Investors battle electricity regulator over policy suspension

The novel alternative electricity distribution arrangement of the Federal Government called the Eligible Customer Policy is now a subject of discord; companies that have bought into the policy are kicking against a new directive by the industry regulatory agency, the National Electricity Regulatory Commission (NERC). On July 7, NERC directed the Transmission Company of Nigeria (TCN) to suspend all Eligible Customers’ transactions, without its approval. It repeated the directive on July 30.

According to TCN, in a memorandum it issued to all Eligible Customer investor-companies on August 3, NERC informed it to cease working with the companies because they had not been issued operating licences.

TCN’s memorandum said NERC directed it to “forthwith stop all Eligible Customer transactions pending the conclusion of the review and approval of the respective applications for eligibility status by the commission”. TCN has since heeded the directive.

However, the affected companies, about 30 of them, have since been kicking against the decision of the NERC, describing it as unfair and an attempt to sabotage their multi-million-dollar investments, as well as the government’s plan to relieve the country of the endemic electricity inadequacies.

The Eligible Customer Policy, also known as the Willing Buyer-Willing Seller policy, is a provision of the Electric Power Sector Reform Act (EPSR) 2005, which gives the Minister of Power the authority to declare open the Eligible Customer Scheme. It was operationalised by the President Muhammadu Buhari administration in 2017 and piloted by the Vice President, Professor Yemi Osinbajo (SAN), to take satisfactory power distribution services to consumers in different parts of the country. The then Minister of Power, Works and Housing, Babatunde Fashola, declared open the Eligible Customer Policy in 2017 to begin the new phase of dispatching stranded power being generated by the Electricity Generation Companies (GENCOs).

According to him, Section 27 of the Act states “the Minister may issue a directive to the Commission, specifying the class or classes of end-use customers that, from time to time, shall constitute eligible customers under this Act”.

It was introduced at the peak of the national outcry against a rather mediocre service provision by virtually all the Electricity Distribution Companies (DISCOs) in different parts of the country and considering the huge federal investments into the power sector notwithstanding and the outrageous bailout funds being provided to the DISCOs without improved service delivery, a national solution was needed to be implemented to rapidly change the deplorable situation.

According to sources, the template of the policy indicates that electricity consumers, who feel dissatisfied with the services of the DISCOs in their area, can request and receive alternative electricity distribution services from any of the available Eligible Customer vendors in their area if their power requirement is over 2 Megawatts.

Some of the companies that have made this investment include We Wood, Persepolis Energy, Sun Flag Steel, Abuja Steel, Kam Industry Nigeria Limited, Lord’s Mint Technologies, Smart Power Systems and many others, including the two largest companies under this policy, Mainstream Energy Solutions and Niger Delta Power Holding Company (NDPHC), which are the largest investors and players under the Eligible Customer Policy.

However, the picture obtainable of the policy, since its launch, seems not to be looking like it was intended to be, as the regulatory authority has only been able to license only one company to operate on the platform; Phoenix in Ogun State, and has decided to block others’ access to receive power to distribute to customers, with whom they had signed various degrees of transaction agreements.

Some of the affected vendor companies, who claimed to have invested billions of Naira to install equipment, build distribution networks, substations and signed transaction agreements with the power transmitting company and several consumers are already crying foul over NERC’s action. Some of them have alleged that the commission’s refusal to conclude the licence approval processes for the Eligible Customer investor-companies, more than four years after, was in connivance with the DISCOs, which are bound to be the losers by the time their unsatisfied customers start leaving to seek alternative services elsewhere.

After narrating their ordeal under the prevailing circumstance, the investor-companies, which have already formed a common front to get justice through the courts, have already gotten injunctions. They are looking to re-open access to services and have called on the Economic and Financial Crimes Commission (EFCC) and other anti-graft agencies to focus their searchlights on the activities of NERC and its management, with regards to the way the Eligible Customer policy had been run since it was launched. Some of them are alleging graft and a corrupt relationship between NERC and the DISCOs.

In a telephone discussion with a staff of Mainstream Energy Solutions, who wanted to remain anonymous, he felt the NERC is directly targeting some companies to enable the DISCOs to continue to have a competitive edge over them where they are not performing, citing the letter written to TCN with regards to their company. The NERC has insisted its only interest is transparency.

