Blackout experienced by some sections of the country a few weeks ago is not that power generation dropped or that the Transmission Company of Nigeria, TCN, could not wheel available power, neither is it that the Electricity Distribution Companies, (DisCos) encountered encumbrances.
It was rather a deliberate action by the Market Operator of the TCN, to enforce market rules and entrench discipline in the system.
The Market Operator, MO, in its action was mindful of the need to ensure the continued sustenance of the Nigerian Electricity Supply Industry (NESI), which requires strict adherence to Market Rules and the application of sanctions where necessary.
On that note therefore, the Market Operator suspended APLE Electric Limited, Kano and Kaduna Electricity Distribution Companies for breach of the Market Rules, which governs and sanitizes the Nigerian Electricity Supply Industry.
The MO, went further to enlighten the stakeholders in the Nigerian Electricity Industry (NESI) who were offered unbalanced information by NESI defaulters, and are in desperate attempt but smart-less move to clear themselves of guilt on the social media.
TCN’s Market Operator (MO), Mr Edmund Eje, had earlier warned in a statement that one of the fallouts of the sanctions would be the partial or complete disconnection of defaulters from their point of connection to the grid.
According to the MO, it is natural that some of the sanctioned players may attempt to politicise the action to score cheap points and whip up unnecessary sentiments.
NATIONAL ECONOMY, reports that the Nigeria Electricity Supply Industry is governed by Market Rules which are absolutely necessary for the smooth operation, viability and sustainability of the sector. These rules are voluntarily signed by all Market Participants – Generators, Transmission, Distribution and Eligible Customers – after being licensed by the Nigerian Electricity Regulatory Commission (NERC).
The administrator of the Market Rules is the Market Operator (MO) – Engr Dr. Edmund Eje, under the administrative oversight of the TCN.
The MO is the custodian of all contracts operating in NESI and all energy traded in NESI is bulk-metered, audited and accounted for by MO and monthly invoices given to all Participants including NBET. For revenue collection, the MO is only in-charge of collecting Service Charges for TCN (TSP-SO-MO-Ancillary Charges), NERC and NBET.
The TCN operates on self-sustenance basis, it depends mainly on its Internally Generated Revenue (IGR) even for its overheads and most of its major projects and the Revenue of TCN is not crafted on cost-reflective tariff basis like the other participants in NESI, reason being that the federal government uses TCN to subsidise the NESI operations. The non-cost-reflective tariff which the regulator allowed TCN to recover is not being paid in full by the Market Participants, leading to funding deficit for the TCN, supposedly, the fulcrum of the NESI.
It is also important to note that if TCN fails as a result of paucity of fund, no Market Participant would be functional and the NESI would crumble.
The Transitional Electricity Market commenced in February, 2015 with, among other preconditions for the participants, posting of adequate bank guarantees and paying their monthly invoices 100 per cent.
By December 2016, the MO was on 15 per cent collection and catering for overheads became a herculean task and by December, 2019, the outstanding on MO’s services invoice stood at N443b with interest.
However, the figure may have been traded for DisCos credit on Tariff-Gap, reason, the Service Providers belong to the Federal Government.
Unfortunately from January 2020 to date, the MO invoice outstanding stands at N80billion and it was becoming very difficult for TCN and other service providers to function properly because of poor revenue receipt, explained Eje.
To sustain the system, the MO commenced revenue-drive since last year but the defaulters were largely adamant to the various advances and notices for them to cure their defaults.
Revenue drive procedure in NESI is well streamlined and no arbitrary process is adapted while the process is very well known to the participants except those who pretend to be ignorant of the Market Participation Agreement they voluntarily signed before entering the Market. The major default here is failure to put up a valid Bank Guarantee (BG) and also failing to clear their outstanding debts with MO.
Giving more details of the debt, Eje said on 16th of February, 2022, all defaulters, including APL Electric ( 23rd Nov. 2022) were notified to put up their BG or validate as the case may be and on 2nd March, 2022, all defaulters, including APL Electric (7th Dec.2022) were served with “Notice of Event of Default.”
