Discos Insist FG Expropriating Power Distribution Assets in Breach of Extant Laws

•Decry ‘thuggish’ arrest of BEDC CEO

•Announce record N777bn Q1 revenues

•Say 129,352 transformers installed in first three months of 2022

•Benin Disco reacts to AGF’s opinion on expiration of Federal High Court orders

Emmanuel Addeh in Abuja and Peter Uzoho in Lagos

The Association of Nigerian Electricity Distributors (ANED) has knocked the federal government over alleged illegal expropriation of five distribution companies (Discos), saying the action was worsening the failure of the power sector.

ANED added that with the federal government’s 40 per cent share of Discos’ assets through the Bureau of Public Enterprise (BPE), it was complicit in the sector’s limited performance, warning that any attempt to resell the expropriated Discos would be nothing more than fantasy and an exercise in futility.

In a statement issued yesterday by its Director of Research and Advocacy, Mr. Sunday Oduntan, entitled, “Expropriation or Disregard for the Rule of Law is Not the Answer to NESI’s Challenges,” the Discos’ body noted regrettably that recent events happening in the sector had continued to undermine an already fragile and moribund Nigerian Electricity Supply Industry (NESI).

The Director General of BPE, Mr. Alex Okoh, had announced a few days ago that the government had successfully concluded the takeover of struggling Discos, including Kaduna, Kano, Ibadan and Port Harcourt Discos, adding that the challenge in the takeover of Benin Disco was being addressed.

THISDAY had reported in July that the federal government had announced the restructuring and takeover of five Discos across the country by some banks following their inability to meet up with the repayment of their debt obligations.

However, in the statement obtained by THISDAY, yesterday, Oduntan stated that a long history of policy and regulatory inconsistency, which were significant contributory factors to the poor performance of sectoral operators was being worsened by a resort to violations of the rule of law through the expropriation of Discos outside the framework of the agreements reached under the privatisation of the assets.

He said the more recent example of such government’s illegal action was the, “thuggish arrest or abduction of the Chief Executive Officer of the Benin Electricity Distribution Company (BEDC) by purportedly rogue elements of the law enforcement apparatus, in enforcement of this expropriation, on Monday, August 15th, 2022.” 

He added that the most recent related issue was a tussle between the federal government and BEDC on whether the restraining or Ex Parte order issued by a Federal High Court against the government on the expropriation, in favour of BEDC had expired.

Oduntan maintained that a continued absence of the respect for the rule of law and lack of policy and regulatory consistency cannot be what was envisioned under the National Electricity Power Policy (NEPP) 2001, which was the foundation of the Electric Power Sector Reform Act, 2005 (EPSRA), the statutory basis for the privatization.

The NEPP, according to him, envisioned an enabling environment that would encourage the mammoth private sector investment necessary to reverse historical government underinvestment in NESI, coupled with the injection of private sector ingenuity and expertise. 

He lamented that the nine years since privatisation had largely been deficient of the enabling environment stated in the NEPP, pointing out that that had resulting in the limited performance of the Discos and the larger NESI.  

“Disco performance cannot be divorced from the presence of an enabling environment or, particularly, a partnership with the federal government. Indeed, the shining moments in the evolution of the privatisation have come out of collaboration between the DisCos and the agencies of government,” Oduntan said.

He noted that the Central Bank of Nigeria’s (CBN) loan initiative to the Discos in collaboration with the Ministry of Finance, BPE, the Nigerian Electricity Regulatory Commission (NERC) and the Ministry of Power established a successful template for addressing the thorny and difficult issues of the Discos’ lack of access to capital and addressing the metering gap.

Additionally, Oduntan maintained that NERC, in tandem with CBN also worked with the Discos to address and reverse some of the historical regulatory challenges that had adversely impacted Disco performance, describing the move as a commendable partnership by all the parties.

He warned that the expropriation or forcible removal of investors’ interest or persons from the Discos would not address the need to resolve the key fundamental deficiencies of the sub-sector. 

Oduntan listed the deficiencies as, “a misalignment or misallocation of risk (government-owned risk of gas pipeline vandalisation, limited gas pipeline network and commercial framework, limited or constrained government-owned transmission network, government policy/regulatory inconsistencies have all been wrongly passed on to the Discos – undermining a core predicate of the electricity business that risk should be borne by the party that can best bear it.).

