Court Restrains NERC from Escrowing Discos’ Accounts

Ejiofor Alike

Two Federal High Courts sitting in Abuja have granted separate injunctions at the instance of eight electricity distribution companies, restraining the Nigerian Electricity Regulatory Commission (NERC) from implementing its directive for the Central Bank of Nigeria (CBN) to escrow the accounts of the distribution companies, who cannot meet their monthly payment obligations to the Nigeria Bulk Electricity Trading Plc (NBET).

NERC and other connected persons were also restrained from compelling the distribution companies from entering into Promissory Note arrangement with NBET, as well as from calling on the Letters of Credit (LC) placed by the Discos with NBET through certain commercial banks, pending the hearing and determination of the Motion on Notice.

The distribution companies had alleged that despite the cash flow problems they faced as a result of NERC’s bad management of the power sector, the regulatory agency had vide a directive with reference No. NERC/MC &R/16/098 of March 30, 2016, directed the apex bank to escrow the accounts of Discos who cannot meet their monthly payment obligations under the vesting contracts and who are yet to place their LC with NBET in accordance with the escrow directive.

The Discos had instituted two lawsuits at the Federal High Court (FHC) – suits No. FHC/ABJ/CS/387/2016 and FHC/ABJ/CS/386/2016 to seek redress for the lingering problems.

At a hearing before Justice Ademola J of the Federal High Court of the FCT, Abuja on June 14, the Discos got an injunction restraining NERC and connected persons from “(i) giving effect to the Escrow Directive and Guidelines; (ii) calling on the Letters of Credit placed by the Discos with NBET through certain commercial banks; and (iii) compelling the Discos to enter into any Promissory Note arrangement, pending the hearing and determination of the Motion on Notice.”

Also, in the second Suit No. FHC/ABJ/CS/386/2016 before Justice Abang J of the Federal High Court of the FCT, Abuja, the court ordered that NERC and NBET be put on notice.

Justice Abang also directed that NERC and NBET must refrain from taking any action capable of frustrating the hearing of the Discos’ motion on notice for interlocutory injunctions, until the hearing of the motion on notice on June 20, 2016.

While the suit before Justice Abang was instituted by Abuja Electricity Distribution Company Plc and four others, the suit before Justice Ademola was filed by the Enugu Electricity Distribution Company Plc and two others, which has been adjourned to June 28, 2016.

Two Senior Advocates of Nigeria (SANs), Prof. Konyin Ajayi and Mr. Oluseye Opasanya led Prosper Akubue for the applicants/plaintiffs in Justice Abang’s court.
The Discos have argued that the federal government and NERC have reneged on government’s statutory obligation to the power sector and electricity consumers.

According to them, the Electric Power Sector Reform Act (EPSRA) in Part VIII obligates the federal government, through NERC to provide funds to subsidise indigent electricity consumers, who cannot pay electricity bills.

“Such subsidy and other obligations of the federal government has not been satisfied, hence the difficulty in improving the power sector, as the Discos are unable to collect payments for electricity supplied, the price of which keeps rising, even though, there is no commensurate power generation to be distributed by the Discos,” the Discos argued.

The Discos also accused NERC of introducing unwholesome regulations and undue interference in the management of the business of the Discos in a manner that frustrates the efforts of the private investors.

According to the Discos, the electricity market has been badly managed by NERC, such that the Discos are not able to meet their obligations under the various industry contracts entered into with various counterparties to facilitate their activities in the power sector.