Direct sale of electricity will address challenges in power sector ---GenCos

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*Ughelli power plant managed by Transcorp Power

(Nigeria) The Association of Power Generation Companies, APGC, has said that the Federal Government’s directive on direct sale of electricity to end users, will address major challenges in the nation’s power sector.
The Federal Government had through the Nigerian Electricity Regulatory Commission, NERC, announced on May 19, 2017 that “GenCos in Nigeria are now free to generate and sell electricity to end-users in Nigeria.”
The Executive Secretary of APGC, Dr Joy Ogaji, said this at a news conference in Abuja on Wednesday.
The government’s decision tagged as the ‘Eligible Customers’ Regime”, is in line with the provisions of Section 27 of the Electric Power Sector Reform Act 2005, EPSRA.
The decision, when fully implemented would have very little interference on determination of power generated from the 11 electricity distribution companies in the country.
Ogaji said that the declaration of eligible customers portend several benefits for the sector as it would also address some of the revenue shortfalls in the industry.
She said the declaration would make GenCos to ramp up their generation capacities, to provide supply to eligible customers and address issues on financial viability in the electricity supply value chain.
Ogaji said that the envisaged guaranteed cash flow that would follow the practical implementation of the exercise would definitely boost morale of potential investors in the area of gas field development.
The APGC executive secretary said that the decision would also boost the development of the manufacturing sector, as constant power generation and supply would be provided to meet production demands.
According to her, declaration of customer eligibility will further introduce competition on the demand side and complete the liberalisation of the Nigerian Electricity Supply Industry, NESI.
This, Ogaji said, would result in greater pressure for efficiency on the suppliers of electricity in the country.
She said that the presence of retailers, or the mere possibility of future competition, would force existing power distributors to establish appropriate customer services and commercial divisions.
According to her, the measure will also promote national economic development through supply of electricity to the productive sectors of the economy.
“This will go a long way to supporting economies of scale, through bulk purchase of electricity,” she said.
She said that the measure would result in further reduction of technical and non-technical losses for bulk high voltage supply in the NESI.
According to her, it will reduce financial risk by supplying power to credit worthy eligible consumers.
Other benefits accrued to the selling of power direct to the consumers, according to Ogaji include: increased attention to consumers, confer on consumer’s power to choose energy supplier.
She said that the decision would also bring about a more efficient electricity market, stimulate investment in the sector as electricity generators could sign long term contracts.
She explained further that the declaration would also send a powerful signal that the electricity sector was evolving towards full retail competition.
On its effect on the Distribution Companies (DisCos), Ogaji said that they could also on the other hand, procure additional power as eligible customers.
She said that the development would compel the DisCos to increase efficiency with sufficient attention to service improvement in the short-term by reducing major losses incurred by them in the power chain.
She said that the development would also result in the creation of jobs, given the availability of adequate power in the country.
“ The impact will create jobs with enough power made available to eligible customers who are willing to increase production.  The direct effect of this will be a working and stabilized economy for all,” she said.
She said that the decision by the government was a step in the right direction, given the challenges in the power industry.
“With stranded generation capacity in the electricity market and poor market liquidity, declaration of eligible customer is a brilliant way to liberate the electricity sector from the current monopoly by some under-performing companies.
“Although, there might be some misconceptions on this long awaited move by the government, the impact of the implementation on the market will silence the critics.
“The government cannot fold its arms while the gains of Power Sector privatisation dwindle to zero, benefiting only a few.”
She also dismissed fear that residential consumers would be affected by the decision, adding that NERC was already working out the framework for its implementation.

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