In a phone interview, the Managing Director of another company operating under this policy, Persepolis Energy, Prince Mustapha Audu, viewed the current actions of NERC as sabotage of the government’s attempt at solving the electricity problem in the country to a large extent, pointing out the fact that four years is rather too long for the commission not to have found more than only one of the investors fit for approval.

“The NERC seems to have intentionally failed to give more than one approval and it is very suspicious that they will now intentionally and deliberately stop companies from giving power to those who need it. In over 4 years, they have only given one approval. They are working against the federal government’s attempts to improve the power sector.

“My honest advice is that if the NERC legitimately feels that there have been many irregularities, the right approach is to ask TCN to ensure that those companies regularise their documents within a reasonable time frame. It is incredulous and rather unheard of for NERC to ask TCN to deliver the power not contracted to the DISCOs directly for onward delivery to customers that do not belong to them. Therefore, there are many insinuations out there that they are working with the DISCOs.

“According to public insinuations relating to corruption on the subject matter, the issue of graft has been mentioned in many public quarters, although any issues relating to graft has to do with the relevant statutory government agencies saddled with that responsibility of investigating these claims.”

He lamented that the decision of the commission had put the investments of many companies at risk saying “many GENCOs are unable to dispatch most of the power they generate under the current system where there is power rejection by the DISCOs. Eligible Customer Policy allows for GENCOs to partner with private companies that can aggregate customers in clusters and build new distribution networks to provide power that is desperately needed to those customers willing to pay for it. This encouraged companies such as Persepolis Energy to invest in state-of-the-art distribution networks that allow for delivery of safe, reliable, and uninterrupted power supply. Now that many companies have invested in these distribution networks, NERC has effectively halted the Policy thereby putting the many billions of Naira invested by those private companies at risk.”

He went on: “On the continental front, it puts in jeopardy Nigeria’s capacity to participate in the West African Power Pool (WAPP), as many GENCOs were partnering with private entities to build new distribution networks to deliver power to other West African countries such as Togo, Benin Republic, Ivory Coast, Mali and the Niger Republic. The Eligible Customer Policy is part of President Muhammadu Buhari’s administration’s grand plan to make Nigeria a major player in the power sector on the Continental front and to improve power supply in Nigeria.

“Meanwhile, TCN said the power contracted to Eligible Customers will be given to the DISCOs in their various locations. On what basis does that work? We signed an agreement with TCN for what is called transmission use of a system (TUoS) for them to transport the power to Eligible Customer clients. How then can they give power not belonging to the DISCOs to the DISCOs? The whole thing smells funny.

“Nigeria is also going into agreements with other West African countries under the Eligible Customer Policy to provide them with safe, reliable and uninterrupted power supply. These agreements were put in place by the Late Mohammed Mahmoud of NDPHC who sacrificed so much for the Nigerian power sector and were one of the greatest champions and the Chairman of the Eligible Customer Policy, under the current Managing Director’s Strategic National Power Development Plan to dispatch of over 2000 megawatts of stranded power being generated daily but unable to be sold or dispatched by NDPHC. This initiative is part of the legacies intended to benefit the Nigerian Power Sector. With the new directive, TCN will not be able to transfer this power from the generation stations in Nigeria to these countries. What has this new directive done to President Muhammadu Buhari’s initiatives in the power sector to improve power distribution in the country and the continent at large?

“The Vice President, H.E Prof. Yemi Osinbajo, who oversees the Power Sector, has been the main champion of the Eligible Customer Policy and has encouraged NDPHC to invest significantly and partner with capable private entities to deliver much-needed power to industrial clusters across the country. This has encouraged many companies to invest in new distribution networks across the country but unfortunately, this new NERC directive is a dent and an indirect attempt to scuttle that effort.

“In addition to this, Nigeria has a Take-or-Pay agreement with Accugas Limited, which is costing the country about 30 million dollars a month. Without the ability of NDPHC and other players under the Eligible Customer Scheme being allowed to perform optimally, NERC is further plunging the country into debts, it can ill-afford not to pay, without considering the full impact of its decision.

“There is a huge deficiency in transmission and especially distribution networks in Nigeria. The current infrastructure can only transmit a high of under 6,000 megawatts, whereas the capacity needed is for about 20,000 megawatts. The distribution capacity is even lower at under 5000 megawatts whereas what is needed is for about 30,000 megawatts. The cost required to put the needed infrastructure in place is over $50 billion. A cost too high for any single government to bear giving the current financial landscape. The Federal Government had recently signed the Siemens agreement, called the Presidential Power Initiative, an ambitious and courageous plan to increase power generation 5 folds and to build new transmission and distribution networks across the country, that promotes local skills and sustainable technology to make up for some of this shortfall. The Federal Government also aims to encourage private sector participation in bridging this infrastructure and investment gap in the distribution networks through encouraging private sector participation under the Eligible Customer Policy. I doubt if the NERC has considered the true scope and magnitude of its decision and its impact on Government Policies and Private sector participants in the power sector under various policies especially the Eligible Customer Policy.

