Sam Amadi is the chairman, Nigerian
Electricity Regulatory Commission
(NERC). In this interview with PEMBI
DAVID-STEPHEN and PAUL CHIAMA,
he speaks of the recent successes made
in the power reform initiative, the challenges in the power sector and what
Nigerians should expect from the sector,
among other issues. It has been observed that power
supply seems to have improved lately,
why is there “light” now? Well, we are happy that we are seeing
increase in capacity even though we are
not satisfied with what we have. We need
to do a lot more than we have done and
we hope to do more. But essentially, we
have light because, one; it is a combination of several activities we have
taken especially towards the end of last
year. We had meetings with Nigerian
National Petroleum Corporation (NNPC).
We thought that we have done everything
we could do in terms of general regulatory framework but what was
missing was project management; closer
effective look at the detailing of the
electricity market. So, we started the Chief Executive
Officers (CEOs)’ meeting, a regular
meeting of all the CEOs in the electricity
market. It involves the CEOs of every
electricity generation, distribution and
transmission companies, including government institutes like the Bureau of
Public Enterprises, bulk traders, special
taskforce on power and NERC. We meet
every second Wednesday of the month.
The meeting, which is our innovation, is
an idea to move away from the bill picture and get down to problem solved. At the meeting every month, we flag all
the issues that people in the field have
contributed. We flag all the issues that
the CEOs of these companies have
raised. So, at each of those meetings,
we sit down, pay closer attention to these problems and provide solutions to
them. Therefore, what you are seeing is partly
as a result of the success of those
meetings because initially, we were more
concerned with regulations. But now,
since last year, we are now saying, ‘let’s
now sit back and look at how these regulations are working’. So, we discovered, for example, that gas
is a problem. So, NERC started the idea
of the Central Bank of Nigeria (CBN)
intervention fund. It was an idea, and the
idea was simple; we felt that you need to
put liquidity into the sector. If you do not have the components of gas supply,
then, they won’t send to the market;
rather, they will send to fertilizer and
other industries. We wanted to pay off
debt of over $14bn owed to gas
suppliers. So, that is the first measure. The second measure is that we now
focus on contracts. In fact, in the past,
there were no contracts. So, we
established a process by which you have
contracts. We now moved to the
electricity market which is a contract- based market. So, what all these have done is that they
have created confidence. They have
been able to help us to tie some loose
ends in the power value-chain. The power
system is inter-related; if you don’t take
care of the gas, it will affect generation; if generation is not up, then, distribution will
have problem and it goes on in
transmission until it gets down to the
household. So, we have built different parts; we are
now coupling them and in coupling them,
we discovered that they have problems.
We are now going back to those
problems and dealing with them one after
the other. So, that is what helped us. The second thing that helped us is that
the change of government has brought
greater urgency. I do believe before
election, the NNPC told us and gave us
guarantee that by July, things would
work. By then, we were pushing them and the GED came here and we had
meeting with all the stakeholders. We
laid out a plan for them to recover, repair
their gas pipelines and get more gas. So,
they gave us assurance that by July,
things would work but in the past, we have had plans that slipped. But with the
new government, with the change now,
there is high degree of discipline and
urgency to deliver. The third reason will be that essentially,
the very direction of the reform right from
President Obasanjo to President
Jonathan who really worked very hard for
the electricity reform. The Transmission Company of Nigeria
(TCN) was divided into two different
companies at the end of last
administration’s tenure but you were
reported to have kicked against it.
Why? No, no, no! We didn’t kick against it.
NERC, as a regulator, the very first day
we came to this job, we were convinced
of two things – one; if there must be a
credible regulator, it has to be an honest,
incorruptible regulator and today, for instance, the staff here and the
commissioners are probably the most
honest, accountable and transparent in
this country. For the Independent System Operator
(ISO), first, there will be public hearing
and consultation. The regulator will now
provide the terms by which it will be done
through the board of the TCN. That board
will be the board that will unbundle it in line with the regulator’s direction. The Independent Service Operators all
over the world are usually owned by the
industry, not the government. It exists
like a trustee between the consumers
and the Discos (Distribution companies)
to guarantee non-discriminatory and impartial distribution of power. Our job is to survive the electricity
market according to the Act. There is
only one licensed company called the
TCN and that company has three
business units – system operation,
market operation and transmission service provider. The law says that at the
appropriate time, NERC will lay condition
for those three business units to become
two companies which mean that there
will be no TCN any more. So, you can’t
have an ISO and have a TCN. We have an ISO and it is registered under the law.
We are proposing that it should be a non-
profit organisation. That means it is a
company owned by all the operators.
