THE management of Afam Power PLC, has been compelled to cut generation from 560 megawatts, MW to 250 MW as a result of distribution challenges.


The Managing Director of Afam power PLC, Engineer Olumide Obafemi, who made the remarks on the sideline of ministerial press visit to Afam Power PLC, in Oyigbo Local Government area of Rivers State, regretted the company was generating power almost at loss due to the prevailing circumstances.

Meanwhile, the Transmission Company of Nigeria, TCN, has raised alarm that the inability of the Distribution Companies, DISCOs, to take electricity to consumers would worsen liquidity crisis in the sector. electricity Both Afam Power Plc and TCN agreed that the electricity rejection by the DISCOs was responsible for stranded 2,000 megawatts of electricity awaiting evacuation.

However, Engr. Obademi, while calling on DISCOs to expand their distribution capacity, said: “To evaluate generated electricity, ordinarily in this our environment, we don’t have challenge. We have so many lines that go out. But you know that in the power industry we are in a team, a problem even in Sokoto State will affect us here.

Presently from Afam here to Alaoji, we have more than enough lines. “But I am not talking of DISCOs, they are not taking power. Electricity is not something you generate and keep. As you are generating it somebody must be consuming it.” “DISCOs are not taking and that is why most of the time we are not generating as much as we want. On gas supply we don’t have problem. we have gas flow station behind us here.” In his remarks, the General Manager, in charge of Transmission, from TCN, in the zone, Engr. S. Euyouko, said that: ”You know you can’t store electricity, as the GENCOs are generating power we are transmitting it but in a case where the Distribution Companies lacked the capacity to get the power to the consumers, it automatically became a waste.

“To be honest with you, I think on daily basis, like I have said, let me use Afam 6 as an example.” I said it has the capacity to generate over 500 megawatts, but each day you see them producing arbour 200mw, at most you se them producing at most 400mw. “There is power to generate, but sometimes, the DISCOs will not pick the load. So these are some of the things that are affecting us. Like i have told you, electricity is not something you cannot be stored.

“As you are producing it, you are using it, so if they are not picking the load, in Osogbo in order not grand the machine to a halt yes, Osogbo will try to suppress load. “Protecting the transmission line is the responsibility of the Nigerian Security and Civil Defence Corps, NSCDC, and we get them informed once there are attacks on the facilities by vandals. We report back to them always.”


Read more at: https://www.vanguardngr.com/2018/04/stranded-power-compels-us-cut-generation-560mw-240mw-afam-power/

It appears Discos are having serious challenges with load rejection.

Iolo:


It appears Discos are having serious challenges with load rejection.

Sometimes I just wonder if the best thing to do is to repossess the DISCOS from the unserious private owners who only care about giving estimated bills and rejecting power.

obailala:
Sometimes I just wonder if the best thing to do is to repossess the DISCOS from the unserious private owners who only care about giving estimated bills and rejecting power.

A thorough inquiry should be done by the legislative arm.

The DISCOs have been complaining about non-payment by the government (of all arms). That hasn't been looked into. I see no reason why we have almost a trillion naira set aside to pay the generation companies for rejected power, yet the government can't negotiate a payment plan with the DISCOs for the amount owed by the government for decades.

For the DISCOs to secure loans, they have to prove they have a sustainable cash flow. The GENCOs got loans because of the FG fund that guaranteed payment for some power losses. The DISCOs don't have that luxury.

By the way the Ministry of Power recently completed the regulation on third party meter sales. So estimated billing will be a thing of the past in a few years. However, repossessing the DISCOs will not make the huge debt go away. We'd either have to assume and write off the debt and pay a fortune to repossess them or balance the debt and prioritize funding for them.

Moreover, as at late last year, the DISCOs owed the NBET over N500 billion. If you're repossessing them, you'd also have to settle that debt.

In any case, it's positive that we're isolating the specific issues with the sector. So we know how to tackle them. Under NEPA and PHCN, everything was clumped together and everyone was complaining about everything.

-Lord

LordAdam16:


A thorough inquiry should be done by the legislative arm.

