Tasks Before NERC’s New Chairman

0

The new chair of the board of commissioners of the Nigerian Electricity Regulatory Commission, Prof. James Momoh, has his job cut out for him already. Chineme Okafor writes that Momoh would have to quickly restore the confidence of stakeholders in Nigeria’s electricity industry and the autonomy of the regulator to honestly manage the industry’s challenges

After almost three years without a substantive head to drive its tasks of regulating Nigeria’s electricity market, NERC is reportedly sliding in its regulatory commitment to the market.
It is therefore, not surprising that the job before Prof. James Momoh, who was last week confirmed by the Senate as NERC’s new chairman, comes quite straightforward and really vital to the progress of the power market.

Of all the troubles of the electricity market today, the realities as shared by stakeholders are that it has lost so much confidence and unable to attract relevant interests, in addition to the NERC’s apparent failure in its regulatory commitment.
Thus, Momoh is expected to push through processes that could restore market confidence and put NERC back on the track as a fair and productive regulator that is independent of the whims of the ministry of power.

Protracted appointment process
When the tenure of Dr. Sam Amadi-led NERC ended in December 2015, it was expected that the federal government would be swift in either replacing or reappointing them considering the need to avoid an unnecessary regulatory vacuum.
But it never did until in late 2016 when it nominated commissioners and inaugurated them in February 2017 without a chairman.

While six of the nominated commissioners were screened and confirmed by the Senate, the then chairman-designate, Prof. Akintunde Akinwande, a US-based professor at the Massachusetts Institute of Technology (MIT), was not confirmed because he did not turn up for unknown reasons.
The government, however, inaugurated the six commissioners and asked the vice chairman, Mr. Sanusi Garba, to act as NERC’s chair until a replacement for Akinwande was found.

For over one year that NERC had no commissioners, its affairs were directed by an acting chairman, Dr. Anthony Akah, a general manager in the commission whose interim management of the regulator was dominated by enforcement of regulatory actions against recalcitrant operators in an effort to keep the market from going under.

Subsequently, the government found a replacement for Akinwande, in Prof. James Momoh, who was announced, screened and confirmed by the Senate exactly a year after the six commissioners took office, meaning that he would be resuming at the NERC a year behind his colleagues.

The new chair, Momoh
In announcing President Muhammadu Buhari’s nomination of Momoh as Akinwande’s replacement in April 2017, the Senior Special Assistant to the president on media and publicity, Mr. Garba Shehu, said in a statement then that: “President Buhari strongly believes that Prof. Momoh has the technical knowledge, capacity and integrity to lead the commission’s effort to bring about the much needed change in Nigeria’s power sector.”

The president, he stated thus urged the Senate to screen and confirm Momoh so he could resume work at the commission in earnest. The Senate then confirmed him last week after considering a report read by the Chairman of the Senate Committee on Power, Steel Development and Metallurgy, Senator Eyinnaya Abaribe (PDP, Abia South).
Momoh is reportedly a professor of electrical engineering and computer science, as well as the Director of Energy Services and Controls at Howard University in the US.

He is equally reported to be a life fellow of the Institute of Electrical and Electronics Engineers as well as a fellow of the Nigeria Society of Engineers (NSE). He also has, according to his curriculum vitae, amassed for himself over three decades of teaching and research experience in power system; smart grid; optimisation and power communications.
Momoh is reputed to be a 1987 recipient of the National Science Foundation-US White House Presidential Young Investigator Award.

He has a doctorate degree in electrical engineering from Howard University; master’s degrees in systems engineering from the University of Pennsylvania; and electrical engineering from Carnegie University. He also got his bachelor’s degree in electrical engineering in 1975 from Howard University, and is a widely published scholar with several professional leadership positions held in the academia.

Based on Momoh’s curriculum vitae, industry stakeholders who shared their thoughts with THISDAY on and off the records, expressed hopes that he would take up the challenges of restoring NERC’s independence which they alleged it had handed over to the power ministry to the detriment of the market.

To buttress their claims, they pointed to the repeated stepping down of the tariff methodology of the market by the commission on alleged political influence from the government, thus creating backlogs of financial shortfalls for the sector, as well as the reported inability of the regulator to step up regulatory actions against operators for repeated breach of existing Service Level Agreements (SLAs) in the industry.
Actions expected from Momoh

From their aggregated thoughts, these experts expect that Momoh would quickly restore the confidence of the market by taking quick actions on the unimplemented tariff that have piled up and created a lot of financial instability in the sector.

