The Nigeria Bulk Electricity Trading Plc (NBET) has expressed its preference for a preservation of its capitalisation funds for the final commencement of the Transition Electricity Market (TEM) as well as its further expansion in the emerging Nigerian Electricity Supply Industry (NESI).
Managing Director of NBET, Rumundaka Wonodi, who made a presentation at the recent public hearing on interim rules to guide the sector before the eventual declaration of TEM by the Nigerian Electricity Regulatory Commission (NERC), explained that the sector was metamorphosing and would need some form of protection.
“The capitalisation of the bulk trader is important for this sector; but to that extent, the capitalisation of the bulk trader should be preserved until the Transition Electricity Market to be able to support the market,” Wonodi said.
Funds for the operations of the NBET has been capitalised by the federal government to about $750 million within 2013 in tranches of $350 million from government raised Eurobonds, $312 million from proceeds from the sale of Egbin power plant, while the remaining are from government’s budgetary provision to the bulk trader.
The Egbin proceed was recently approved by the National Council on Privatisation (NCP) for the NBET to create confidence in its activities, which include the purchase and resale of electrical power and ancillary services from independent power producers and from the successor generation companies of the Power Holding Company of Nigeria (PHCN) as well as the Bureau for Public Enterprises (BPE) which got about N9.55 billion to facilitate the conduct of its activities.
Wonodi who further clarified the position of the bulk trader noted that in view of possible thoughts by the new owners of the PHCN successor companies that the NBET’s capitalisation fund may be a sort of subsidy to the sector, it was not but meant to take care of incidental shortfalls in electricity bulk trading within the sector.
He noted that requests by the new owners for the capitalisation fund to be used in cushioning shortfalls in the interim market would not work considering that no provision was made for the restoring the fund in the interim market and as such, it would amount to the bulk trader engaging in what it is not established to do which is providing confidence for bulk electricity trading in the sector.
Wonodi said rather than seeking for the conversion of the capitalisation fund of the bulk trader to take care of such shortfalls, the new owners should, if they consider it necessary, seek for alternative stabilisation funding for the sector in the interim stage of the market.
“The capitalisation is not to pay for the shortfalls because these people have made the promise and agreed to the cost-reflective tariff set by NERC and so we expect them to be able to collect and bring the losses to what is allowed in the tariff. Once they do that, they should be able to make payments for power supplied to them.
“But we still need working capital for contingency situations because we envisage that in these days before the market stabilises, there may be issues related to gas supplies, transmission challenges and operations within government control, so the bulk trader’s capitalisation is to take care of all the little quirks in the market,” he said.
He further explained: “Even though there are shortfalls in payment due to these contingencies and the bulk trader is making the payments, it is our expectation that the money will be clawed back and the bulk trader’s capitalisation is not a diminishing amount of money and while we are making that payment, it is part of the tariff and will come back in other months.
“The capitalisation is for the gaps in when we are making payments and receiving payments because we have to make payments to generation companies to give them that confidence that is needed as our collection from the distribution companies might be at different times because they may not be able to collect at the same times.”
He also said the bulk trader would ask distribution companies in the sector to activate their vesting contracts with a three-month payment guarantee in flexible forms to ensure commitments and instruments to rely upon for payments.
Information from This Day was used in this report.