Akah: NERC’s Regulatory Competence Still Intact

Acting head of the Nigerian Electricity Regulatory Commission, Dr. Anthony Akah spoke to Chineme Okafor on pertinent issues in Nigeria’s electricity sector including the constitution of a new board for the regulatory agency. Excerpts:

NERC has no board at the moment, what is the regulatory implication of this?

The Act was mindful that a situation could arise where the Commission may not have Commissioners and made provisions to ameliorate any such leadership vacuum occurring there from.

Section 44 subsection 1 of the Electric Power Sector Reform Act provides that: “No decision or act of the Commission or act done under the direction of the Commission shall be invalid on the ground that: (a) there existed a vacancy or vacancies among commissioners; or (b) there existed some defect in the constitution of the Commission at the time the decision was taken or act done or authorised.”

Having said that, Sections 34 to 43 of the Act copiously refer to the appointment of the Chairman, Vice-Chairman and Commissioners and the duties, functions and expectations required of them. However, section 60 of the Act refers to another set of persons and their responsibilities in the Commission.

Sub section 1 holds that: “The Commission shall employ such persons as it considers expedient for the better exercise of the functions of the Commission.” Sub section 3 provides that: “Subject to subsection (5) of this section, the Commission may assign to its staff such functions of the Commission as the Commission deems fit.”
Again, subsection (4) states that: “Any assignment of functions under subsection (3) of this section may be made either generally or specially and subject to such reservations, restrictions and exceptions as the Commission may determine, and maybe revoked by the Commission at any time.

Furthermore subsection (5) provides the extent of the functions that can be delegated to the staff. According to this subsection, “Anything authorised or required by or under this Act to be done by the Commission, other than the making of final orders, maybe done by any member of the Commission staff who has been authorised either generally or specially by the Commission to do so.”

So, what then is the making of “final orders”?

As the Act provides, this is the exclusive preserve of the Commission’s Commissioners? The answer is alluded to in Section 50 (2) which states that: “The Commission may, reconsider, vary, or rescind its decisions before issuing a final decision, in accordance with such procedures as the Commission may establish; provided that such review or reconsideration shall be completed within sixty days of the date it is required.”

But there are other provisions in Sections 46 (5) or 49 (1). Section 46 (5) of the EPSRA 2005 empowers the Commission the right to ‘make interim orders pending the final disposition of a matter before it.’ It is therefore clear that pending the reconstitution of the Board of Commissioners by Mr. President, the Commission pursuant to the provisions of EPSRA 2005 is amply empowered to discharge its responsibilities but we look forward to having a reconstituted board.

So, this has no negative impacts on your regulation of the sector?
No, absolutely not. We have remained resolute in our task of providing fit-for-purpose regulation of Nigeria’s electricity industry. We don’t have a board yet but NERC’s regulatory competence is still intact.

You’ve consistently talked about Discos upping their metering plans, your talks however don’t seem to have pushed the Discos enough, are you worried about this, are you thinking about new measures to check this?

You know metering is critical to the survival of the electricity industry as it represents the parameter for measuring the return on all the investments sunk into generation, transmission and supply of electricity to the final consumer.

This means that for revenue protection to be guaranteed all customers should be effectively metered. On the side of the customer also, the meter ensures fairness in billing and gives confidence to the customer that he is not being overbilled or exploited. In this regards therefore metering is very important in the relationship between the operator (Distribution Company) and the customer.

NERC has put in place a number of measures to enhance meter deployment to all categories of customers in the NESI. The MYTO 2015 has made adequate provisions in the capital expenditure to assist the Discos to invest massively into metering in line with their performance agreement and even to surpass the levels agreed with the Bureau of Public Enterprises (BPE).

We also introduced a novel scheme for accelerated metering known as the Credited Advance Payment for Metering Implementation through which willing customers can advance money to the Discos and get metered within 45 days of payment. The money advanced by the customer will subsequently be refunded in the form of monthly electricity units with 12 per cent interest on the amount paid.

Customers without electricity meters reserve the right to reject paying any estimated electricity bill they believe is irrational and pay the last bill they accepted, while subjecting the disputed one through the Commission’s customer complaint redress mechanism for determination. We are also opening up more NERC Forum offices for electricity complaints at appellate level in all the zones of the federation.

NERC has a monitoring team that is evaluating the submissions of Discos on their metering performance levels and also various complaints received from electricity customers on metering and alleged issuance of crazy or unjustified estimated billings for unmetered customers.
We assure Nigerians that the Commission will take a decisive action on any violation of our regulation on metering and billing soon. We appeal for patience and cooperation.

But consumers are lately subjected to poor supplies; have you any protective measures against this anomaly?

The Commission has put in place various customer protection regulations to ensure that the customer is adequately protected against the vagaries of exploitation and overbilling in times of acute shortage of supply as being experienced presently.
Notably, Discos are being encouraged and incentivised to accelerate their customer metering to ensure objective billing of customers in their network. The Commission recently removed fixed charges that used to be part of the bills issued to customers due to clamours that Discos were relying on such receivables for revenue and not making efforts to provide the needed services.
The removal of the fixed charges now compels the service providers to ensure service delivery before they can earn revenue and thus the customer is protected from paying for service not rendered.