“Non-payment of electricity liabilities by the Ministries, Departments and Agency (MDA), inconsistent and unsustainable electricity tariff modelling and implementation, electricity theft, etc.”

He argued that it was the federal government’s acknowledgement of its role in the non-performance of the Discos that resulted in the determination or declaration of the two years of mutual non-performance by the government and the Discos (2017 and 2018) under the Multi- Year Tariff Order (MYTO-2015).

According to him, the BPE’s Performance Assessment of nine Discos Comprehensive Report of December 2021, had further stated that several commitments and investments had not been executed timely by government, leading to continuous structural issues impacting Discos.

Oduntan added that the same report further highlighted specifically, the following areas of government failure to meet its obligations and commitments including misallocation of liabilities on the books of Discos as market shortfall; inadequate electricity supply.

Others, he noted, included insufficient investment to address 30 years of historical underinvestment in the sector, apparent misalignment between assets (meters, number of customers) communicated to the Discos pre-privatisation; and clarification of roles between BPE and NERC not done at the time of privatisation.

In addition to persistent security breaches’ impact on Discos’ collection capacity, Oduntan

listed other deficiencies as lack of minor reviews from 2015-2019 despite dynamic variables, resulting in N2.4 trillion of tariff shortfall accumulating between 2015-2020 and unfavorable regulatory guidelines negatively impacting Discos’ source of revenue.  

He further said, “Significantly, these challenges were similarly identified in the final report issued by the National Economic Council’s (NEC) Ad Hoc Committee on the Review of the Ownership Structure of the Partially-Privatised Electricity Distribution Companies (March 2020). 

“It is important to also highlight that the Director General, BPE, as a board member who represents the federal government’s 40 percent minority share in each of the Discos, is an integral participant in the board decisions that guide the operations of the Discos.

“How then is the ‘restructuring’ or expropriation of the five Discos justified, given the government’s contribution to the challenges that have bedeviled Disco operations?

The Discos cannot reasonably be exempted from the issue of non-performance, admittedly.

“The Discos take and own responsibility for falling short of their performance objectives, thereby depriving their valued electricity customers a key contributor to improved quality of life. However, Disco investors and operators remain totally committed to improving service delivery to their customers.”

Oduntan said the evidence of the commitment by the Discos had been progressing in areas such the establishment of a new revenue collection of N777 billion as of first quarter (Q1) 2022 and the reduction of average Aggregate Technical, Commercial and Collection Losses (ATC&C) estimated in excess of 56 per cent pre-privatisation to 46.3 per cent.

Other progress recorded by the Discos, according to the ANED director, were the increase in the number of registered customers from an estimate of less than two million customers pre-privatisation to 10.2 million, and the establishment of 1,035 customer centers.

Furthermore, he listed others as the creation of 32,573 jobs as against 23,515 at privatisation; increased metering from 2.3 million in 2013 to 4.7 million, representing a 100 per cent increase and the installation of 129,352 distribution transformers as of 2020 against 75,041 in 2013, a 72 per cent increase.

While also informing that the Discos equally increased electricity distribution capacity from 15 gigawatts to 30GW post privatisation, Oduntan, however, pointed out that the Discos still have a long way to go, to meet the service delivery requirements that will ensure consistent and stable electricity to their customers.

Admitting that this journey was a direct function of the level of investment that was attracted to the sub-sector, which he said was necessary for the capital expenditure critical for increased efficiency and performance, he stated that such investment was not likely to come into an environment where there was no respect for sanctity of contract or ready expropriation of largely private assets was the norm.

He said, “And there is no greater affirmation of this fact than the paucity of capital importation into the power sector, as indicated by the National Bureau of Statistics’ data, since the privatisation. 

“The CBN’s commendable loan initiative to the DisCos was a clear recognition of the financing or access to capital constraint that is a product of the unfavourable operating environment of the DisCos. A related casualty of this environment was the departure of the technical partners that were part of the Disco operations, post-privatisation.

“The federal government’s Power Sector Reform Policy (PSRP) was supposed to be the basis of a reset of the subsector, by way of the implementation of the relatively recently approved Performance Improvement Plans (PIP).

