The introduction of the N701.9 billion Payment Assurance Facility (PAF) to raise Generation Companies’ (GenCos) monthly revenue by 80 per cent has raised generation capacity to 7,009 megawatts (MW) in the past 18 months, records have shown.
This paper reports that according to official update obtained from the Nigerian Bulk Electricity Trading (NBET), the fund was borrowed by the agency as an intervention in the electricity market due to poor performance by the 11 DisCos.
NBET is the manager and administrator of the electricity pool in the Nigerian Electricity Supply Industry (NESI). It acts as the middleman between the GenCos and the DisCos in creating assurance for payment of electricity generated and supplied.
The DisCos get the invoices for generated electricity through NBET and pay, while NBET remits to the GenCos. As the systems settlement administrator for NESI, NBET manages and implements the N701.9bn PAF to the GenCos.
The funding was initiated by the Minister of Power, Works and Housing, Mr. Babatunde Fashola, in April 2017, to pay at least 50 per cent GenCos’ invoices in addition to the average of 20 per cent the DisCos were remitting monthly to guarantee adequate electricity generation.
“The N701.9bn PAF is a loan to NBET to meet its obligation of GenCos, which means that like all loans, it is expected to be paid back by NBET to the borrower, in this case the Central Bank of Nigeria (CBN), with interest,” the agency said in an update note sent to Daily Trust.
NBET which was incorporated on July 29, 2010, is 100 per cent owned by the Federal Government.
The fund was to cover settlement from January 2017, up to 2019, when it is expected that through the Power Sector Recovery Programme (PSRP), the electricity market would have become buoyant and the DisCos would have improved significantly on their remittances for energy supplied.
NBET which stated the impact of the funding to the GenCos since January 2017, said it had demonstrated timeliness and efficiency that could be achieved in settlement administration in the NESI.
“This is a good indicator for demonstrating the agency’s credibility in attracting investment and boosting confidence in NESI,” NBET noted.
The regular funding, according to NBET’s data, had increased and sustained electricity generation onto the national power grid. PAF, in its workings, guarantees 80 per cent of the GenCos monthly invoices to the DisCos, and 90 per cent of gas invoices.
With this procedure, “As at June 2008, the available generation capacity stood at 7,009,” NBET said.
The guaranteed payment to the gas suppliers ensures that GenCos continue to receive constant and reliable gas supply. The GenCos, according to the electricity trading middleman, had been able to maintain their plants, which in turn translated to increase in energy injected onto the grid.
The agency, through its spokesperson, Henrietta Ighomrore, told our reporter that as at June 2018 Market Payment Cycle, “We have observed incremental supply of electricity from generators during the last 18 months of implementing PAF, possibly due to GenCos implementing their network development plans in response to the certainty of receiving 80 per cent of their invoices each month under the PAF.”
For the DisCos, NBET said the average performance from January 2017, till June 2018, was an average of 27 per cent. Hence, the market has largely been sustained by the implementation of the 701.9bn PAF approved as loan facility to NBET so that it can meet its obligations.
During the period under review, NBET said Ikeja and Eko DisCos remained the top performers among the 11 DisCos, with an average performance of 43 per cent and 40 per cent respectively.