Minister of Power, Barth Nnaji
By Chineme Okafor
The total indebtedness to successor companies of the Power Holding Company of Nigeria (PHCN) has now risen to about N110 billion, THISDAY can report, even as the management of the company had since 2004 operated the staff pension administration scheme contrary to the principles of the Pension Reforms Act (PRA 2004).
THISDAY gathered that the management had instead opted to continue operating the inherited Nigerian Electric Power Authority (NEPA)/PHCN Superannuation Scheme in which it has failed to make remissions of an estimated N80.26 billion of accrued benefits and monthly contributions to employees.
Minutes of the proceedings for the fourth round of negotiations on power sector reforms between the Federal Government and the three labour unions of the PHCN – National Union of Electricity Employees (NUEE), Senior Staff Association of Electricity and Allied Companies (SSAEAC), and Nigeria Union of Pensioners (NUP) – which was obtained by THISDAY, revealed that the Federal Government contributes to about 20 per cent of total debts owed to PHCN.
Out of the N110 billion owed PHCN, the Nigerian military formations, including the Nigerian Army, Navy and Air Force as well as other Federal Government Ministries, Departments and Agencies (MDAs), are yet to offset their N20 billion debt to PHCN, while single-phased residential consumers of electricity constitute majority of other PHCN debtors.
The minutes showed that the Executive Director, Market Operation of PHCN, Mr. Uzoma Achinaya, explained to the government-appointed Chief Negotiator in ensuing negotiations, Alhaji Hassan Sunmonu, that the total nationwide indebtedness to PHCN had risen to that amount out of which the Federal Government accounted for 20 per cent.
Achinaya, however, noted that the 20 per cent government debt was not a major factor in increasing the collection efficiency of the 11 PHCN successor distribution companies which have a revenue collection target in view of the need to consistently offset the improved salaries of the workers as part of the 50 per cent salary increase granted by the government.
While noting that the market operation, which ensures that electricity production and consumption are metered and known as well as carry out financial settlement between distribution, generation and transmission companies is currently running at deficit due to high operational costs and low revenue generations, Achinaya asked for an improvement in revenue collection efficiency of the distribution companies.
“It is clear that at the time the salary increase was approved, the company was already running a deficit. However, the Minister of Power directed that the 50 per cent salary increase be paid as agreed with the unions, thus the only way to be able to meet obligations was to drive revenue collections efficiency,” he said.
Achinaya added: “Government indebtedness is about 20 per cent of the total outstanding collections due to the DISCOs, so while it is true the debts need to be collected from government agencies; it is not a major factor in increasing collection efficiency as the targets would be met if the other 80 per cent was collected.
“Total indebtedness nationwide is about N110 billion out of which government (army, navy, etc) owes N20 billion. The majority of debtors are single-phase residential consumers but the target being asked for is not based on monetary but collection efficiency, that is, 100 per cent of energy supplied and invoiced for must be collected.”
Meanwhile, part of the items submitted for negotiation by government to the chief negotiator in the last rounds of meetings included a proposal for the closure of the NEPA/PHCN Superannuation Scheme to bring it in compliance with the PRA 2004.
According to a memorandum, which was submitted and defended by government’s representatives at the negotiation, the scheme which has been grossly underfunded and has not been in compliance with the provisions of PRA, has accumulated about N80.26 billion as accrued benefits to active PHCN workers but has yet to remit such to the workers.
The document, which was signed by the leader of government’s negotiating team, Dr. Timiebi Koripamo Agary, stated thus: “Following the promulgation of the Pension Reform Act 2004, the accrued benefits of staff of PHCN computed as at June 30, 2004 is N80.26 billion comprising of total accrued pensions of N53.47 billion and total accrued gratuity of N26.78 billion.
“The Pension Reform Act 2004 states that this accrued benefits be paid into each individual’s Retirement Savings Account (RSA). After which the monthly contributions of 15 per cent of each month’s total emolument be paid into the RSA. PHCN has not made any remission of both accrued and monthly contributions so far.”
Government in this light seeks a termination of the scheme and implementation of the PRA as well as transfer of accrued rights of staff as at June 30, 2004 to their RSA which they should open with any pension fund administrator of their choice.
Accordingly, the value of assets of the scheme as at September 30, 2010 stands at N3.31 billion.