Again, on 9th of May 2022, all defaulters , including APL Electric (14th of May,2022) were served with “Notice of Intent to issue Suspension Order”
Between May and October, 2022, (8 defaulters applied for “Hearing” in line with the Market Rules, reconciling their accounts and offering various reasons for their inability to pay and asking for time.
Eje, noted that in all these, APL Electric never responded/replied the MO letters, not even phone calls to offer reasons for their inability to pay their accumulating debt (N896M in only six months of operation).
Finally, on the 21st of March, 2023, the Market Operator went to media to notify all defaulters to fix their default within 14 business days or face Suspension from the Market.
Suspension goes with complete disconnection or partial disconnection of the defaulter from the grid. It is the prerogative of the MO to carry out this sanction in batches to give room for the defaulters to approach MO for remedy in line with the Market Rules.
Many other defaulters have been scheduled for similar sanctions should they fail to fix their default. The MO did not demand anything outside the Market Agreement they voluntarily signed. Note that Distribution companies also embark on load disconnection during their revenue drive. Investors should not embark on using trust fund they reck in on behalf of the Market to settle their bank loans and render other operators in the value-chain ineffective due to poor remittance.
Our correspondent reports that the NESI market indiscipline is one of the major factors dealing a disastrous blow to the growth and sustainability of the market. Some of the participants believe it is business as usual where flouting the rules is the norm. They believe they can always intimidate by going to the “high places” and using derogatory languages mixed with cheap political sentiments as capital for sympathy. It is only natural that some defaulters will resort to using political blackmail to portray our genuine action in bad light. It is important to know that until the Market Rules are derogated, the MO will continue to apply it for the stability of the market. Stakeholders should be sensitive to the real issue, which is efficiency and survival of the NESI.
In defending the MO action, the general manager, Public Affairs of the TCN, Ndidi Mbah, insisted that due diligence was observed by the Market Operator before issuing the suspension/disconnection order which is in accordance with procedures of the rules guiding the market. This is to ensure the preservation of the Market and that non-compliant Participants are held accountable for their actions.
Corroborating Eje’s position, Mbah, stated that the APL Electric Limited was found to be in non-compliance with the Market Rules for not having adequate Bank Guaranty and for incomplete payments of APLE’s Market Operator’s invoices for September 2022 to February 2023.
As per the Market Rules, the Market Operator first sent a request for a Bank Guarantee to APLE on the 29th of November 2022. However, the company failed to provide the required Bank guarantee. Consequently, a Notice of Event of Default was issued to APLE on 7th of December 2022, for incomplete payment of issued invoices.
Following the Notice of Event of Default, a Notice of Intent to Issue a Suspension Order was issued on 14th December 2022. Based on the Market Rules APLE requested for a Hearing which was held online on the 20th of December 2022, where APLE was given an opportunity to show just cause why it should not be issued a Suspended/Disconnected Order.
After the hearing, a 14-business day notice was issued on the 21st of March, 2023 in three (3) national daily newspapers (Daily Trust, Guardian & Thisday newspapers), as required by the Market Rules. Thereafter, a Suspension Order was issued on the 19th of April, 2023 which required APLE to cure its Defaults.
The Disconnection Order was carried out on the 20th of April, in line with the Market Rules. This order resulted in the disconnection of the Feeders within the APLE franchise area until such a time that they provide the required bank guarantee and settle their outstanding invoices with the Market Operator.
Also, the KADUNA and KANO Electricity Distribution Companies were equally found to be in non-compliance with the Market Rules for not having adequate Bank Guarantees and for incomplete payments of their Market Operator’s invoices for the time-line January 2020 to February 2023.
Both companies were sent a request for their Bank Guarantees in line with the Market Rules, on the 16th of February 2022 and they failed to provide the required Bank Guarantees. Consequently, a Notice of Event of Default was issued on 2nd of March 2022, for incomplete payment of invoices.
This was followed by a Notice of Intent to Issue a Suspension Order, issued on 9 May 2022. Both DisCos requested for Hearing which were held on 31st May 2022 (KEDCO) and 2 June 2022 (KAEDCO), where both DisCos were given an opportunity to show just cause not to be suspended/disconnected.
