A Review of the Nigerian Energy Industry

Nigeria: NERC on collision course with Discos

Sam Amadi, NERC.
Sam Amadi, NERC.

*Storm brewing over plan to cap estimated billing, initiate ISO

Oscarline Onwuemenyi

10 June 2015, Sweetcrude, Abuja – The National Electricity Regulatory Commission, NERC, has urged Electricity Distribution Companies (Discos) to come up with a reasonable and scientific methodology by which estimated billing can be reached, otherwise the regulator will do the needful to protect customers as well as investors.

This is coming as the regulatory agency and the and the Electricity Distribution Companies, DISCOs, are on collision path following the refusal by the DISCOs to comply with plans by the regulator to set limits on estimated billing.

The DISCOs have reportedly kicked against plans by NERC to establish Independent System Operator, ISO, as well as putting a ceiling on the amount that unmetered customers in a particular class could be billed by estimation in a particular month.

Things came to a head last week at a public hearing organised by NERC in Abuja, aimed at seeking stakeholders’ views on the issues, where the representatives of the various Discos rejected both proposals, with some arguing that ceiling on estimated billing is not in the interest of operators.

They also argued that the establishment of an ISO is in conflict with Section 65(2) of the Electric Power Sector Reform, EPSR Act 2005, which empowers the Transition Company of Nigeria, TCN, to engage in system operations (including procurement of ancillary services).

The Executive Director, Regulatory and Stakeholder’s Affairs, Abuja Electricity Distribution Company, AEDC, Mr. Abimbola Aduniyi, argued that NERC should have sought the amendment of the EPSR Act 2005, before contemplating the establishment of the ISO.

He added that this would have removed areas of ambiguity or overlapping of functions of the TCN and ISO.

“The establishment of an ISO is in conflict with Section 65(2) of the Electric Power Sector Reform (EPSR) Act 2005, which empowers TCN to engage in System Operations (including procurement of Ancillary Services). Furthermore, Section 66(1) also empowers the TCN as the System Operator to administer the wholesale electricity market, including the activity of administering of settlement payments in accordance with the market rule.

“If the Commission is contemplating the proposal to establish an ISO, it will be advisable to first seek to amend the EPSR Act 2005, to remove areas of ambiguity or overlapping in both the functions of TCN and that of the proposed ISO,” he said.

In his remarks, the Assistant General Manager, Regulatory Affairs, Enugu Disco, Mr. Reuben Okoye, argued that the ceiling on the amount of billing will encourage some customers who are currently using pre-paid meters to tamper with their meters.

According to him, “We think that customers who have meter right now, if such a ceiling order is in place he will have a reason to tamper with his pre-paid meter so that he will get the benefit and maybe recoup all the losses that he had been subjected to over the years.”

Okoye also pointed out that the estimated billing methodology put forward by NERC has not been fully implemented, adding that while Discos are already implementing this, the creation of another substitute for estimation is unnecessary.

The Chairman of NERC, Dr. Sam Amadi, defended that the basis for the ceiling is to protect those who are being over billed, adding that the ISO is provided for in the EPSR Act 2005, and that that the Commission does not have a preconceived position on the issues.

According to him, the consultative stakeholders’ meeting is organised to allow the industry to determine whether it is appropriate at this time to establish the ISO, and also to put a cap on the estimated billing system.

“The ISO is provided for in the EPSR Act 2005, and it is now left for the industry to determine whether it is appropriate at this time. What will be the model, what nature will it take, who should own it, what should be the management structure and how should it operate largely in line with the rules and the Act?

“As a regulator, NERC has not concluded on any of these issues put forward for industry consideration, and so I will encourage us to grapple with these issues as robustly as we can offer our views knowing that there will be other fora for consideration of these issues,” he said.

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