Alternatively, one can say it is a publicly
owned company. However, government said it must be a different company
registered under the law. So, NERC now says when government
gives us instruction, in the meantime, the
process outlined in the Act has to
continue. Based on our letter, the
minister, before he finally departed, said,
“revert” and that there is no ISO. He said it is now system operator (SO) and
market operator (MO) but the SO is
already a business unit of TCN. The problem with TCN now is that there
are confusions as to which is which and
NERC has had a meeting to streamline
and set up a committee to say ‘you have
to run things here like a regulated
company under the best code of conduct and corporate governance’. You cannot
have multiple structures with five
different people answering managing
directors (MDs), say, MD of SO, MD of
Manitoba, from Nigeria. That is
confusion. So, we stepped in. We said we were
trying to solve this problem but the
bottom-line is that as part of this reform,
the government itself must be a
disciplined player. The rules should apply
and when the rules are no longer good or when the government wants to change
the rules, it should change the rules, not
to act against the rules. We have seen in
the past, some degrees of interference in
the management of TCN and I have
always stood up against it. I have always made it clear. I believe in an independent
regulator. People think I am being
confrontational or radical but the point is
simple. The government created the
rules; the government set up the
regulator; the government decided that they are going to do it in a rule-based
market. Therefore, the government
should try its best to follow the rules in
running even government-owned
companies as long as those companies
are part of the regulated electricity market. That is NERC’s position. As a matter of fact, if the government
tells us today that they want TCN to be
done in XYZ way, our job is to point out
the rules, the process and change them
to suit what the government wants. But
so far, there are no policies of government, past or present, conflicting
with or contradicting or cancelling the
policies already in the Act and in NERC’s
rules. So, it is our job to point out those
contradictions (if they exist). We made it
clear, no ISO has been created by the
government and if they want to create it,
they will go to Corporate Affairs
Commission (CAC), Ministry of Finance, PPA, who have been customary
shareholders of these companies. Then,
they will create a new company. Two; nobody has spoken to us to say,
‘today, we want you to start a process of
creating an independent system
operator’. It was our own process in the
market and that process is still running
and until it concludes, we don’t have an independent system operator. There is the general feeling by people
that they are being short-changed over
service (fixed) charges and estimated
billings. What are you doing about
pre-paid metres which seem to be
scarce? I spoke last Monday with the Nigerian
Bar Association (NBA) and I made it
clear. By the way, NERC’s regulation
says that every customer should have a
metre and that the only condition
precedent to connecting a consumer to the grid is via a metre. But this is the
problem. For the last 30 or 40 years, we
have not done anything significant about
metering until between 2010 and 2012.
We set up a committee to ascertain the
extent of metering in some countries. That committee presented a report which
says that we have about 40 (or slightly
more) per cent metered customers in
Nigeria. So, if you have an electricity
market where about 50 per cent of the
customers are not metered, it is a huge legacy problem. So, you don’t expect that the new owners
would have metered everybody in short
duration. So, what we have done is that
we introduced the idea of customer-
credited metre (because there is also a
cash flow for financing problems). You can see how rich or poor the new owners
are. They bought their assets with
borrowed money; they are over-
leveraged; they don’t have easy access
to capital. It is not really reasonable to
expect that they would have metered everybody. So, we came up with a very
brilliant idea which South African
electricity regulator is trying to borrow by
introducing the customer-credited metre.
That means customers can now pay and
reimburse. Why did we do that? It is because we want to find a fast track
means of getting financing. All over the world, there is a concept
called crowd-sourcing of financing. So,
instead of crowd-sourcing, we source for
the crowd. Instead of waiting for Abuja
Discos to borrow money and metre all of
us, we now say why don’t you lend me the money and I give you the meter and I
pay you by discounting your fixed charge
over time, plus interest? That is a very
innovative idea. So, today, we have seen
some movements in metering customers
but it is still insignificant considering the amount of the gap. The metering gap is
huge and therefore, the little effort looks
like a drop of water in the desert. So,
there is still the need for more. What we
are doing today is that we are proposing
a new measure to try to locate the problem: Why is it that the Discos are
not doing enough? Perhaps, they are making more money
through estimation. How do we
discourage that? We now came up with
‘capping’ – a proposal to reduce charges
on unmetered customers. It is a
restriction to the effect that any person who doesn’t use metre should not pay
more than a certain amount of money. Secondly, metering is just like tariff. We
want to make sure that the Discos have
sufficient revenue. So, we expect that in
a couple of months, there will be much
faster and aggressive improvement in
metering but there is no false promise here that all customers will be metered. On the issue of fix charge or service
charge, what we have said to the Senate
is that fixed charge is not illegal, it is not
unusual. It is only paid for in Nigeria
because we had large hours of low
electricity supply in the past. But if you watch, since we moved above 4,000 or
about 4,500 megawatts, you discover we
have few hours of low electricity supply.
What we are doing, therefore, is to
ensure that we pay fixed charges
proportionate to what we are consuming.