The Disconnection Order was then carried out on the 26th of April, 2023 in line with the Market Rules. This order resulted in the disconnection of the major Feeders within the franchise areas of both KAEDCO and KEDCO, until such a time that they provide the required bank guarantees and settle their outstanding invoices with the Market Operator.
The Market Rules provide clear and concise procedures for enforcing compliance with its provisions, and in these cases, the Market Operator acted in accordance with procedures to ensure that non-compliant Participants are held accountable for their actions.
Faulting MO’s Action
Condemning the action, over 20,000 members of the Aba Landlords Protection and Development Association (ALPDA) threatened to mobilise to the Alaoji power plant in Abia State and occupy it.
The Landlords vowed to to embark on this protest action, if the MO failed rescind its order which has thrown Abia state into darkness over N896m owed by Federal Government agencies in the power sector to Aba Power.
The ALPDA president general, Chief Alphonsus Udeigbo, said the disconnection of Aba Power from the sole transmission network violated the Electricity Industry Market Rules (EIMR) of 2010 on two grounds.
Chief Udeigbo observed that the TCN wrote a letter to Aba Power on April 19, 2023, asking it to pay its debt within one month and on the same date directed the MO to remove Aba Power completely within a few hours.
“This amounts to a profound and deliberate contradiction in a very sensitive sector”, declared the ALPDA leader.
“It is a flagrant violation of market rules”.
he second breach of the market rules in the power sector, according to Chief Udeigbo, is that Aba Power was not notified of the TCN’s order to the market operator to disconnect it from the nation’s sole transmission network.
“Both the market rules and natural justice demand the other party must be put on notice”, he stated.
At a news conference, Udeigbo read out a letter written to the Market Operator, Dr Edmund Eje signed by the ALPDA Board of Trustees chairman, Chief Leo Ike Okoye, and the BOT secretary, Sir B. Okoro , as well as the ALPDA deputy president, Engr Leo Onyemesiri, the secretary, Comrade Benson Imo, and the legal adviser, Barrister Ejike Obi.
The letter reads, among other things: “We, on behalf of ourselves and on behalf of electricity consumers within Aba and environs, hereby demand you lift the said Disconnection Notice MO-DO/TCN/002/2023 within 24 hours from the date of the receipt of this demand letter having failed to comply with the market rules as well as the content of own Suspension Notice.
“Take note that in the event of your refual to lift the order within the stipulated period, we, the electricity consumers who are now being made to suffer the consequences of your action by throwing us into darkness since over a week now shall have no option to embark on a peaceful protest to your office at Alaoji Aba”.
If the Alaoji power plant is shut down it will affect power supply to not just the Southeast but also the South-south, up to Edo State, according to Cliff Eneh, an energy consultant and a former senior engineer with both the Power Holding Company in Lagos and the Texas Power and Light Company in the United States.
“The TCN, from the evidence before me, has acted unprofessionally and arbitrarily against Aba Power”, Engineer Eneh was quoted as saying.
“It needs to ensure that the matter doesn’t escalate, otherwise heads will roll there.
“Legally speaking, the TCN or any unit of it like the Market Operator, is not licensed to act as a market operator.
Power Ministers Intervention
The unfolding saga, which created some measure of uncertainty in the system was resolved after the MO reconnected at midnight of 1st May 2023, the three Distribution Companies earlier disconnected from the Electricity power grid as a result of non compliance with the Market Rules.
This is coming at the intervention of the Hon. Minister of Power, Engr Aliyu, who has considered the collateral consequences on the paying Disco Customers.
Eje announced that the Suspended & Disconnected defaulting Market Participants will be reconnected to the National Grid at the instance of the Minister of Power.
NATIONAL ECONOMY understands that the intervention by the Minister has automatically prolonged the grace period to 60 days from this publication.
However, the MO sternly warned all Market defaulters to comply with the provisions of the Market Rules with respect to payment of their outstanding invoices, posting of adequate Bank Guarantees (BG), and forwarding of their active Power Purchase Agreements (PPA) as the case may be, to the Market Operator/TCN.