“Unfortunately, the recent ‘restructuring’ or expropriation of the five Discos not only fails to acknowledge the complicity of the government in the performance challenges of the Discos but amounts to, seemingly, the jettisoning of the tenets of the PSRP. 

“Unless there is good faith engagement and partnership with the Disco investors and operators who, in spite of the myriad of challenges, have committed extensive resources to the subsector, the notion or thinking that reselling the expropriated Discos or handing the Discos to new investors is nothing more than a fantasy or a proverbial exercise in futility.” 

He added, “The core issues of the lack of a cost reflective and sustainable tariff, inadequate gas supply, inconsistent regulatory and policy determinations, transmission grid constraint, non-payment of MDA electricity debt, electricity theft, lack of respect for sanctity of contract, etc must be addressed, if the electricity distribution subsector, in particular, and NESI, in general, is to make progress.

“Expropriation, ‘restructuring’ or disregard for the rule of law is not and cannot be the solution. Nor is the federal government’s disregard for, or disobedience of court orders or its unilateral dissolution and appointment of Disco Boards of Directors, inconsistent with the Companies and Allied Matters Act, 2020 (CAMA).

“All of which constitute one more nail in the coffin that private investment in the Nigerian economy, specifically, the power sector, is becoming.”

BEDC Reacts to AGF’s Alleged Opinion on Expiration of Federal High Court Orders

Meanwhile, the BEDC Electricity Plc has reacted to the alleged opinion of the Attorney General of the Federation (AGF) which proclaimed that the ex-parte orders of the Federal High Court issued in Suit No.FHC/ABJ/CS/1113/2022 – Vigeo Power Limited v. Fidelity Bank PLC & 7 Ors on the 8th day of July, 2022 had expired after 14 days.

 According to a statement from the Disco yesterday, an online medium had reported on August 23, 2022 that, “The Attorney General of the Federation and Minister of Justice, Abubakar Malami believes that the refusal of the sacked Managing Director of the BEDC Electricity PLC, BEDC to vacate office is acting beyond her legal power or authority.”

It stated that “Malami cited the recent restraining order paraded by the ousted BEDC boss, which she reportedly obtained from an Abuja High Court, as lawless, ultra vires, and of no effect as the 14 days granted by the Federal High Court had slumped to vacate her from the office.

“In his opinion on the matter titled: Legal opinion on the possession and management of BEDC Electricity Plc, dated August 18, 2022, with reference number LE/14/1.7/95, the Attorney General cited Order 26 Rule 10(1-3) of the Federal High Court (Civil Procedure) Rules 2019 which states in Part to buttress his advice.”

 According to him, “An application to vary or discharge an order made ex-parte may be made by the party or person affected within 14 days after service and shall not last for more than 14 days after the application has been argued unless the court otherwise directs” and “Where a motion to vary or discharge an ex-parte order is not taken within 14 days of its being filed, the ex-parte order shall lapse unless the court otherwise directs in the interest of justice.”

Reacting to the development, the legal Counsel to BEDC, Mr. Kunle Adegoke, was quoted in a statement to have stated: “Our attention has been drawn to the opinion published in the social media on the 23rd day of August, 2022 which purported to have emanated from the office of the Attorney General of the Federation proclaiming that the ex parte orders of the Federal High Court issued in Suit No. FHC/ABJ/CS/1113/2022 – Vigeo Power Limited v. Fidelity Bank PLC & 7 Ors. on the 8th day of July, 2022 had expired after 14 days.”

He added, “First, we refuse to believe that the Attorney General would publicly comment on a matter that is subjudice and sit in judgement over an order given by a court of competent jurisdiction. In the unlikely event that the opinion indeed emanated from his office as reported, then we would describe it as unfortunate, in bad faith and an invitation to anarchy.”

He added that an order of court does not expire until the court so pronounces.

He said, “The law is that an order of court does not expire until the court pronounces so. We refer to the decision of the Court of Appeal in Deux Projects Limited v. Access Bank PLC delivered on the 14th day of December, 2020 – CA/LAG/1342/2019 – where the court corrected the impression and held that an ex parte order would not lapse after 14 days until a court so pronounces.”