Adequate, cost-reflective electricity supply has long been seen as the backbone of industrialisation, but the Nigerian Electricity Regulatory Commission (NERC), the industry regulator, lost a historic opportunity of achieving stable power supply in the country thanks to internal rancour at the Commission and misplaced political patronage, BusinessDay has gathered.
When the Federal Government handed over the unbundled assets of the defunct Power Holding Company of Nigeria (PHCN) to private investors in November 2013, many Nigerians heaved a sigh of relief, with hopes for a brighter lit-up future.
It was believed that a dramatic turnaround in the fortunes of the troubled power sector was in the offing. However, the country has struggled to maintain stable and efficient power sector despite an array of technocrats that the nation parades. The series of meetings between stakeholders and regulatory interferences have availed little in terms of measureable results and comfort for consumers.
Three days before the 2015 presidential elections, the NERC took a significant decision to reduce electricity tariff. This decision clearly dented NERC’s credibility, power sector reforms outlooks, market and investors’ confidence.
For four years the NERC had been going around the country making a case to Nigerians about the need for a cost-reflective tariff and finally effecting the tariff changes just two months earlier on January 1, 2015. The decision had also implied the commission was taking off more than 30 percent from the 2015 cost-reflective charges taking, going lower than it was before January 1, 2015.
Sam Amadi, former chairman of NERC, said the commission unilaterally took the decision without interferences from former President Goodluck Jonathan after listening to complaints from consumers and operators alike.
”We have always tried to listen to complaints from consumers and operators alike and we carry out tariff reviews when necessary. We are a responsive and accountable regulator,” Amadi had said on March 15, 2015 at a meeting with a delegation of the Electricity Consumer Association of Nigeria (ECAN).
Amadi had explained that the reduction in tariff was a decision reached in line with the Commission’s Business Rules after consideration was given to protests from the Manufacturers Association of Nigeria (MAN) on the implication of the January 1, 2015 increase in tariff on their businesses.
However, the person under whose purview tariff issues were supposed to have been issued, Eyo Ekpo, former commissioner of market competition and rules (MCR) at NERC, said the tariff change was done immediately he started his leave on February 19, 2015 without due process or proper consultation inside the Commission.
“He (Sam Amadi) completely bypassed the Market Competition and Rates Division, which I headed and which alone had responsibility for staffing, proposing and implementing rate-making decisions on behalf of NERC,” Ekpo said in a tweet on Wednesday via his verified handle @eyoekpo.
Ekpo narrated that he proposed alternative ways of dealing with concerns that were raised by those complaining and suggested a way to deal with the complaints and advised Amadi that his real objection was not about the tariff change itself.
“I advised him that the customers and the general public would assume (correctly?) that this tariff decision was politically-motivated coming as it did just a few days to the 2015 presidential elections,” Ekpo said.
After the decision to reduce tariff the worst happened, the electricity Distribution Companies (Discos) declared force majeure while the NERC suffered massive loss of credibility with all its stakeholders who resolved never to accept the commitment of NERC in good faith, a development which ruptured the industry.
“In the most cavalier manner, he (Sam Amadi) waved aside my objection. These things are in writing,” Ekpo said.
However, the NERC commissioner who took over from Ekpo sent a memo to the commission making it clear that the tariff reduction decision was a mistake.
“Instead of immediately correcting his mistake, Sam Amadi used his Chairman’s office to filibuster the market correction process that ought to have followed,” Ekpo said.
“He made sure it was at the end of tenure in December 2015 that the correcting Order was made and even then it was stated to take effect in February 2016, after he and the remaining 5 Commissioners would have vacated office. By then, 9 months later, it was far too late.”
After NERC reflected the cost-reflective tariff on January 1, 2015, the outlook for the electricity market changed dramatically as collections and remittances for energy purchased went up rapidly.
The cost-reflective tariff is good for Nigeria on several fronts. The obvious advantage is that it will enhance power delivery as it will enable Distribution companies (Discos) pay the Generation companies (Gencos) for power generated. Gencos too will be able to pay gas suppliers to enable them generate more power.
Besides, it will also enable both the Discos and Gencos to make more investments in their networks and in power generation. Gas suppliers also will be able to invest in more gas production. Similarly, it will enable the Transmission Company of Nigeria (TCN) to strengthen their weak transmission lines so that they can be able to evacuate more power.
The development of which would have brought in the second wave of privatisation that would have seen Discos gaining new institutional equity owners and later on doing Initial Public Offers (IPOs) on the Nigeria Stock Exchange(NSE).
As of the 1st of February 2015, contracts between market participants were effective which implied some certainty of responsible market behaviour had kicked in while an N204billion loan from the Central Bank of Nigeria (CBN) designed to tidy up the sector’s balance sheet was already being disbursed although it was later terminated in March after the tariff reduction.
Meanwhile, Ekpo explained that he resigned from NERC after discovering Sam Amadi had actually campaigned for former President Goodluck Ebele Jonathan something unheard of in good regulatory practice and which no other regulator did Central Bank Of Nigeria (CBN), Securities Exchange Commission (SEC), and Nigeria Communication Commission (NCC) even though we were all ostensibly PDP members or supporters.
“Our story could have been different and former President Goodluck would have gone down in history as the leader who kick-started Nigeria’s electricity and industrialisation renaissance. In my honest opinion, Sam Amadi, for his own intellectual aggrandisement, destroyed that possibility,” Ekpo concluded.
To date, the electricity sector (no longer a market) is yet to recover. Sam Amadi can never say that he was not warned. So, it does not avail him to hide behind the fig leaf of technical jargon and all manner of -isms.
The decision to reduce tariffs just 2 months after increasing them to market-making level in the manner it was done was patently wrong. No amount of dissembling can change this reality.
The Nigerian Electricity Supply Industry continues to be a disabler, not an enabler of the country (and indeed the ECOWAS sub-region’s growth). It need not have been so.
STEPHEN ONYEKWELU & DIPO OLADEHINDE
