A Review of the Nigerian Energy Industry

Nigeria: NERC insists on writing electricity market rules

Sam Amadi, NERC12 0ctober 2013, Abuja – The Nigerian Electricity Regulatory Commission (NERC) yesterday held firm its position that it will ultimately write the rules that will guide the electricity market, taking into consideration inputs from all stakeholders.

This is even as the new owners of the privatised power firms accused the commission of championing the interests of consumers without adequate consideration of their business interests.

Speaking in Abuja at a well-attended public hearing and workshop on regulatory issues regarding the draft interim rules for the management of the electricity industry before the Transitional Electricity Market (TEM) is declared, Chairman of NERC, Dr. Sam Amadi, stressed that NERC and not the operators will write the rules.

He said: “In making rules we need to listen to all stakeholders, operators, experts and those that will be impacted by the rules. We will not make rules without the inputs from those to be affected by the rules. We will write the rules; not the operators or Disco Roundtable but NERC will write the rules.”

He said the regulators job was to converge the interests of the operators and consumers into a single commitment to provide to every Nigerians with adequate, reliable and safe electricity.

Earlier, while presenting the draft interim market rules which would guide the industry between November 1, 2013, when the power firms are expected to be handed over to the investors, and February 28, 2014, when the TEM is expected to fully commence, Deputy General Manager, Market Competition and Rates, NERC, Abdulkadir Shetimma, said the rules were necessary because Power Purchase Agreements (PPAs) and vesting contracts could not be enforced before TEM.

Under the draft rules, Genco energy charge is fixed at 100 per cent, capacity charge 45 per cent, while Disco fixed charge and variable cost is 20 per cent, admin cost 100 per cent of MYTO 2 provision, return on capital 50 per cent and depreciation 10 per cent.

But the investors which called for a more practical analysis on cash flow posited that NERC was championing consumers’ cause rather than supporting everyone in the new interim rules, accusing NERC and BPE of trying to reduce tariff to Gencos through the 100 per cent energy charge and 45 per cent capacity charge.

Robert Yates, who spoke on behalf of the Discos argued that fixed variable should be fixed at 70 per cent and return on capital 60 per cent, adding that the Discos need more than NERC was suggesting to cater for salaries and other cash outgoings, stressing that arrangement suggested by NERC would result in their breaching covenants with their bankers.

For their part, the Gencos, spoking through Sirjay Abdullahi of Mainstream Energy, said their position has already been made known to NERC in an earlier letter, but Samaila Zubairu, representing Eko Disco, urged NERC to consider that investors need to maintain business relations with their bankers adding that VAT and the N6.7 billion owed the Lagos State government by Eko Disco should be factored into allowable revenue.

– Leadership

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