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Bill to make GENCOs pay 5% of revenue to host communities passes second reading

The House of Representatives has passed through the second reading, a bill to amend the Electric Power Sector Reforms Act, 2005 to provide for the reservation of 5 percent of all revenues accruing from power generated by all Power Generating Companies (GENCOs) in Nigeria for the development of host communities.

Sponsored by Babajimi Benson (APC, Lagos) the bill seeks to amend the Principal Act by creating a new Part V titled: “Development of Host Communities”, deleting Part V to XII and renumbering them as Part V to XIII, and inserting a Section 77 under the new Section V.

Section 77 of the proposed Act will read that: “The adverse effects on the environment, human and aquatic lives on the communities hosting the power generating stations all over the country, particularly thermal pollution from the power generating stations are, hereby, recognised under this Act.

“Without prejudice to any existing right or rights that may be accruing to host communities under this Act or any other enactment, five percent of the revenue accruing from power generated by the various power generating companies in Nigeria shall be set aside for the development of the respective host communities.

“The revenue referred to in Subsection 2 of this section shall be received, managed, and administered by a trustee to be appointed by the GENCOs and representative of the host communities, upon agreement between the host communities and GENCOs on one part and the trustee on the other part.”

Leading debate on the Bill, Benson said the purpose of the amendment is to lawfully provide for the development of communities hosting power generating companies across the country.

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He argued that the Bill when passed, will help to ameliorate the untold hardship and infrastructural degradation often suffered by communities hosting power generating firms as a result of the adverse climatic, livelihood, and public health effect of their activities.

According to the sponsor of the bill, host communities of all generating companies (GENCOs) shall be entitled to 5 percent of the firms’ previous year’s actual operating expenditure.

“Hon. Colleagues, power generation, transmission, distribution, and usage is known to cause huge harmful environmental and health challenges for host communities. In fact, it is almost impossible to produce, transmit and consume power without significant environmental impact. The electricity sector is unique among industrial sectors in its very large contribution to emissions associated with nearly all climatic and health issues.

“Power plants also require access roads, railroads, and pipelines for fuel delivery as well as electricity transmission lines and cooling water supplies which could lead to soil erosion, deforestation, and water pollution from their construction work. This destabilizes the livelihood of the communities hosting them and also leads to water and soil contamination from waste and byproducts.

“Furthermore, the electricity sector is known to have a significant impact on water habitat and species. Power generation leads to the destruction of aquatic life and consequently the disruption of sources of livelihood for host communities, especially the fishing communities. In particular, hydro dams, which are a major source of power generation in Nigeria, and transmission lines have significant effects on water and biodiversity.

“Specifically, power generation, especially through fossil fuels, biomass, and municipal and industrial waste, is known to lead to the emission of the following substances: Carbon dioxide (CO2) – a greenhouse gas, which contributes to the greenhouse effect.
Sulfur dioxide (SO2) – causes acid rain, which is harmful to plants and animals that live in water. Nitrogen oxides (NOx) – contribute to the degradation of ground-level ozone. Particulate matter (PM) – causes hazy conditions in cities and scenic areas.

“As for human health, power generation causes serious health challenges for people living in their host communities. For instance, SO2 worsens respiratory illnesses and heart diseases, particularly in children and the elderly while Particulate Matter contributes to asthma and chronic bronchitis, most especially in children and old persons too. It also causes emphysema and lung cancer. Finally, NOx is believed to irritate and damage the lungs. The effect of carbon monoxide on human health is also common knowledge, while heavy metals such as mercury remain hazardous to human and animal health”, he maintained.

Benson noted that setting aside 5 percent of the revenue generated by GENCOs for developmental projects in host communities will further promote peaceful and harmonious coexistence in these communities.

The lawmaker said the amendment is holistic and nationalistic in its impact as GENCOs exist across all geopolitical zones with 23 companies operating in Sapele, Jebba, Egbin, Ughelli, Shiroro, Afam, and Kainji.

Others are in Katsina (windmill), Olorunsogo (Ogun state), Omoku (Rivers state), Benin, Alaoji (Abia State), Geregu (Kogi State), Egbema (Imo State), and several other parts of the country.

“The host communities are in dire need of development, and this can only be achieved through the provision of a special fund which this amendment seeks to achieve.

“In line with the recommendations by this honourable House for 5 percent of oil companies operating expenses (OPEX) to be allocated to host communities in oil-producing states as contained in the PIB, a law requiring that a similar 5% of expenditure by GENCOs be allocated to their host communities will engender equity, fairness and even development in similar communities across Nigeria.

“Monies accruing from this fund will be applied to sustainable infrastructural development projects, job creation, improvement of education, empowerment and skills acquisition for youths, women and other vulnerable groups, provision of medical facilities and personnel and any other developmental project agreed to consequent upon a needs assessment.

“It is pertinent to note that provision of certain funds for the development of host communities is a global best practice. These funds, often referred to as Trust Funds, exist in Canada, Namibia, United Kingdom, Kyrgyzstan, and neighbouring Ghana”, he added.

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