Power Sector: One Year with a Makeshift Regulator

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Owing to the federal government’s seeming lack of enthusiasm, Nigeria’s electricity market would have by December 20 operated for a year without a board to run the affairs of the Nigerian Electricity Regulatory Commission as required by law. Chineme Okafor writes

On December 20, 2016, it would have been one year since the term of the Sam Amadi-led board of commissioners for the Nigerian Electricity Regulatory Commission (NERC) ended. The federal government is yet to appoint to a replacement for them.

Also, that date will make it exactly one year that Nigeria’s privatised electricity market would have operated without a properly constituted industry regulator, leaving the sector with quite some regulatory uncertainties.
In deference to Section 34 of the Electric Power Sector Reform Act 2005 (EPSRA), which specifically deals with the appointment of a seven-man board of commissioners for the NERC as well as Section 35 (5) of the same Act, that stated the period which the appointment should be made, the government has by its negligence of the fundamentals of the Act, failed to abide by the law buttressing the power reforms it inherited.
As stated in Section 35 (5) of the EPSRA, “all appointments or reappointments of commissioners shall be made before expiry of their term of office.” The Act recognised the need to maintain stability in the NERC and power sector regulation, hence its insertion of such clause in the EPSRA.

Section 39 stipulated that, “on the death of, or vacation of office by, a Commissioner, the President shall nominate a candidate to fill that vacancy, and submit that nomination to the Senate, within one month, in accordance with section 34,” at least to affirm the stance of the law on vacancy at the power Regulator.

One year on, no regulatory commissioners

Spurred by the poor electricity situation in the country, as well as changes in the politics, technology and institutions of electricity business, Nigeria opted to undertake a reform in her electricity market, backing it up with regulations that should sustain the market’s growth.

As stated in the EPSRA, such regulator as found in the NERC must amongst other statutory tasks: create, promote, and preserve an efficient industry and market structures; ensure optimal utilisation of resources for the provision of electricity services; maximise access to electricity services by promoting and facilitating consumer connections to distribution systems in both rural and urban areas; ensure that an adequate supply of electricity is available to consumers; ensure that the prices charged by licensees are fair to consumers and are sufficient to allow the licensees to finance their activities and allow for reasonable earnings for efficient operation; as well as ensure the safety, security, reliability, and quality of service in the production and delivery of electricity to Nigerian consumers.

The regulator must also: ensure that its regulations are fair and balanced for licensees, consumers, investors, and other stakeholders; promote competition and private sector participation when and where feasible in the sector; and monitor the operation of the electricity market.

Within this remits, the jobs of the commissioners are clearly spelt out, and even if they do not exist as it is the case now, the regulator cannot be said to be fully convened.

There are clear evidence to buttress the impacts of the absence of a fully constituted board of commissioners for the NERC on the sector, one of such is the seeming reluctance of the market and its participants to enter into a Transition Electricity Market (TEM), one which emphasises on contracts and obligation.

The refusal of the market to enter TEM has contributed immensely to the sector’s very bad financial status as seen in the about N809 billion reported financial shortfall of the sector.
In adopting the electricity privatisation and regulatory reform, Nigeria saw in it the solution to the problem of poor performance by the power sector and its defunct monopolistic manager, the Power Holding Company of Nigeria (PHCN).

It wanted to achieve improved services and perhaps competitive price regime, one that will stimulate allocative and productive efficiency through competition as against the natural monopoly hitherto enjoyed by the PHCN.
This, however were expected to be buoyed by a stable regulatory environment, one that rewards efficiency and punishes inefficiency, yet the situation in Nigeria’s power sector cannot be said to have benefitted from this, largely on account of regulatory uncertainty with the federal government guilty of repeated intrusion including its refusal to appoint commissioners to independently regulate the electricity market.

However, attempts by the government to appoint commissioners for the regulator has as at the last count suffered setbacks.

Months after Amadi and his other commissioners left office with a reported prior notice to the government to appoint their replacements, President Muhammadu Buhari then nominated Prof. Akintunde Akinwande and six others to the post, but Akinwande reportedly declined the offer, putting the recruitment process in jeopardy.
Several accounts stated that Akinwande failed to honour the various protocol requests required in the recruitment process. He also failed to honour a mandatory screening by the Senate before he would be confirmed chairman of the commission.
Again, when the Senate screening was rescheduled in deference to the government’s excuse for him, he reportedly failed to turn up last week.

Making it the second time in one month that he would turn down the screening exercise, the development further raised questions on the government’s commitment to an independent and transparent Regulator in the NERC.
Despite initial claims by the government that Akinwande was simply trying to formalise his resignation from the Massachusetts Institute of Technology (MIT) where he works before turning up for the screening, he never made it to the second screening while other nominees did.

In fact, reports stated that Akinwande had informally told the committee that he was not available for the NERC job, hence his repeated absence at the screening.

Now, even with the screening of other nominees, industry experts told THISDAY that the non-screening of a chairman designate by the Senate means that the process of recruiting new commissioners for the NERC would be inconclusive for now until such a time the government finds a solution to it, while regulation of the sector remains incomprehensive, though the acting chair of NERC, Dr. Anthony Akah stated otherwise.