The DISCOs have been complaining about non-payment by the government (of all arms). That hasn't been looked into. I see no reason why we have almost a trillion naira set aside to pay the generation companies for rejected power, yet the government can't negotiate a payment plan with the DISCOs for the amount owed by the government for decades.

For the DISCOs to secure loans, they have to prove they have a sustainable cash flow. The GENCOs got loans because of the FG fund that guaranteed payment for some power losses. The DISCOs don't have that luxury.

By the way the Ministry of Power recently completed the regulation on third party meter sales. So estimated billing will be a thing of the past in a few years. However, repossessing the DISCOs will not make the huge debt go away. We'd either have to assume and write off the debt and pay a fortune to repossess them or balance the debt and prioritize funding for them.

Moreover, as at late last year, the DISCOs owed the NBET over N500 billion. If you're repossessing them, you'd also have to settle that debt.

In any case, it's positive that we're isolating the specific issues with the sector. So we know how to tackle them. Under NEPA and PHCN, everything was clumped together and everyone was complaining about everything.

-Lord

Valid points bro.

It would surprise you that a big reason why the Government MDAs are yet to settle their debts is that bills given them are also estimated. The Disco's have refused to install prepaid meters at MDA locations. Largely because these MDAs make up a large proportion of Disco receivables.

It's a chicken and egg problem. One that can only be solved when actual consumption is billed as you've highlighted sholud be a reality in coming months.

Imagine the nonsense.

There is enough power available. But discos are rejecting it.

SMH.

Iolo:


Valid points bro.

It would surprise you that a big reason why the Government MDAs are yet to settle their debts is that bills given them are also estimated. The Disco's have refused to install prepaid meters at MDA locations. Largely because these MDAs make up a large proportion of Disco receivables.

It's a chicken and egg problem. One that can only be solved when actual consumption is billed as you've highlighted sholud be a reality in coming months.

But most of the debt were from pre-DISCO days. They were assumed debt from PHCN and NEPA, both government entities.

Did a research and found that the FG (note the FG alone) approved payment for approx 27 billion last year. What caught my attention was that the DISCOs billed 90 billion. The FG didn't negotiate it, they said they owed 27b and that was what they were going to pay. No external audit, nothing. Now, although I have my reservations about the DISCOs, 90b to 27b is a huge reduction esp when they might have planned their operations based on the 90b figure +/- 20b because of bureaucratic red tape.

Did the FG account for inflation? What about interest? Are they saying all the money owed by the FG for decades is "only" N27b as at 2017?

The DISCOs also have to interface with the state governments one by one, which adds years to actually get repayment.

Estimated billing is a sharp practice and should be stopped. But truth be told, it's one of the primal ways they're able to stay afloat. If the FG can write off 70b. Expect the states to do same.

I personally hate this campaign of calumny being launched against one segment. The GENCOs and TCN are trying to throw the DISCOs under the bus. When they know the DISCOs don't have the same cover that they enjoy.

-Lord

U guys don't want to tell Nigerians the truth about power supply in this country.

We know something is fishy somewhere

LordAdam16:


But most of the debt were from pre-DISCO days. They were assumed debt from PHCN and NEPA, both government entities.

Did a research and found that the FG (note the FG alone) approved payment for approx 27 billion last year. What caught my attention was that the DISCOs billed 90 billion. The FG didn't negotiate it, they said they owed 27b and that was what they were going to pay. No external audit, nothing. Now, although I have my reservations about the DISCOs, 90b to 27b is a huge reduction esp when they might have planned their operations based on the 90b figure +/- 20b because of bureaucratic red tape.

Did the FG account for inflation? What about interest? Are they saying all the money owed by the FG for decades is "only" N27b as at 2017?

The DISCOs also have to interface with the state governments one by one, which adds years to actually get repayment.

Estimated billing is a sharp practice and should be stopped. But truth be told, it's one of the primal ways they're able to stay afloat. If the FG can write off 70b. Expect the states to do same.

I personally hate this campaign of calumny being launched against one segment. The GENCOs and TCN are trying to throw the DISCOs under the bus. When they know the DISCOs don't have the same cover that they enjoy.

-Lord

I agree with your summation. It appears you're more grounded in the details of this than I am.

