By Hosea Parah, Abuja

Power generation companies in Nigeria have sounded a fresh warning over a growing ₦6.2 trillion debt and lingering disputes around capacity payments, cautioning that the situation threatens the stability of the electricity market and could deter future investment.

In a statement issued by Dr. (Mrs.) Joy Ogaji, Chief Executive Officer of the Association of Power Generation Companies (GenCos), said persistent disagreements over capacity payments and the interpretation of Power Purchase Agreements (PPAs) are undermining the long-term sustainability of electricity generation.

According to the association, its members have received only about 35 per cent of the total amount invoiced for power supplied to the national grid since 2015. It added that the outstanding ₦6.2 trillion debt does not fully capture the value of their contractual entitlements.

At the heart of the dispute, GenCos said, is the failure to recognise “capacity made available” in payment settlements. Under standard PPAs, generation companies are entitled to payment not only for electricity delivered but also for the capacity they declare and make available to the grid. Although Nigeria’s installed generation capacity stands at about 15,500 megawatts, the group argued that excluding capacity payments from settlement calculations has discouraged investment needed to rehabilitate idle or underperforming plants.

The association stressed that electricity cannot be stored at the point of generation and must be transmitted and consumed in real time. As such, it maintained that generators should be compensated for the capacity they have made available in line with contractual provisions.

GenCos also highlighted operational constraints within the power system, noting that some plants are directed to reduce output to maintain grid stability despite having declared available capacity. In such cases, the group insisted, producers should still be paid for capacity that remains unused due to system limitations.

Beyond this, the association cited structural challenges—including transmission bottlenecks and load rejection by distribution companies—as factors contributing to stranded capacity and worsening liquidity across the value chain.

It warned that recognising only “called-up” capacity sends adverse signals to investors and conflicts with the objectives of the Power Sector Recovery Programme approved by the Federal Executive Council. The group also expressed concern that only five active PPAs are reportedly being recognised by the Nigerian Bulk Electricity Trading Company (NBET), a development it said complicates payment assurances and weakens Gas Supply Agreements for some operators.

With rising gas prices, heavy financing obligations and continued partial settlements, many generation companies are said to be approaching insolvency. Despite installed capacity of 15,500MW, average grid generation remains around 4,000MW — a gap GenCos described as evidence of deep market distortion.

Rejecting claims that they benefit from electricity subsidies, the association said its members have honoured all industry agreements since acquiring generation assets in 2013 but are now among the most affected by the sector’s liquidity crisis.

GenCos called for urgent reforms to uphold the sanctity of contracts, strengthen enforcement of market rules and ensure that all participants meet their financial and operational commitments. It maintained that sustainable growth in Nigeria’s power sector depends on proper compensation for available capacity and improved fiscal discipline across the electricity value chain.