Why Power Generation Is Problematic Now, By Market Operator

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Why Power Generation Is Problematic Now, By Market Operator

Saturday, 21 December 2013 00:00 Written by Emeka Anuforo, Abuja

The Operator of the Nigerian Electricity Market (ONEM) is licensed to function as Market Operator (MO) of the wholesale electricity market of the Nigerian electricity supply industry at the Transmission Company of Nigeria (TCN). In this interview, Executive Director in charge of Market Operations at TCN, Mr. Jan Bagnall speaks on the challenges with power generation in Nigeria

What are your main duties as the Market Operator?

MY job is to create the market according to those rules and supply rule changes as needed to maintain and give the most competitive market. What we really need to do is to get outside investment into the generation sector and transmission and distribution segments. We need to grow this electric power sector so we can get power 24/7. To get there, we have to start with more distribution. The Distribution Companies have to be able to pay their bills too. We have to build more transmission, because we are having weak transmission system since they have not had maintenance for years. All the generation system in the South with their weak system does not make it possible to get electricity up to the North.

Now, the MO is going to be breaking up from the TCN. The first aspect of this as stated in the TCN blueprint is the Ring Fencing. It is when we would define what the projections are for the three entities to find out the number of personnel that are needed and we start filling those positions and responsibilities.

On the reasons for drop in power supply

The truth is that supply is better in some areas than others, but the problem we are having on the system right now is that the generation capacity has gone down from a year ago to now. We have less generation now in the system and what is drying them up is the question. It is the lack of gas and mostly, its vandalism, damage to infrastructures and lack of the gas infrastructures; so the gas plants cannot run. I understand we have roughly 3080mw on the system now, not even up to 4000mw.

So what we need now is that, all Nigerians will really need to participate and stop vandals from hurting other Nigerians by destroying gas and power infrastructures. They hurt transmission lines, and some people dig up sands from under our transmission towers and they fall down because there is not foundation for them anymore. We need a concerted effort as a whole to help move the power sector to where it needs to be, and if we get that, it will be better for everybody. It is hard to say when people do not realize what it is like to have power all round the clock in a week. When that is done, it is going to drive a whole lot of things including the cutting down in cost of goods and service.

What would you say about the Transmission Company of Nigeria (TCN)?

Manitoba Hydro International comes to play in this. They have a management contract with the federal government and the Bureau of Public Enterprise (BPE) to manage the Transmission Company of Nigeria (TCN) or the old Power Holding Company of Nigeria (PHCN) transmission section. What that entails is to bring in best practices worldwide for managing the TCN. But in essence, TCN is being split into three entities, which are Transmission Service Provider (TSP) – responsible for building and maintaining the transmission system to supply the power to wherever it needs to go to.

The System Operator (SO) in the actual design is going to be tasked with operating the system reliably and dispatching generation at the least cost electricity supply. And the Market Operator (MO), which is my function is in charge of managing the market by the market rules. The market rules are actually designed by the market participants and not the MO. That means it is designed by all the Generation companies (Gencos), Distribution companies (Discos) and anybody else who is a participant in this market place.

The next step is that we need to have some independence from the TCN. Before the unbundling comes which is actually scheduled for December 31st 2015, we must have formed legal separation of the three entities in TCN. The Market Operator will be its own individual company, but the System Operator and the MO are going to be combined to make the Nigerian Independent System Operator (NISO). They will now have an independent governing board and the only body they will probably be responsible to would be the Nigerian Electricity Regulatory Commission (NERC).

That means, the SO and the MO would culminate in the NISO. That design is very much after the North American market, which is called the Independent System Operator (ISO). They would run the market (MO) and transmission (SO), but they do not build and maintain it. That is where the Transmission Service Provider (TSP) comes in. We would break first into the three entities, and then we are going to build them back into two entities, NISO and TSP.

When we get to the Temporary Electricity Market (TEM) scheduled now for March 1st 2014, I think that is going to be a lot of momentum behind these. We are going to be on the right path with more investors coming in, though it would be quite a few years to fill the gap.

What do we expect in the sector within the next few years?

In a few years to come, and if you look at where Nigeria can be, we should have at least 150,000megawatts of generation. We do not have 4,000mw now, so the growth will just have to be enormous and fast.

On MO and other market participants

Specifically, I know there have been questions about the Nigerian Bulk Electricity Trader (NBET) and how they play into this. NBET in my view is a market participant like any other Genco or Disco. It is a facilitator to give confidence to the investors that they are going to be paid till such time that the Discos can get on their feet, when they can pay their bills fully, then the real market can take off. NBET is not designed to be there for long term, the reason is that since it is backed by the federal government, investors do not want the FG to be necessarily involved. They want an open, honest and fair market place where everybody can make money.

What will eventually happen is that people will rely more on the MO for payment when the market stabilizes. The way ISO works in North America now is that 95percent of all payment transactions goes through the MO but right now in this bilateral market, it is not happening because the market is still new. Sooner when people get more confident about what they do, they are going to sell to the market even though the price goes up and down, knowing the Discos are going to buy from the market. It is then up to the MO to match up those two sides and everything will flow in and pass out through the MO. However, the key will have to be independent because we have to be seen as not having any outside influence and that is why the MO has to break up soonest, and get the TCN unbundled.

Who draws the bills for the Discos?

The MO sends out bills to Discos of what they have consumed since it controls the meter readings. This settlement function si core for the MO but we can tell NBET the meter readings by giving them the data for the billings. It is extremely important that we monitor the data collectively so that there will be no hint of impropriety or manipulation.

What about the November Remittances compliance?

I do not think all of them have complied but I will say we have been working with them to confirm payments that have been made. Some of these payments may not have being credited to the bank account yet because it takes sometimes like seven days for the notification. We are actually working with them to confirm what they have paid and I cannot give you a list of that yet because we are still waiting for the data collation.

The only ones we have confirmed is the same one we had last week (two billion naira payment) but we have heard and seen letters of significant amount being paid so we are awaiting confirmation from the banks.

Modalities for settling all service providers

We have a prioritized list as stipulated by the Interim Rule which is in effect before the Temporary Electricity Market (TEM). It has been in conception since the handover on 1st November but was just recently finalized and approved. We are going to be following those payments strings in the Interim Rule. There could be schedules of who gets paid first for the Gencos and So. The first month is definitely got some hiccups, but I think as we go on, we are going to see things get smoother, but everybody will have to be patient for it to work.

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