A lot of work still needs to be done. One question that begs an answer is to know what gross margins these disco's operate with. Let's assume every billable customer is given a prepaid meter as of now...would these disco's turn a profit given their cost structure?

If yes, then I wonder why the FG isn't setting a Development Fund to bridge the gap so that prepaid meters are installed across board? If no, then we have bigger problems.

Iolo:


I agree with your summation. It appears you're more grounded in the details of this than I am.

A lot of work still needs to be done. One question that begs an answer is to know what gross margins these disco's operate with. Let's assume every billable customer is given a prepaid meter as of now...would these disco's turn a profit given their cost structure?

If yes, then I wonder why the FG isn't setting a Development Fund to bridge the gap so that prepaid meters are installed across board? If no, then we have bigger problems.

One of the biggest issues in the power sector is liquidity.

The financial structure is simple. The NBET owned 100% by the FG buys power in bulk from the GENCOs, then sell the electricity to the DISCOs.

But for some reason, the NBET is saying the DISCOs owe them N500b+. Which has made them unable to pay the GENCOs. The GENCOs in turn are owing gas suppliers, sub-contractors, and scaling back investment because the debt. The DISCOs with such amount of debt on hand have decided to scale back investment as well. Banks won't touch them with 10-foot pole.

The question is, how is it that the NBET let the DISCOs owe that much? Are they trying to say the DISCOs received N500b+ in payment from consumers and failed to revert it? If no, then did Nigerians (from the government to the companies to residents) receive N500b+ worth of electricity for free? That's why I called for the legislative arm to investigate the issue thoroughly. The executive arm runs the NBET, so they're a biased party.

The so-called load rejection is less than 15% of accepted load. It's a lot, but it's not as bad as they're making it appear. According to figures I could find (I can't vouch for their veracity), our installed generating capacity is 7000MW+, transmission is 6000MW+, but distribution is 4500MW+. And our generating capacity is increasing exponentially, while the other segments lag, even with the liquidity crisis.

So the DISCOs have N500b+ in debt, don't have enough capacity to wheel generated power, and they're expecting the DISCOs to finance heavily in increasing capacity or a bank to lend them at a 14% p.a. interest rate with all those pending obligations hanging over.

You can see no one is being totally honest here. Everyone has a question to answer. Instead everyone is trading blames.

Imagine the FG deciding to pay back money owed and instead of giving it to the DISCOs to decide how to divide it for their different engagements, since they're very illiquid; they unilaterally decided to apply it to the NBET debt.

-Lord

obailala:
Sometimes I just wonder if the best thing to do is to repossess the DISCOS from the unserious private owners who only care about giving estimated bills and rejecting power.

The bowler hatted one sold DISCOs to a bunch of traders and looters. The incompetence and parovialism of the departed PDP government has caused too much whale in this country. Made worse by the local mindedness of their petty trader children supporters. Do you know Nigeria has paid back the money used to by DISCOs twice over without improvements. That is what you get when a thoroughly corrupt party puts the weakest and most confused guy they have into Aso Rock

obailala:
Sometimes I just wonder if the best thing to do is to repossess the DISCOS from the unserious private owners who only care about giving estimated bills and rejecting power.

What is holding Buhari from repossessing the discos?

As long as we keep pricing power like potatoes and tomatoes by avoiding prepaid meter there will be problem.

LordAdam16:


One of the biggest issues in the power sector is liquidity.

The financial structure is simple. The NBET owned 100% by the FG buys power in bulk from the GENCOs, then sell the electricity to the DISCOs.

But for some reason, the NBET is saying the DISCOs owe them N500b+. Which has made them unable to pay the GENCOs. The GENCOs in turn are owing gas suppliers, sub-contractors, and scaling back investment because the debt. The DISCOs with such amount of debt on hand have decided to scale back investment as well. Banks won't touch them with 10-foot pole.

The question is, how is it that the NBET let the DISCOs owe that much? Are they trying to say the DISCOs received N500b+ in payment from consumers and failed to revert it? If no, then did Nigerians (from the government to the companies to residents) receive N500b+ worth of electricity for free?

-Lord

1) Transmission and distribution lines are not effective so there are losses. This is always a source of pain as Disco's claim they receive xMW and would only pay for x while Transmission says they sent yMW and expect the Disco's to pay for y.

