11 October 2013, Abuja – The Bureau of Public Enterprises, BPE, said, Thursday that new owners of successor generation and distribution companies of the privatised Power Holding Company of Nigeria, PHCN, would now take over operations of their respective assets on November 1, this year.
This is just as the Nigerian Electricity Regulatory Commission (NERC) also told the new investors in the power assets that it would not allow operators to dictate the rules governing the electricity industry of the country irrespective of their huge investments.
The Deputy Director, Electric Power Department of BPE, Mr. Amaechi Aloke, made this disclosure at a public hearing cum workshop to update the new owners on regulatory issues regarding the draft interim market rules for the management of the electricity industry before the eventual declaration of a Transitional Electricity Market (TEM) by NERC in Abuja.
Aloke, who assured the investors of government’s commitment to hand over the assets to them by November 1, stated that before then, most of the verified workers of the defunct power utility would have been paid their severance benefits.
He, however, reminded them that the National Council on Privatisation (NCP), which is chaired by Vice-President Namadi Sambo, still maintains its stance that the workers must be given a six-month lay-off grace, following which the new owners can sack and recruit from among them according to their requirements.
The Chairman of NERC, Dr. Sam Amadi, who took time to explain the interim market arrangement, also had to defend the neutrality of the commission in discharging its statutory responsibilities in the sector.
The commission was accused of championing the interests of consumers by the new owners of the privatised power firms without adequate consideration to their business interests, but Amadi in his remarks, stated that the commission’s operational mode was in sync with global standard regulatory practices.
“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.
Amadi explained that the forum provides an opportunity for the new operators to understand the various regulations and benchmarks which NERC employs in its regulation of the market and give their inputs before the final rules become an order.
According to him: “We believe that the operators and consumers do not have irreconcilable interests. Our job is to converge their interests into a single commitment to provide to every Nigerian home and business access to adequate, reliable and safe electricity.”
NERC’s Deputy General Manager, Market Competition and Rates, Abdulkadir Shetimma, had earlier stated in a presentation on the draft interim market rules which would guide the industry between November 1, 2013, when the power firms were expected to be handed over to the investors, and February 28, 2014, when the TEM was expected to fully commence that the rules were necessary considering that Power Purchase Agreements (PPAs) and vesting contracts cannot be enforced before TEM.
The draft rules fixed generation companies energy charge at 100 per cent and capacity charge, 45 per cent, while for the distribution companies, fixed charge and variable cost is 20 per cent, administration cost 100 per cent of MYTO 2 provision, return on capital 50 per cent and depreciation 10 per cent.
However, Robert Yates who spoke on behalf of the distribution companies argued that fixed variable should be fixed at 70 and return on capital 60 per cent, adding that they need more than NERC is suggesting to cater for salaries, interest to banks and other cash outgoings.
He also noted that arrangement suggested by NERC would result in their breaching of covenants with their bankers and that they should be allowed to keep cash covering allowable revenue before paying the rest to the Market Operator (MO) in addition to starting loss reduction timeline from November 1, 2013, which is the agreed deal they signed with BPE as against March 1, 2014, suggested by NERC.
They equally called for a more practical analysis on disco cash flow, adding that NERC was championing consumers cause rather than supporting everyone in the new interim rules.
– Chineme Okafor, This Day