“Another issue of note is that the power sector is the only sector where competition is not allowed or encouraged. If I am unhappy with my telecoms service provider, I can switch from MTN to Glo or Airtel or 9 Mobile, but in the power sector, if we are unsatisfied with the performance of a DISCO in an area, for example, it is not possible to switch to another service provider. They will tell you to get a generator or pay a premium for poor services. If competition is hampered in the power sector, then there can never be any change or progress in the sector.

“Persepolis Energy has 15 megawatts contracted with NDPHC and we have signed up many clients to deliver this power to. Now, due to the new directive, NDPHC cannot give us this power, meaning our clients cannot get this power while NDPHC and ourselves have invested over N350 million to put the state-of-the-art distribution network needed in place.”

When reached for its reaction on the development, NERC denied there was any connivance with any of its licensees, including the DISCOs, explaining that its decision to suspend transactions on the platform was predicated on the discovery of many sharp practices being perpetrated on it.

Its General Manager, Public Affairs, Dr Usman Abba Arabi, reacting to questions during a telephone interview in Abuja, said the suspension was directed to allow the commission to conclude the review and approval processes on applications for Eligible Customer licences. According to him, the suspension is part of due process and that it will subsist until the processes are followed through.

“First of all, I would like to say that NERC does not connive and has not connived with any distribution company. It does not connive, and it will never connive with, not only the distribution companies, but NERC will not connive with any of its licensees or any stakeholder in the industry. NERC is a regulator, I mean, why will the regulator be conniving with DISCOs or the GENCOs?

“What is happening is that there were a lot of illegal connections. A lot of connections were not approved by the Commission. This Eligible Customer thing was suspended pending when these issues are sorted out. What NERC said is that forthwith, all Eligible Customer transactions have been suspended pending the conclusion of the review and approval of respective applications for Eligible Customer status.

“There are a lot of applications that have not been approved, there are processes and procedures that we’ll have to follow. You know, people don’t just come and say, ‘give me’ and you’ll just give no, there’s a process. We must follow the process. So, there were a lot of illegalities going on when there were connections, so those were removed, and the thing was suspended until when we sort out all these… That’s just it,” he said.

Although both sides have their arguments, issues that are still being reasoned, especially as the matter has entered the litigation phase, are questions surrounding the length of time it has taken for licenses to be processed, especially for a matter considered to be so critical as regarding electricity supply. Many analysts of Nigeria’s socioeconomic crisis have been consistent in pointing out the role that unreliable power supply across the country, especially to the industrial sector, has played.

While those who have invested huge resources in the scheme, who NERC’s action would be threatening the lives of their businesses, keep wondering why those who have satisfied the required prerequisites are yet to get the necessary approvals, those employees in the companies are afraid for their jobs because their employers will only be able to weather the stalemate created by the commission’s directive for a little longer before sending redundant workforce back into the labour market.

Another consideration is the circumstances that gave birth to the idea of creating alternative power providers, especially in areas where the conventional DISCOs are seen as failing and giving unsatisfactory services to consumers. At that point, it was considered as a national emergency intervention, one through which the President Muhammadu Buhari administration meant to show Nigerians that it takes their matters seriously. That emergency, from the outcry of the investors, looks like one that is failing, even before the public gets to understand what it is all about.

Lastly, the question of how legal business agreements are treated has also been generated by the Eligible Customer debacle. In some views, the decision of the commission and the TCN to transfer power belonging to Eligible Customers with already signed agreements with companies on the Eligible Customer platform to DISCOs, which had no contribution or role in the signed agreements or development of distribution networks, calls much to question.

The unfolding development looks like one that can generate sensational topics as they go to court and argue their cases. Already, according to sources within some of the investor companies, those whose investments have entered the transaction had decided to go to court and some have already secured injunctions. What many, however, hope is that an amicable settlement will present itself soon so that litigations can be averted and Nigerians and all electricity consumers in the country can get the benefits of the original initiative of the Eligible Customer policy.

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