They posited that in taking up and implementing key issues like the tariff, the confidence of operators would return to the market, as well as the regulatory independence of the NERC. According to them, the inability of the NERC to implement and enforce its tariff reviews since 2015 has done more damage to the market and its independence, hence the need to start from implementation of tariff reviews even though it is appears difficult.

“For market confidence to be restored there are a few things he (Momoh) can do. But, most importantly, invoices presented at the wholesale and retail ends of the market must be settled in full,” said a market participants who preferred to stay anonymous.

“My thoughts are that if he can get the retail market fully funded through a mix of tariff increases; subsidies paid by the World Bank through Power Sector Recovery Programme and the federal government, then the money will flow upward and ensure the wholesale market is fully funded as well encourage Discos to invest in metering and asset renewal,” he said.
Continuing, the operator explained: “The biggest way they can show they are an independent regulator is to implement the tariff reviews immediately, which is tough, but he can provide forbearance for the government by insisting that they pay the subsidy of the retail consumers such that prices don’t change in reality.”

Clarifying how such a system would work, the operator noted: “So, the NERC will go ahead and officially increase tariffs, however the Discos will not change their prices. Rather at the end of the month, they will present invoices for the difference between the NERC approved tariff and the unchanged ‘market’ tariff to the government for prompt payment”.
“If the FGN pays this subsidy promptly (together with what the Discos collect from both pre-paid and post-paid customers), the Discos should be able to settle their wholesale market bills from the Gencos,” he added.

He added that: “This arrangement satisfies a few things: It allows confidence to be fully restored to the wholesale market as bills will be settled 100per cent. Also the two CBN facilities can be stopped. It provides an incentive for Discos to invest in meters and asset renewal. It also encourages them to increase collections.

“It formalises the subsidy that is paid to the electricity sector. The government can budget for it properly and it increases transparency. It equally allows NERC to be fully independent and to make regulations according to its enabling statutes. If they do not agree with any of Fashola’s requests, then they can simply tell him no,” he said.
“The best thing about this arrangement is that it forces the FGN to go and look for the money for subsidy for the electricity sector. No problem if they do not want retail prices to increase. But they should go and look for the money to ensure that prices stay constant,” he explained.

“If the FGN refuses to pay the subsidy, the Discos should be free to raise their tariffs up to the limit set by NERC. The onus then falls on the FGN to ensure that subsidies are paid promptly. If Discos end up raising their prices because Fashola refuses to pay subsidies, then Fashola has no one else to blame but himself when tariffs go up,” he explained further.

Similarly, the President of the Nigerian Association for Energy Economics (NAEE), Prof. Wumi Iledare, offered his views on what he thinks Momoh could do to revive the confidence of the market and NERC’s autonomy.
Iledare said: “My advice to him is to avoid regulatory capture, the moment you depend on the people you are regulating to fund your activities, and it limits you.”

He further stated on the need to get the market working again with market-based instruments: “I will like him to follow the methods he know very well on how to determine tariff. Most of the time, tariff is based on investment to supply, and in there is what we call normal rates of return. I will like to advise that he should try to engage local professionals that will tag along with him if he will bring in international professionals because the local guys will stay back when the international guys leave.

“I think he will do very well having lived in the US for a long, but he must avoid landmines and be independent of the people he is regulating to survive and train his personnel.”

Also in his perspective, a member of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), and one-time president of NAEE, Prof. Adeola Adenikinju, said he expected Momoh to be firm in his management of the NERC.
Adeola said: “It is good we finally have a substantive chairman for the NERC to guide the electricity because for a very long time there had been so much uncertainty around the industry. Nigerians had a lot of expectations from the sector’s deregulation but after a while many people became disillusioned and even asked that it be reversed.

“Momoh is well qualified and experienced and I hope he comes with a very strong vision of where the sector will be and working with his colleagues will address the challenges it has. The fact is that there are obligations on government and investors’ side and he should look at them and see to it. The issue of pricing has been there, there is a need to look at tariff because pricing is important and it signals the real cost and provide the investors reasons to make new investments and cover their costs.”