In our Geplaw Focus Report on the “Review of the Nigerian Electricity Supply Industry (NESI): Five (5) Years Post Privatization”, published in December 2018, GEP made some salient recommendations; one of which was the suggested realignment of all stakeholder interests which would accelerate the development of the NESI especially in light of the five (5) year target timeline for market participants as enshrined in the Performance Agreement (PA).
Recently, following the requirements of the Power Sector Recovery Plan (PSRP), strategic meetings between key sector stakeholders, Bureau of Public Enterprises (BPE) and Nigerian Electricity Regulatory Commission (NERC) took place during the last quarter of 2018 to brain storm on solutions that will ‘reset’ the sector.
The purpose of the meeting(s) was to commence the review of the Performance Agreement and in effect the targets of the Distribution Companies (DisCos) and the Federal Government of Nigeria (FGN). An important outcome of the meeting was the setting up of an Inter-Agency Committee made up of both stakeholders. To this end, several recommendations were put forward in resolving salient knotty issues.
Regarding the review of the Performance Agreement between the DisCos and the FGN, this report highlights and provides further narrative on the efforts being made by key sector stakeholders in orchestrating solutions and recommendations for restoring and achieving sector viability.
GEP continues to remain instrumental in shaping and contributing to the ongoing reforms in the power sector.
The privatization of the power sector in Nigeria was hinged on the attainment of certain specified performance targets within a five-year period. Upon an evaluation of this period, stakeholders agree that both the FGN and DisCos did not meet their respective obligations.
The BPE and NERC as key stakeholders met sometime in the last quarter of 2018 to create a road map to restore viability of the sector in order to hold the DisCos accountable to their performance targets based on identified conditions precedents.
KEY TIMELINES POST PRIVATIZATION
- The privatized companies were handed over to core investors on 1st November 2013;
- Base Loss Studies (BLS) were validated in 2014;
- Based on the BLS, NERC released a tariff in February 2015;
- However, in April 2015, NERC withdrew the collection losses which made DisCos declare Force Majeure, thereby resulting to an industry stalemate;
- In order to resolve the industry stalemate NERC reintroduced the collection losses into the reviewed tariff in February 2016;
- However, despite the public outcry that greeted the tariff review, the February 2016 reviewed tariff did not take into account the already weakened naira;
- In December 2016, the FGN and a team from the World Bank met to resolve the power sector issues.
- The meeting resulted to the setting up of a committee that drafted the Power Sector Recovery Plan (PSRP) which was approved by the FGN by March 2017.
- Following these developments, a stakeholder meeting between BPE and NERC during the last quarters of 2018 culminated into discussions on moving the NESI forward.
We have for ease of comprehension identified the salient issues and the anticipated solutions below.
STAKEHOLDER ENGAGEMENT- ANTICIPATED SOLUTIONS FOR THE SECTOR
The recent outcome of the stakeholder meeting between BPE and NERC signifies a major milestone in restoring confidence in the NESI by realigning sector operators and the regulator of the NESI on key issues pertaining to their respective performance obligations as enshrined in the PA.
The commendable efforts also signify increased regulatory scrutiny on the part of NERC regarding ensuring continued service delivery to electricity consumers. Hence, it is also anticipated that the Business Continuity Regulation will be implemented in the event of exit of a core-investor in the industry due to non-performance. It therefore behoves the DisCos as the last mile in the electricity value chain to strategize on performance improvement initiatives and regulatory compliance mechanisms, in order to win the trust of both the regulator/industry stakeholders and electricity consumers.
As efforts are being made to implement the PSRP and reset the power sector regulatory environment, it is hoped that all the sector operators and stakeholders collaborate in accelerating the implementation of the PSRP for the sector, in order to showcase it as being attractive to investors both locally and on a global scale.