2) The Disco's are supposed to collect money from consumers. They are the last leg and they do collect money but don't remit. They claim customers have not paid. Also estimated billings favor them, it's why they won't install prepaid meters. If they were serious about collecting money, the first thing they would have done is install prepaid meters.

AZeD1:

1) Transmission and distribution lines are not effective so there are losses. This is always a source of pain as Disco's claim they receive xMW and would only pay for x while Transmission says they sent yMW and expect the Disco's to pay for y.

2) The Disco's are supposed to collect money from consumers. They are the last leg and they do collect money but don't remit. They claim customers have not paid. Also estimated billings favor them, it's why they won't install prepaid meters. If they were serious about collecting money, the first thing they would have done is install prepaid meters.

1. The NBET is the final arbiter of who pays what. That point isn't even in the discussion. It's not a negotiation. Everything is recorded monthly, the amount (MWh) they collect, the amount they reject, and eventually compared with previous values to quickly identify any hiccups. If you know where to look, you'd get this information.

2. Estimated billings favor them. Does loss from energy theft also favor them? What about the owed money by the government?

Abuja DISCO alone needs N54b to meter all their customers. However, the revenue shortfall in the sector is over N800b. And btw, the power base pyramid recommends that distribution capacity should be at least 4 times the installed generating capacity. Currently that is 24,000MW. Unfortunately, current distribution capacity is approx 4500MW.

Considering these tight contractual obligations and liquidity crisis, which bank do you think would approve their loan request? Which "competent, financially buoyant" foreign company do you think would be st*pid enough to put their one cent in the distribution segment without asking for these challenges to be taken care of? Or do you think investors are charity organizations?

Then you sneak in a snide remark that "they do collect money, but don't remit." Pray tell, what is your source? Since you're so certain, why not your whistleblow on them to the NERC and Nat'l Assembly so they probe the fraud? We're talking about over half a trillion naira in NBET debt.

All of these ignorant postulations and disgusting inferences are the reason why we aren't moving as fast as we could. Instead of you guys to talk about the challenges, you dunces just decide to pick a scapegoat because that's easier. Then all this white noise allow the challenges to persist because apparently all you armchair energy economists have a simple quick fix--"Oh, why not you just sell the DISCOs. They're incompetent." Like you've ever managed one.

What about the TCN? Are they the competent ones? The FG that takes forever to make urgent decisions and plays politics with everything, I bet they're competent? How about the GENCOs that get minted cash from the CBN whenever they run at a loss? Who wouldn't be competent with such an arrangement?

-Lord

LordAdam16:


1. The NBET is the final arbiter of who pays what. That point isn't even in the discussion. It's not a negotiation. Everything is recorded monthly, the amount (MWh) they collect, the amount they reject, and eventually compared with previous values to quickly identify any hiccups. If you know where to look, you'd get this information.

2. Estimated billings favor them. Does loss from energy theft also favor them? What about the owed money by the government?

Abuja DISCO alone needs N54b to meter all their customers. However, the revenue shortfall in the sector is over N800b. And btw, the power base pyramid recommends that distribution capacity should be at least 4 times the installed generating capacity. Currently that is 24,000MW. Unfortunately, current distribution capacity is approx 4500MW.

Considering these tight contractual obligations and liquidity crisis, which bank do you think would approve their loan request? Which "competent, financially buoyant" foreign company do you think would be st*pid enough to put their one cent in the distribution segment without asking for these challenges to be taken care of? Or do you think investors are charity organizations?

Then you sneak in a snide remark that "they do collect money, but don't remit." Pray tell, what is your source? Since you're so certain, why not your whistleblow on them to the NERC and Nat'l Assembly so they probe the fraud? We're talking about over half a trillion naira in NBET debt.

All of these ignorant postulations and disgusting inferences are the reason why we aren't moving as fast as we could. Instead of you guys to talk about the challenges, you dunces just decide to pick a scapegoat because that's easier. Then all this white noise allow the challenges to persist because apparently all you armchair energy economists have a simple quick fix--"Oh, why not you just sell the DISCOs. They're incompetent." Like you've ever managed one.

