NERC Moves to Protect Power Market, Rejects Force Majeure by Discos

•  Extends SPDC’s operative licence for Afam plant by 10 years

Chineme Okafor in Abuja

The Nigerian Electricity Regulatory Commission (NERC) tuesday disclosed that it had initiated immediate regulatory measures to protect Nigeria’s electricity market from potential collapse on the back of the force majeure recently declared by 10 electricity distribution companies (Discos).

NERC stated in Abuja that 10 Discos comprising Abuja, Kano, Kaduna, Enugu, Port Harcourt, Jos, Benin, Ikeja, Ibadan and Eko, had conveyed their notice of force majeure to the Bureau of Public Enterprises (BPE) on the grounds of changes in the laws of the power market.

It explained that only Yola Disco, currently under the control of the federal government since its initial investor declared a force majeure and handed it back in 2015, was left out of the recent actions by the Discos. It added that it would not accept the declaration by the 10 Discos.

Speaking on the side-lines of a consultative workshop on benchmarking a national content for the electricity industry, NERC’s Commissioner for Licensing, Legal and Compliance, Mr. Dafe Akpeneye, said the commission considered the declaration to be premature and would not allow it erode the market’s confidence which he noted was being rebuilt.

Akpeneye, explained that the basis for the force majeure declared by the Discos was unfounded and done in bad faith, noting that they participated in all the public consultations for the eligible customers’ regulation and did not kick against its final content.

“Under no circumstances would we sit down and allow an industry that is critical and affects all Nigerians to delve into uncertainty. The legal issues as they are now are mainly between the BPE and investors in the Discos but the NERC is watching very closely and would not allow the market to go under because no matter what happened, the average Nigerian is already dissatisfied and we cannot allow the industry to lose confidence,” said Akpeneye.

He further stated: “The force majeure declaration arose on the ground of change of law and political issues on the new eligible customers’ regulation that was released a couple of weeks ago. The Discos believe that that is going to result in a significant carve out of a lot of their customers and have declared force majeure on that basis, but we need to bear in mind that there was a consultative process and the Discos participated in it.

“The regulations were issued to ensure that we optimise our generation capacity by ensuring that what the Gencos generate can go to customers through direct contract with the Gencos, and thereby bypassing the Discos, but this is not a total bypass because if the Discos’ assets would be used, they would be paid for as well as the assets of the TCN.

“We do not think that this is the appropriate step to be taken at this point in time when we are seeking to build confidence and address the issues in the industry, we think it is rather premature and we don’t see this as the way to go.

“We align ourselves with the response of the BPE which rejected the notification. We think that the appropriate issues, if there is any, should be put on the table to be addressed,” Akpeneye added.

Asked what the regulator would do if the Discos refuse to back down, Akpeneye stated: “This is a matter that is evolving and we need to see how it goes. The disputes are between the investors of the Discos and the BPE. The Discos as companies are our licensees, so, we need to look at how the decisions of their investors would impact on the operations of the licensees and we would ensure that nothing happens to impact on the present supply to Nigerians.”

The Discos, he continued, “participated in the making of the regulations, and the concerns they raised were addressed, and at that point there were no objections to the regulation.

“I can only address the fact, and from the fact, it shows that what they told us was not what we have seen on ground. They have issued the force majeure and said there is a change of law, but we do not see that change because it is the same law we used for privatisation that is applied.”

He added that: “There is a legal process to this, if somebody says he cannot do a business and there is a performance agreement with dispute resolution clauses, we are a country that is governed by the rule of law and we will abide by it.”

Meanwhile, the NERC has extended the operational licence held by Shell Petroleum Production Company (SPDC) on the 650MW Afam power plant by another 10 years.

Akpeneye, who presented the extended licence to officials of SPDC, said the commission would work with the company to address the challenges of the industry as it concerns power generation, but would also enforce the terms approved for the use of the licence.