficiaries of the current subsidy regime but rather its biggest victims. They seek payment for services rendered and clarification on capacity payments to ensure the sustainability of power generation in Nigeria.
The statement questions how power growth in Nigeria can be encouraged if GenCos are not incentivized to make capacity available for dispatch to the national grid. It also highlighted the anomaly in the market, where available generation has met increased stranded capacity.
GenCos explained that the process of verifying their invoices is rigorous, involving metered data validation and settlement statements. They emphasised that no sector participant has the power to negotiate inflated invoice payments.
The GenCos’ outstanding amount does not represent all their contractual entitlements, and they have been technically insolvent due to persistent non-payment. They urge stakeholders to recognize their challenges and work towards a more sustainable electricity market.
Going by this, the Association of Power Generation Companies is calling for a review of the current market design to ensure that GenCos are incentivized to invest in capacity maintenance and expansion, ultimately improving power supply to consumers.
Dr. Joy Ogaji concluded by saying that “when next time you feel the urge to throw stones at the GenCos, understand their business first”, she quoted.
