Despite appealing the court ruling that mandated them to immediately reverse the hike in power tariff, operators in the sector are still jittery.
On Wednesday, July 13, 2016, a Federal High Court in Ikoyi, Lagos reversed the 45 per cent increase in electricity tariff by the Nigerian Electricity Regulatory Commission and the Federal Government in a landmark judgment.
The court declared the hike in tariff as illegal and directed that it should be reversed immediately. It held that the implementation of the 45 per cent increase constituted a violation of its interim order and awarded N50, 000 cost against NERC.
In a swift reaction to the judgement, power distribution companies, as well as NERC, filed separate appeals against the ruling. They also asked for a stay of execution order.
Our correspondent gathered that despite the steps taken by the operators, there is still apprehension among players in the industry, particularly among core investors in the privatised power assets.
It was gathered that the real owners, not just the chief executive officers or managing directors of the power firms, were so disturbed to the point that they, for the first time, agreed to hold a meeting with the management of the NERC in Abuja to discuss the tariff matter, amongst other issues, last Thursday.
The meeting was, however, postponed.
During the tenure of the immediate past Chairman of NERC, Dr. Sam Amadi, the commission often held monthly meetings with the CEOs of the power generation, distribution and transmission companies.
During the period, most core investors or real owners of the privatised assets never partook in the meetings, as they were always represented by the CEOs or MDs of their respective firms.
But this time around, our correspondent gathered that the major shareholders of the Discos as well as other stakeholders, agreed to meet with the regulator to discuss issues affecting the sector, especially the recent court order mandating the Federal Government and NERC to reverse the hike in electricity tariff.
A CEO of one the distribution companies in Nigeria’s south-western region, who was visibly vexed by the ruling, stated that the owners of the Discos were becoming apprehensive as a result of the kind of support which the court judgement had garnered.
“Billions of naira hang in the balance as a result of that ruling; people should know that. I say this because it’s like there is a gang up against power distribution companies on this issue of tariff, considering the kind of support which the court judgement has been receiving both from consumers and from senior citizens across the country. This is absurd,” the CEO,who spoke to our correspondent in confidence, said.
Many Nigerians had lauded the court ruling and had called on the power firms to obey the judgement, instead of appealing it.
A professor of financial economics, University of Uyo, Prof. Leo Ukpong, for instance, wondered why the Discos would increase tariffs without any tangible or commensurate improvement in power distribution facilities as well as in supply.
He said, “The reaction from the Discos is expected. However, after the split of the industry into segments, the companies were expected to improve their facilities, whether generation or distribution facilities. But they did not do that. For example, it will be a very simple thing of justifying the rates or charges if the Discos had installed meters in most of the residents and business places, but they did not.
“They went on charging most of the time by estimated billing. Now it is very difficult for you to justify that when as a consumer of electricity, we have not seen any improvement. The facilities to deliver electricity have not been upgraded and power distribution has not improved.”
Ukpong added, “So I think the court has done the right thing by denying them the increase in tariffs and by forcing them to go and improve the facilities and provide some justification for the increase in rates. Therefore since facility improvement has not been done, I agree with the popular sentiment that they should deny them any increase in tariffs.
“If they threaten not to supply or distribute power, what the government should do is to increase the number of firms in the sector and this will engender stiff competition. By so doing, those who feel they can’t cope will run out of business.”
Also expressing worry over the court ruling and the kind of support it had generated among Nigerians, the Chief Executive Officer/Managing Director, Copperbelt Energy Corporation, Africa, a core investor in the privatised Abuja Electricity Distribution Company, Mr. Emmanuel Katepa, said the ruling was not just counter-productive, but would hinder power firms from breaking even any time soon, if implemented.
He said, “Our projection at the beginning of this year was that we were going to break even by December. Unfortunately, developments in the market are really threatening that projection. We are dependent on the tariff and it is important to let consumers know that the more energy that comes into our system, the lower the tariff can be.
“We had a tariff increase last year and we had one this year as well. It was on assumption of the country’s generation capacity that we made projections to break even. But generation has been less than half this year and there has been a significant resistance from the paying public on the new tariff, which obviously puts the whole model in some level of concern.”
Similarly, the Executive Director, Association of National Electricity Distributors, an umbrella body for the Discos, Mr. Sunday Oduntan, insisted that the power firms were not going to reverse the tariff, and maintained that they were ready to take the case up to the level of the Supreme Court.
He said, “We are not going to reverse the tariff because we have appealed. When you give a judgement at the Federal High Court, I can still go to the Court of Appeal. From the Court of Appeal if I’m not satisfied I can go to the Supreme Court, which is why we have these layers in our jurisprudence. Whatever is said at the Supreme Court is the finality and that is where we will head to at the end of the day if we don’t get justice at the Court of Appeal.”
Corroborating the arguments of the Discos, the Acting Chief Executive Officer, NERC, Dr. Tony Akah, told our correspondent that the commission respected the ruling of July 13, 2016 at the Federal High Court, Lagos by His Justice Mohammed Idris, which declared the electricity tariff regime that became operational February 1, 2016 as illegal.
Akah, however, stated that “the commission is dissatisfied because it represents, in our view, the reversal of the commercial foundation upon which contracts for gas, hydro, coal and solar resources for the production of electricity had been predicated on.
“It also extends to other service improvement contracts that were entered into by operators in the sector for the development of the electricity industry, as well as for the ultimate improvement in the quality of service delivery to consumers.”
He added, “This judgement, in our view, is a setback to the gains made so far in the electricity sector. Therefore, while we respect this judgement, we will challenge its decision. We have instructed our lawyer to appeal. Consequently the commission has filed for stay of execution and the notice of appeal of the judgement.”