NERC, W’Bank, Others May Meet over Power Sector Illiquidity

Chineme Okafor in Abuja
There are indications that key stakeholders in Nigeria’s electricity supply industry may meet within the week in Abuja to discuss some of the critical issues currently affecting the operations of the country’s electricity market, especially its growing financial illiquidity.

With a view to finding solution to the issues, THISDAY gathered from an industry source yesterday that agencies such as the Nigerian Electricity Regulatory Commission (NERC), the World Bank, Central Bank of Nigeria (CBN), Nigeria Bulk Electricity Trading Plc (NBET), as well as operators in the sector have agreed on the meeting which would be held at an undisclosed venue.

Top on the meeting’s agenda, the paper learnt, would be the deep financial troubles of the electricity market, the possible impacts of the upcoming electricity rates which the NERC is due to complete its review, and other operational challenges of the sector.
Already, the sector’s financial shortfalls have continued to grow. The status was in October 2016 stated to be around N809 billion.

Similarly, the NERC is expected to factor-in a number of fundamental economic indices like changes in foreign exchange and inflation rates, gas supply and generation capacity in its review of the electricity tariff. These would ordinarily reflect in the tariff.

The confidential meeting, a top industry source said, would talk about these and proffer solutions to them.
It was however, agreed to be kept confidential because of the sensitive discussions.

While refusing to disclose the actual day and time of the meeting to the paper, the source noted that media report of its proceedings was not approved, and that its final outcome may be made available to the media.
He however stated that it could be between Wednesday and Thursday this week.

“We know the market is in a very critical situation. We also recognised that it was not really regulatory mistakes that contributed to this challenges but more of government’s, and now want to find solutions to them.

“In our analysis for instance, we discovered that the regulatory mistakes which were committed by the last board of NERC and which contributed to the shortfalls had been taken care of by the commission.

“Through the last tariff, these regulatory mistakes had been corrected but now, we see a lot of government contributions to the industry’s problems. There are forex, inflation and volumetric issues. These we want to talk about at the meeting,” the source explained.

Speaking further on the tariff review which would expectedly launch a new electricity rate in January 2017, the source said the meeting would also look into it and the likely rate shock from it.

According to the source: “To mitigate such rate shock, the government can step in with either a subsidy or auctioning of the gas marginal fields that are closer to generation plants. There has to be a way to gradually decentralise gas supply to allow for improved generation.

“Besides, there is also the need to allocate risks appropriately. Risks should be allocated to people that can best manage it, you do not punish people for what is not within their control like gas pipeline breaks and low generation.”