By CLARA NWACHUKWU
APPARENTLY uncomfortable with the current power supply situation in the country, which is far below national demand, the Federal Government struggles to improve efficiency and service delivery in the sector, enough to attract fresh foreign investments.

In view of dwindling resources and increasing demand on government’s meager resources, the bulk of which is derived from the sale of crude oil, decision makers now appreciates the need for private sector assistance, if the country is to realize its objective of becoming one of the top 20 economies in the world by the Year 2020.

Previous attempts by the former President Olusegun Obasanjo’s administration to revamp the sector with over $10billion down the drain, failed woefully, as the exercise was froth with corruption of very high magnitude.

Against this backdrop, the newly- appointed management of the Nigerian Electricity Regulatory Commission, NERC, is challenged to live up to its responsibilities of creating a level playing field for all players in the power sector, while ensuring adequate value for money for both the investors and consumers.

To this end, the NERC recently held a workshop for all stakeholders in Calabar, Cross River State, with a view to acquainting all concerned with the rules of the game, especially as the power sector enters the Transition Market stage.

The Chairman, NERC, Dr Sam Amadi, explains that the whole process of the transition market revolves around fair play, transparency and accountability in order to derive maximum benefit from the cost of electricity.

According to him, “Before any entity incurs cost either by way of expanding network, by way of installing new capacities, or whatever that will affect its total cost, it has to seek for permit because these activities have cost components and these components will affect the total cost, which they will like to take back from the consumers.

“Cost, any how you look at it must be either internalised or externalised, and one way or the other, has to be passed on to the customer or in one way or the other, reimburse the licencees.”

As a result, he said the commission will benchmark the licencees to improve or minimize these costs to improve efficiency, adding that the regulator, will no longer tolerate the addition of frivolities as part of the cost to be passed on to consumers.

“We must verify the cost of companies’ expenditures and we must check that the costs you are reporting are prudent. So if you spend N20billion on trips all over the world, we will mark it down and say ‘no, you can’t recover this cost, because it is not part of the assets and that is what you will be allowed to recover.’ These kinds of costs are not responsible or prudent, and therefore, will not be allowed to be part of the consideration for recovery.”

A British power consultant, and one of the resource persons at the workshop, Mr. Maurice White, breaking down the process of liberalisation in the power sector, noted that the transition market is the first stage, which the producing or generating companies sell power to the distributing companies under a contractual basis.

He argued that the only way the objectives of the power sector can be realised is to break down current monopoly enjoyed by the Power Holding Company of into separate management entities.

Agreeing that globally, such liberalisations have taken place had attracted widespread suspicions both among the workforce in terms of job stability and consumers in terms of tariff rates; he insisted that eventually competition would even out all odds.

He said, “We are massively under-delivering electricity here in Nigeria. If we properly deliver the electricity required, we can probably employ twice as many people as we currently have. Anybody who is good at their jobs should not have any difficulty, not just in getting more work, but in getting better paid for it.”

He gave the assurance that Nigeria, with its huge population is very attractive to investors as an emerging market, saying, “Investors around the world are very happy to invest in the power sector because it is a long term investment.

They want to invest for a long period of time and utility investment, where electricity, gas, water is a long term investment, and very essential to the people around the world. You won’t have to fear to invest in Nigeria because there is a large premium here for all risks. So there is premium first of all in terms of a developing country and in terms of creating a large market.”

Also speaking from this premise, the Executive Director, Market Operations, NERC, Mr. Bulus Dan Magaji, noted that “Presently, the market is suffering from a lot of inefficiencies,” adding that the purpose of the transition market is to, among others, remove the bottlenecks and inefficiencies that had bedeviled the sector, with a view to “doing things differently, re-defining the roles and making positive adjustments towards improving the market.”

Expatiating further, the Commissioner, Market Competition and Rates, NERC, Mr. Eyo Ekpo, said the market is meant to give stakeholders a certain degree of certainty from two points of view: “certainty from the regulatory point of view, which means that you know that in a given set of circumstances, the regulator is likely to take decisions along the lines of the basis for reasons that are already well-explained.

“From the commercial point of view, you also get certainty in the sense that you enter into a relationship with another party that participates in the market and his behavior, the duties that he owes you and you owe him are well known to either parties as documented under contractual agreements.”

He added that the whole idea of the transition is to get all those concerned to know what the rules are and what is expected of them, especially with regard to the conditions precedent, for which seven out of the 11 specified have already been achieved.

“So this workshop is designed for us to assess the remaining and we want to sit down and do a number of things:
. What are the conditions we have fulfilled identify them and note that we have fulfilled them.

. What are the conditions that we have not fulfilled, who is to do them, who has responsibility for each one, and we agree on them.

What frame of time do we have to do them, we agree on that, is there a cost, is there a budget.

Then we also ask ourselves, is there anything else that are not in the market rules that we think should be there because it helps the sector and we agree that it is a condition precedent, we agree, we discuss and people will come up with suggestions, we debate and we justify their inclusion through a general consensus. Otherwise, we leave it at 12 or we make it 13 or 14 or whatever number. We agree that these are the things we must achieve, who is to achieve them and when.

“After all these, we now set up a Programme Management Group, PMG, to put people in charge of executing these targets within a particular time frame. So when we leave here, we will have a steering group, which is representative of everyone here, we have within that Steering Group the PMG responsible for these tasks, and following up on the attainment of these objectives.

And hopefully, in a few months or before the end of the year, we take record whether we have done everything, the ones we have not done, are they still feasible or the ones we have done, lets add more. The expectation is that people will notice that work is being done through the changes they observe. First light will be steadier and secondly, it will be more available.”

While the NERC is willing to accommodate all views in order to make a success of the market, the Chairman, Amadi, said the commission cannot afford to spend too much time for the learning process, saying that activities must kick off as soon as possible.

“The revolution in the market will bring some level of confidence in the system, and we want to ensure that this transition is not delayed endlessly, some people are making quick decisions. This workshop will also help participants realize that while waiting for the transition Market, the conditions precedent are not self-driven, people have to do what they ought to do, so that is why we have come together to create some kind of framework, after this the conditions precedent will be fast tracked and we have a clear understanding of what ought to be done and the regulator is committed to this within the given framework.”

Corroborating the chairman’s views, a director in the Ministry of Power, Mr. John Ayodele, said the workshop is part of the sensitisation efforts, “so that people who would be part of the market operations should get together sit down, look at what the market rule says and look at what the transition market will look like. If there is need for amendment, this is the time to have it, if there is no need for amendment everybody must act accordingly.

It is not when the transition market is pronounced that people will now start coming to say there is something wrong somewhere. So this is a preliminary stage to set up the transition market where everybody has been consulted and all comments and observations and challenges can be brought to fore so that when the market becomes effective we would have a smooth sail.”

Consequently, the Director General, Bureau of Public Entreprises, Ms Bolanle Onagoruwa, said the current power sector reform is a burden shared, as “The objective of the reform is to create a viable electricity market, whereby electricity is bought and sold.”

According to her, there are four stages of the reform  pre-transition, transition, medium term and final stage of the market. “They all revolve around trying to create a competitive market and the essence of the competition is to generate more efficiency and people produce more, prices will fall as demand increases and there will be more supply than demand.”

She said that all hands must be on deck, if the reforms are to be successful, saying, “BPE’s role is that we are the ones trying to attract the investors, so that reform is a stronger aspect of our work. What we are going to sell is just about 3,500MW that we are producing currently.

At the very most we can produce 8,500MW which is a very small percentage of what we need. What we are trying to do is to attract people who will come and generate as independent power producers. That is the liberalization that we are talking about.”