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Uncertainties as tenure of NERC commissioners ends

By Kingsley Jeremiah, Abuja
18 November 2021   |   3:55 am
The Federal Government through the Nigerian Electricity Regulatory Commission (NERC), may this week renew the licence of the Nigerian Bulk Electricity Trading Plc (NBET), an intervention agency...

Electricity

Govt moves to renew NBET licence amid N1.66tr debt
• Why revocation of DisCos, GenCos licences may be daunting

The Federal Government through the Nigerian Electricity Regulatory Commission (NERC), may this week renew the licence of the Nigerian Bulk Electricity Trading Plc (NBET), an intervention agency in the power sector, signaling more uncertainties in the sector already overdue for some enduring evaluation.

The sector has been in a dilemma eight years after it was unbundled in privatisation that was intended to end epileptic power distribution and supply, but the government appears trapped with legal clauses that fuel blackmail and promote incompetency.

Although NBET was set up as a temporary bridge builder pending the evolvement of the electricity market, the renewal of the licence means the market is yet to stand on its own in terms of the trading of electricity.

Generation companies (GenCos) are reportedly incurring more losses due to problems such as an increase in the rates of inflation and the attendant rise in the cost of technologies being used for operation in the sub-sector. The firms attributed the development to the non-payment of N1.66 trillion debts owed them by NBET, which is non-payment of ‘deemed capacity’ for the last seven years.

Deemed capacity is the capacity that would have been delivered, but for the system operator’s instructions to a GenCo to derate or reduce its capacity to achieve grid balance and stability.

Executive Secretary of the Association of Power Generation Companies (APGC), Dr Joy Ogaji, lamented how inflation was killing their businesses and affecting the fiscal planning of companies in the sector.

The Guardian also learnt that commissioners at NERC are currently lobbying to remain in office as their tenure come to end by February 2022, further raising concerns over the performance of NERC as the sector’s regulator.

The practice is that three months to the expiration of their stay in office and prior to the announcement of new commissioners, an interim team is put in place to avoid a logjam the transition may cause in the highly technical sector. As of yesterday, there was nothing on the ground to suggest an observance of the disengagement protocol, fueling speculations that the present commissioners may remain in office beyond February.

A seeming lapse in the regulatory functions of NERC has lately seen the Central Bank of Nigeria (CBN) and the Presidency, as well as other committees, moving into the sector to fill the loopholes of the regulator.

The concerns for some stakeholders include the inability of the Bureau of Public Enterprise (BPE) to measure the Performance Agreement signed with distribution companies (DisCos) and GenCos eight years after the privatisation. The section two of the agreement stated that the performance should be measured after five years.

THIS is coming as the government face a daunting task ahead should it attempt to revoke the licences of the DisCos and GenCos as punitive measures for under-achieving on its mandate after the takeover.

Under a major unbundling, the power sector was broken down into 18 entities in 2013. Along with a roadmap, the sector, by now, should be supplying at least 40,000 megawatts of electricity for industrial development and homes. Sadly, available supply remained at about 4,000MW, nearly the same level it was when it was privatised.

Most stakeholders claimed that the foundation of the privatisation was designed not only to fail but make seamless corrections impossible.

Despite the faulty foundation and dismal result, the Federal Government and the CBN are estimated to have spent about N2 trillion on the sector, while donors and financial bodies like World Bank and African Development Bank have spent over $2.5 billion on the sector.

Similarly, with rampant cases of estimated billing as the sector struggles to meter over five million of eight million customers, Nigerians, in the past eight years, have reportedly spent about N5.7 trillion to generate their own electricity.

Stakeholders told The Guardian that it was high time the teething problem in the sector was assessed, which is burdened by huge liquidity, lack of governance structure, huge aggregate, technical and commercial losses as well as capacity gap.

The former Chairman of NERC, Sam Amadi, told The Guardian that revoking the licences of the DisCos and GenCos through the regulator will come at a price.

“If government revokes the licences, then they will pay the sanctions of breach of contract as contained in the sale agreement. Beyond that, it will further damage the credit and credibility of the sector. It will be a huge political risk, which will increase the costs of capital and make it difficult to have a new private investment in the sector,” he said.

Professor of energy economics, Wunmi Iledare, noted the need to rekindle the key energy institutions in the country, stressing that political expediency has continuously delimited the efficiency and effectiveness factors required to add value to the economy through a sustainable, affordable and accessible energy system.

While the National Assembly is already on the review of the Electric Sector Reform Act, Iledare noted that the foundation for the electric power industry privatisation needs a revision, stressing that the foundation remained faulty and the enabling institutions are weak.

“Without malice, the players in the industry have limited understanding of the linkage along the power value chain in Nigeria. Unfortunately, the government is too preoccupied with sustaining political power than electric power.

“The market structure matters a lot. The GenCos are oligopolies, with few large companies with different pricing strategies. Imposing a fixed pricing framework can be detrimental. The transmission company is a monopoly, the tariff must be regulated. Unfortunately, the government cares less about competency,” Iledare said.

Canvassing for the decentralisation of the energy sector business and governance to solve current inefficiency in the system, Iledare stated that the appointment of commissioners at NERC should not be political but based on competence and results.

Pioneer Managing Director of NBET, Rumundaka Wonodi, insisted that leadership remained critical across the ministries, departments and agencies, stressing that the developers tend to miss the point of the reform that is predicated on private sector operations and ownership.

A legal practitioner and President, Nigeria Consumer Protection Network, Kunle Kola Olubiyo, is equally canvassing for the review of the entire power sector privatisation for peer review of Key Performance Indicators.

According to him, the equity stakeholding in the core investors equity stakes should be diluted downward. Olubiyo wants the government to pull out its equity completely from the sector and design the new equity to comprise 30 per cent for core investors and 70 to be raised through Initial Public Offer.

The move will, according to him, instil accountability, fiscal discipline and governance structure in the sector. “The Transmission Company of Nigeria should be decentralised and unbundled into Technical, Commercial and Operational to institutionalise efficiency,” he said.

Executive Director at Powerup Initiative for Electricity Rights, Adetayo Adegbemle, noted that the current NERC commissioners have performed below par and government must use the current window to correct loopholes in the regulatory body.

He noted that the regulator is expected to be held responsible for the poor performance of the sector, adding that most of the recent critical actions in the sector were being taken by the presidency and the CBN instead of the regulator.

He urged the government not to wait until their tenure elapse before looking for replacements that would address the current quagmire in the sector.