Why is TCN disconnecting some DisCos and GenCos?

All participants in the Nigerian Electricity Supply Industry (NESI) must follow the Market Rules. These rules govern the operations of the entire electricity sector, which includes the generation, transmission, and distribution companies. The Market Operator (MO) operating under TCN is responsible for collecting transmission and administrative services charges (which include services provided by the System Operator (SO), Market Operator (MO), Nigerian Electricity Regulatory Commission (NERC), and ancillary services).

The Transmission Company of Nigeria (TCN) has reported that several licensees in the NESI owe the MO huge debts totalling over ₦80 billion from January 2020 to date. Despite the licensees being informed of their payment non-compliance, payment has still not been made to offset the debts.

As a result, the MO has issued a notice of intent to suspend its services, and TCN has threatened to disconnect the defaulting participants from its network.

Is TCN authorized to disconnect licensees?

If any participant defaults, the Market Operator (MO) of the Transmission Company of Nigeria (TCN) is responsible for notifying the defaulter and suggesting corrective actions. If the participant fails to comply with the suggested measures, the MO can issue a notice of intention to suspend them, with conditions for lifting the suspension.

Non-compliant participants can request a hearing to challenge the suspension order. However, if they fail to respond or adhere to the hearing's resolution, the MO has the authority to take the following actions:

  1. Issue a Suspension Order: This restricts the defaulter's participation in the market.
  2. Issue a Suspension and Disconnection Order: The disconnection order allows TCN to disconnect the defaulter from their network.
  3. Take any other appropriate action as deemed necessary by the MO.

How much is being owed?

According to the MO, its outstanding invoice from the defaulting participants, from January 2020 to date, stands at ₦80 billion.

However, there are historical debts also being claimed of N400bn since the privatization of the market in 2013. This figure has been discounted by the tariff shortfalls owed to the Discos, thus the drop in the total amount owed.

What does this mean for customers?

For customers, the possible suspension of defaulting GenCos and DisCos is not good news. The suspension of GenCos and DisCos would mean that there would be far less electricity generated and distributed during the period of the suspension. This would negatively affect the day-to-day activities of customers within and outside the franchise areas of the affected DisCos. During the period of the suspension, electricity customers would have to find alternative sources of electricity, which are often more expensive, to run their homes, businesses, schools, and healthcare facilities, among others.

Is TCN the only Stakeholder affected by liquidity issues in NESI?

TCN is not the only stakeholder in the NESI experiencing liquidity issues, which is largely due to non-payment by Discos. Gencos also do not receive adequate revenue from the Discos and hence are often unable to pay gas suppliers. This poor revenue performance affects NESI stakeholders’ ability to carry out routine maintenance, scheduled equipment upgrades, etc.

However, Disco’s poor revenue performance can be attributed to high losses in the electricity sector due to energy theft and non-payment of bills by customers.

Is the disconnection likely to happen?

TCN has stated that the disconnection process will be gradual to allow defaulting parties to approach the MO for a possible resolution.

Aba Power Limited (APL), which owes N896 million over a six (6) months period, was the first defaulter to be disconnected. According to TCN, this was because, unlike other defaulters, APL failed to respond to the issued notices.

 

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