Jonathan composes New Power Reform Structure

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President Goodluck Jonathan yesterday put in place a new structure for power reform.

The new structure is to be driven by the Presidential Action Committee on Power chaired by him, supported by a Presidential Task Force on Power.

This comes as a major impediment to the realisation of stable power supply in the country seems surmounted with the Federal Government's approval of a new gas supply/purchase template for the gas-to-power domestic market.

Speaking in Abuja at the signing of an agreement for the supply of 65mmcft between the Egbin Power Generating Company, a subsidiary of the Power Holding Company of Nigeria (PHCN), and the Nigerian National Petroleum Corporation-Pan Ocean Joint Venture, Minister of Petroleum Diezani Alison-Madueke said the gas supply/purchase agreement would serve as format for all gas transactions in the domestic gas to power market.

The Presidential Action Committee will provide leadership and guidance for the development of the sector and determine the general policy direction and strategic focus of the ongoing power reform.

This committee has Vice-President Namadi Sambo as alternate chairman and its other members include the Minister of State for Power, the Ministers of Finance, National Planning and Petroleum Resources, the Secretary to the Government of the Federation, the Head of Service, Governor of the Central Bank of Nigeria, Special Adviser to the President on Power and Chief of Staff to the President.

The Presidential Task Force, on the other hand, is charged with developing and driving the action plan for the nation's power sector with achievable targets within the lifespan of the present regime.

It will also articulate a proper plan of action for implementation in the areas of power generation, transmission distribution as well as all issues regarding power sector reform.

The taskforce will report to the President and the Presidential Action Committee on a regular basis.

The Presidential Task Force is to be chaired by the Special Adviser to the President on Power.

Members include the Permanent Secretary (Ministry of Power); Group Managing Director, Nigerian National Petroleum of Corporation (NNPC); Managing Director, Power Holding Company of Nigeria (PHCN); Managing Director, Niger-Delta Power Holding Company (NDPHC); Director-General, Bureau for Public Procurement (BPP); Director-General Bureau for Public Enterprises (BPE); Accountant-General of the Federation; Chief Executive, Nigeria Electricity Regulatory Commission (NERC); CEOs of two power distribution companies; CEOs of two generating companies, and Director of Power in the Ministry of Power.

The Senior Special Assistant to the President (Special Projects) will serve as Member/Secretary.

Under the new arrangement, the ministry of power will, however, continue to supervise the day to day affairs of the ministry and relevant agencies, as well as fund the various projects approved in the 2010 budget.

It will also provide a conducive environment for the presidential taskforce to carry out its assignment.

All requests for the award of contracts for the consideration of the Executive Council of the Federation (EXCOF) are to be handled by the ministry.

Alison-Madueke said the agreement has been designed in such a way that the gas and power sectors would have bankable instrument that is robust enough to attract external finance as well provide for new investors to engage in supply development for the power and other domestic markets.

The minister said the agreement is for the supply of 65mncf/d of gas from Pan-Ocean's Ogharafe Gas Plant to Egbin.

She said Pan-Ocean is one of the three planned suppliers of gas to Egbin, while others include NNPC/SPDC JV and NNPC/Chevron JV.

Describing yesterday's agreement as a landmark achievement, Alison-Madueke said it would help potential investors in Independent Power Projects (IPPs) to have the immediate visibility of the terms and conditions of gas supply in Nigeria , hence expediting their investment decision.

She said the Federal Government is currently spending an average of $1bn yearly on gas development projects to shore up availability of the product.

The minister noted that apart from addressing the fundamental challenges of gas-to- power, the ministry has now progressed to developing a world class domestic GSPA template for the Nigerian domestic gas to power market.

According to her, similar templates are being developed for other sectors too.

"I have directed that the template be loaded on the website of the Gas Aggregation Company of Nigeria (the company set up to regulate domestic gas sector)," she said.

Highlights of the agreement include obligations and liabilities in gas supply while off-take are now explicitly specified, thereby removing the current situation of supply or off-take on best endeavour basis.

Another provision is that when gas is supplied, it must be taken and vice-versa, otherwise penalties (take or pay) apply, clear line of sight between buyers and supplier of gas is now being established through this legally binding contract.

"The new agreement provides a platform for the immediate roll-out of the new gas price to power. It allows a clear and transparent segregation of value chain by separating the gas transmission agreement from the gas supply agreement thereby enabling transparency in pricing and liability," the minister said.

The minister said for Nigeria to realise the potentials inherent in the sector, it is essential that the processes of the sector are bankable and robust enough to attract external finance as well provide for new investor to engage in supply development for the power and other domestic markets.

According to her, the contractual process must be such that it enforces performance of all players in the value chain from producer to the up-taker. Performance is crucial to the sustainability of supply. The current arrangement is relatively loose and poor performance is evident, she stated.

She said what used to be the case under the old arrangement, is that there could be supply of off-specification gas by suppliers or continued cases of gas supply by the producer with the PHCN not being able to take the gas, adding the new dispensation prescribes penalties for any such default.

The General Manager Corporate Strategy of Pan Ocean, Mr. Adeshina Shittu, said the gas agreement provides for take-on-pay and has set in motion threshold for failure to supply or failure on the part of PHCN to pay. "There are penalties enshrined in the agreement to ensure that parties comply.

Some of these penalties come in form of discount and if the inability to supply leads to disruption of PHCN power stations or damage to generation facilities and as such PHCN is not able to supply power, the gas supplier may have to pay for the repair of the plant and in addition foot the bill for the use of alternative LPFO product by PHCN for power generation,” he said.

Minister of State for Power Nuhu Wya said the unveiling of the gas sale agreement has broken the mystery surrounding instability in gas supply to the country's power stations.

Wya said with the signing of the gas deal, both the gas suppliers and PHCN power companies would no longer have any excuse not to provide Nigerians with much-needed electricity.

"I am pleased with this development and I want to assure Nigerians that with the collaborative arrangement, more stable power supply is guaranteed,” he said.

The minister said there would be no hiding place for either PHCN or other power producers as every contestable issue has been addressed by the GSPA template.

The Coordinator of PHCN, Engr. Hussein Labo, listed other power stations to benefit from GSPA to be signed next week with Chevron and Shell to include Olorunsogun, Omotosho, Ughelli, Sapele, Afam and Geregu.

Speaking on the state of the power stations to utilize the gas being supplied, Labo said most of the thermal stations are in good shape, adding that the current power generating capacity has climbed to 4,600MW.

However, THISDAY sources at the company said the power generation peaked at 3,011MW as at yesterday with an off-peak generation of 2,900MW. The sources said the system failure, which occurred last Thursday literally brought generation down to an all-time low of less than 2,900MW.

He further said that even with the low level of electricity generation by the power stations, the distribution companies are not able to receive the power for supply to consumers.

Meanwhile, the Federal Government's bid to reform the power sector and involve the private sector has also received a boost following the signing of a long-term power purchase agreement between the Dangote Group and indigenous power producer, Genesis Electricity Limited, for the production and supply of 9.3 megawatts of electricity to Dangote industries located in Calabar, Cross Rivers State.