We are also monitoring the compliance to our ‘Regulation on Estimated Billing Methodology’ to forestall arbitrary billing of customers who are unmetered or whose meters are faulty.
The methodology strives to protect customers from being overbilled by providing a formula for estimating their consumption nearest to the same class of metered customers within the locality. In computing their average consumption the technical losses associated with their feeder are not added to their bills and this serves as an incentive for the Distribution Companies to expedite their metering.

The CBN recently disbursed N55 billion to power operators, there are however diverse opinions about such additional bailouts for the operators, has the Commission a view on this?

Well, this is a good government intervention through the CBN to help address the financial liquidity issues in the NESI. Mind you, it is not free money but loans predicated on friendlier terms and interest to stabilise the NESI, clear backlog debts and stimulate urgent investment in critical areas aimed at improved quality of power.
Equally, there are talks about a regulatory framework for renewables, how far have you gone with that piece of framework?

Now, NERC has been working on appropriate regulatory mechanism to help implement the draft renewable energy power policy; this will help to cushion the tariff shock on the electricity consumer. Based on the policy, the Commission has initiated regulations for promoting renewable energy penetration namely; net metering, feed-in-tariff and competitive procurement for different size ranges.
On net metering, this is expected to unleash collective capital of individuals to contribute to available power during daytime for peak load shading. The implementation of this regulatory mechanism awaits the upgrades in the distribution networks and improvement in metering.

And about feed-in-tariff, it is a special concessionary tariff to incentivise electricity producers by offering more favorable pricing for electricity supplied to the grid from renewable energy sources. The feed-in-tariff for four priority resources namely; solar, biomass, wind and small hydro power of different capacity limits has already been issued by the Commission.

However, feed-in tariff applies to smaller plant capacity of up to 10MW which could easily be integrated into the local distribution network. Plants with capacities above 10MW (and 30MW for small hydro plants) must be subject of competitive procurement.
Cognizant of the transmission limitation especially as it relates to intermittent supply from renewable energy sources as well as the possible impact on tariff, the Commission has pegged the total contribution to transmission grid from all the renewable energy sources under the feed-in-tariff programme to 500MW up to 2018.

This is in line with S.67(3) of the EPSR Act 2005 on competitive procurement because this is the most cost efficient mechanism for increasing renewable energy penetration as has been demonstrated by South Africa which was able to procure 4000MW of renewable energy in three bidding rounds with bid prices rapidly decreasing in successive rounds.

Has the NERC thought about options to minimise frequent attacks on electricity installations in the country?

In line with the government’s policy thrust on the citing of power generation plants close to energy sources to reduce their vulnerability to vandalism and militant’s attacks, NERC has developed a framework, the ‘Bulk Procurement Regulation’ which encourages investors to cite their power plant close to the source of fuel.

The benchmark electricity tariff in the NERC’s electricity tariff model (MYTO) are derived based on certain indices such as proximity of power plants to sources of energy and thus only prudently located power plants can make money under the Commission’s framework.
Furthermore, the Commission developed power plants citing guideline which is in line with the initiative of the minister of power to develop investors guide. This is a very good initiative that would change the landscape of the power sector for a more efficient, stable and reliable power network.

Would you talk about NERC’s recent partnerships with the ECN and SON?

The Commission’s partnership with the Standard Organisation of Nigeria (SON), Energy Commission of Nigeria (ECN), Rural Electrification Agency (REA), National Orientation Agency (NOA) and NESRA is aimed at building an inter-agency energy efficiency implementation committee that would harmonise the various institutions’ programs on optimising energy usage, so that the country can have a more robust program using demand side management.

At NERC, we have done a lot, including developing an energy efficiency framework, partnership with SON on a proposed energy efficiency rating labelling for all electrical appliances and equipment manufactured or imported into the country so that consumers can make informed choices and get value for money.

Above all, we plan to get the support of other government institutions to ban the importation and manufacturing of such high energy consuming electrical appliances and equipment. Empirical evidence has shown that a well-articulated and implemented energy efficiency program do reduce electricity bill by at least 30 per cent.
This translates to an increase in electricity access by almost the same rate. It is a waste of money and less effective if each government agency continues to embark on demand side management on its own.

Are there other deliverables that NERC is aiming to take away from these partnerships?
In line with our mandate as enshrined in the EPSRA 2005 and having regards to the need to optimise the limited financial resources, we decided to embark on this plan of getting all other government institutions with similar responsibilities on driving energy efficiency to pull our resources together for the overall interest of the electricity consumers in Nigeria. A similar exercise was done in Ghana with significant rate of success.

Nigeria was recently upgraded by the Energy Regulators Regional Association (ERRA) to a full membership in Poland, what’s in this for it?

The association’s main objective is to increase exchange of information and experience among its members and to expand access to energy regulatory experience around the world. It is also an avenue to attract foreign investors into the Nigerian power sector.
Other countries that were elected as members of the governing council, Presidium alongside with myself representing Nigeria include Turkey, Latvia, Estonia, Oman, Romania and Hungary.

Nigeria’s membership of ERRA has been beneficial in terms of exchange of experience with other regulatory agencies and trainings, internship and knowledge sharing among member states.
The body has on a number of occasions conducted trainings and seminars within and outside the country for staff of the Commission in areas of managing emerging privatised energy sector.