The federal government through the Nigerian Electricity Regulatory Commission (NERC) and Manufacturers Association of Nigeria (MAN) will next month sign an agreement that will allow large manufacturing companies purchase electricity directly from power generating companies (GenCos) to ensure that government’s industrialisation policy is not being hindered. Known as Eligible Customer policy, the initiative allows manufacturers bypass electricity distribution companies (DisCos), who have been accused of being thorn in the flesh of manufacturing companies by issuing estimated bills despite irregular and unreliable electricity supply that have escalated cost of production for manufacturers. Already, a recent survey by a professor of economics at the University of Ibadan, Adeola Adenikinju, which was funded by the European Union and the government of Germany shows that persistent power outages continue to haunt industrial zones, causing production shortfalls and raising cost, while Nigerian manufacturers are increasingly generating power on their own, with annual capacity in the industry put at 13,223 megawatts. According to LEADERSHIP investigation, this unabated supply hitches, noticeably caused by failure on the part of the DisCos, forced NERC on May15, 2017 to declare that GenCos in Nigeria would henceforth be free to generate and sell electricity directly to end-user customers across the country. The declaration is line with the provisions of section (27) of the Electric Power Sector Reform Act 2005, whereby eligible customers are permitted to buy power from a licencee other than electricity distribution companies. The declaration called “Eligible Customers Regime” which was signed off by the minister of power, recognises four categories of eligible customers in the electricity sector. President of MAN, Frank Jacob, speaking with LEADERSHIP on the eligible customer policy, said, “We are currently engaging the ministry of power and the Nigerian Electricity Regulatory Commission because the Discos are kicking against it and this is frustrating. We want to key into this initiative because the Discos are not providing power at competitive rates. “We will be meeting with the ministry and NERC again this month and perhaps by next month, (July) we hope to conclude negotiations on issues around that but a significant milestone will be to thrive with the MAN power development company with which we hope to generate our own power and distribute to members.” This move however, generated argument and resentment from the Discos. Speaking on their frustrations with DisCos, Jacob observed that because the power sector privatisation was not transparent, firms without the right qualifications and capabilities were the ones running the power sector. He said the country needs a strong political will to revisit the exercise and get the right people to run the system, adding that government had intended to generate about 7,000 megawatts of electricity but current generation is just about 5,000 megawatts with a shortfall of about 2,000 megawatts. Irked by avalanche of complaints against the Discos, executive secretary, Association of Power Generation Companies, Dr. Joy Ogaji warned of possible sanctions against any Disco found working against the policy. Ogaji, who spoke with LEADERSHIP on phone, said the Gencos have scheduled to meet with MAN representatives during the week, and that NERC is determined at this point to deal with a defiant or unwilling Disco. She said so far the policy is gathering momentum as some Gencos have signed up to seven Power Purchase Agreement, PPA, with some willing customers and the association is canvassing for more deals. On the seeming overt confrontation engaged by the Discos, the director-general of the Lagos Chamber of Commerce and Industry, LCCI, Muda Yusuf, said while some of their members have identified with the Eligible Customer declaration, others out of frustration have installed gas-fired generators, inverters, and generators using low-pour fuel oil (LPFO) to avoid the DisCos. According to Yusuf, government should revisit the power industry reform process because the privatisation exercise did not get it right. “The current system is centralised and it is obvious that we need an entirely new model that will encourage decentrilisation of the system. “From available statistics the distribution network is completely weak, we are ready to pay for electricity but we are not getting it. From every indication the electricity generation chain is working, and with the incremental or embedded power initiative of government the country would improve on generation but then how would consumers get the light,” he lamented. “There is glaring inefficiency among the Discos, they have not injected the required capital or exhibited the technical knowledge of the business which has led to losses and their inability to deal with energy theft”, he said. Yusuf said the private sector was happy with the Eligible customer declaration, but shortly after, the Discos engaged in various frustrating moves to discourage them from buying into it. He said there was a particular Disco that even threatened court action against one of his members for attempting to seek direct power purchase with a Genco. The Eligible customer regime aims at encouraging third party access to transmission and distribution infrastructure as a precursor to full retail competition in the Nigerian electricity market, and allow licensed generation companies with uncontracted capacity to access unserved and underserved customers thus improving the financial liquidity of the electricity industry. It is also expected to enhance the stability and operational efficiency of generation companies arising from the flatter load profiles of Eligible Customers and possibly lower technical losses, depending on the required network interconnection. LEADERSHIP reports that in the listed categories of Eligible customer, the first category comprises of a group of registered customers with NERC, whose consumption is not less than two megawatts (MW), and are connected to a metered 11Kv or 33Kv delivery point on the network of the electricity distribution company. This first category would have to agree to a distribution use of system agreement for the delivery of electrical energy. The second category of eligible customers are customers who are connected to a metered 132KV or 330KV delivery point on the transmission network. This set of eligible customers would be subjected to a transmission use of system agreement for connection and delivery of energy, while the third category under this new initiative consists of customers with consumption in excess of two megawatts on a monthly basis and are connected directly to a metered 33KV delivery point on the transmission network. This category of eligible customers is also subjected to being under a transmission use of system (TUoS) agreement, and must have a bilateral agreement with the distribution licensee licensed to operate in that geographical location. The bilateral agreement covers for the construction, installation and operation of a distribution system for connection to the 33KV delivery point. The fourth and last categories of customers whose minimum consumption is more than two megawatts over a period of one month and are directly connected to a metering facility of a generation company. This category of industrial customers also has to enter into a bilateral agreement for the construction and operation of a distribution line with the distribution licensee licensed to operate in the location. One implication of the declaration for the industrial class is the rise in competition amongst GenCos. Eligible customers’ declaration could potentially favour industrial customers who would have the ability to negotiate for better service quality directly from the suppliers to run their businesses at reduced cost when compared to the cost of making alternative power source available. Nigerian manufacturers spent N213.77 billion on alternative power sources between 2014 and 2016, spending N25 billion in 2014, N58.82 billion in 2015 and N129.95 billion in 2016, according to data from MAN. Manufacturers have formed their power development company to negotiate with private energy suppliers for the provision of electricity at industrial clusters. Power takes up much of manufacturers’ expenditure and they are determined to get more of it to power industries. Thirty to 40 percent of its expenditure goes to power, Jacob said. Also, MAN has signed an agreement with Tower Energy Solution & Systems Limited, for the supply of six to 10 megawatts (MW) of electricity to Henry Carr Industrial Cluster in Ikeja, Lagos. They have also agreed with Negris Group for the supply of up to 80 MW of electricity to Odogunyan in Ikorodu industrial cluster. They are also talking with solar power supply firms in northern Nigeria, where there is limited gas supply to enable clusters in Kaduna, Kano and other parts, to have incremental power at cheaper rates. Similarly, a negotiation is in the pipeline with Sahara Energy, Geogrid LighTec Limited and other companies, for the supply of power to industrial clusters, an idea that is intended to put manufacturers together in clusters and arrange for power which can be supplied through providers that will engage in power supply through hydro, solar and gas.
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