What about the TCN? Are they the competent ones? The FG that takes forever to make urgent decisions and plays politics with everything, I bet they're competent? How about the GENCOs that get minted cash from the CBN whenever they run at a loss? Who wouldn't be competent with such an arrangement?

-Lord

1) NBET being the final arbiter doesn't remove the loss from transmission. Someone has to pay for that loss and who ever pays for it is losing money.

2) The investors were well aware of the metering issue before they bought the companies. A lot of them didn't do their homework before investing, who's fault is that?

As for the so called snide remarks,
https://www.vanguardngr.com/2017/06/gencos-discos-disagree-planned-centralisation-account/

The plan was to open a centralized account so everyone can see what enters, guess who kicked against it?

3) As for government, which debt are you taking of pre privatization or post privatization?

4) As for the challenges you are talking of, I've known and lived around the power sector all my life. If there's one sector I know very well in Nigeria, it's the power sector.

5) When you talk about liquidity in the power sector, it's the disco's, they are the end point. Their collection ability affects the whole sector so yes, they'll get the blame. Consumers deal with discos not Gencos or TCN.

AZeD1:

1) NBET being the final arbiter doesn't remove the loss from transmission. Someone has to pay for that loss and who ever pays for it is losing money.

2) The investors were well aware of the metering issue before they bought the companies. A lot of them didn't do their homework before investing, who's fault is that?

As for the so called snide remarks,
https://www.vanguardngr.com/2017/06/gencos-discos-disagree-planned-centralisation-account/

The plan was to open a centralized account so everyone can see what enters, guess who kicked against it?

3) As for government, which debt are you taking of pre privatization or post privatization?

4) As for the challenges you are talking of, I've known and lived around the power sector all my life. If there's one sector I know very well in Nigeria, it's the power sector.

5) When you talk about liquidity in the power sector, it's the disco's, they are the end point. Their collection ability affects the whole sector so yes, they'll get the blame. Consumers deal with discos not Gencos or TCN.

1. And? I fail to see the relevance of that point to this discussion. The NBET is the final arbiter of who pays what. The NERC establishes the tariff putting all of these technical losses into account. So what's your bloody point?

2. What do you mean by homework? Most of the data currently available were made during or after privatization. There is still a dearth of information. Prior to privatization, most of what as available was guesswork and inaccurate; due to lack of transparency, bureaucratic bottlenecks, and the endemic civil service inefficiency. So you can't talk about homework, like they went in blind. They didn't. I guess the e-commerce operations also facing challenges in the country also didn't do their homeworks.

2b. Your link proves nothing. The books of all DISCO companies are audited by the NERC and BPE annually. You can't talk about centralization of collection when they all have different contractual obligations and when you haven't tackled the challenges that necessitate centralization. If the government thinks there is foul play, carry out an investigation. The NERC and Nat'l Assembly have oversight functions. Scrutinize the books and take offending parties to court. Don't come up with gimmicks like centralized accounts between bona fide separate entities just to score cheap political point.

3. Well, go read up on the NBET debt. That question has a very obvious answer that you shouldn't even bother to ask.

4. Yes. And you conveniently singled out the DISCOs to throw garbage on. And you say ignorant stuff like "If they were serious about collecting money, the first thing they would have done is install prepaid meters." How can you claim to know the power sector "very well" and you make such a disgraceful statement. Is it logistically possible to meet 100% prepaid meter compliance before collecting revenue?

5. Collection ability? Can you read that nonsense you wrote again. In the post you quoted, I carefully detailed some of the challenges that are impinging on their "collection ability" and you still proceed to type that trash. Consumers deal with DISCOs, so f*cking what? Are they all paying? How much low-cost financing is available to the DISCOs compared to the TCN or GENCOs? We're talking about a catch-22 situation, and you're talking about collection ability? Are you ok?

See, I have no interest in debating this. Blame anyone you want. That's your cup of tea. When you guys are tired, you buy back the DISCOs, pay off the current owners handsomely with a golden handshake, then proceed to spend trillions in fixing the sh*t you guys fail to acknowledge now as deserving of attention, then sell them to new guys after Jesus comes because we seem to forget the gross inefficiency of the defunct NEPA/PHCN disaster.

-Lord