Ending DisCos’ Unruly Conduct

NERC (1)

Events of the last few weeks have shown that the Nigerian Electricity Regulatory Commission (NERC) is determined to placate electricity consumers who have grown quite weary of the country’s poor electricity supply system.

The regulatory agency has stepped up its enforcement action against some electricity distribution companies (Discos) that failed to respect its regulatory directives to ensure the satisfaction of customers.

In one fell swoop, NERC, which had approved a new cost-efficient tariff regime for the Discos earlier in the year, and subsequently defended it when it was challenged in the courts, slammed on four Discos – Ibadan, Enugu, Port Harcourt and Ikeja – about N45.6 million fine collectively for failing to either submit their audit reports on time, or refusal to satisfactorily address service complaints brought to them by their customers.
When it released details of the penalties and its beneficiaries, the commission said it acted in line with its regulatory powers, which guarantee fair treatment of stakeholders in the electricity industry.

It noted that it would remain impartial to everyone – operators and consumers alike – and so would not condone such acts by the Discos.
Having done this, NERC said it was willing to go further to address instances of abuse of consumers’ rights to satisfactory service by Discos, a practice it said has sadly lingered on in the sector for too long.

The regulatory authority said in signing off a cost reflective tariff for the Discos, it also extracted from them various service level agreements they owe to consumers.
Parts of this commitment includes: improved metering; upgrade of distribution network facilities; and timely response to consumers’ service complaints amongst others.

The fines
Citing the provisions of the Electric Power Sector Reform (EPSR) Act 2005, as well as NERC’s supplementary law, and the Customer Complaints Handling Standard and Procedure Regulations (CCSHP), the regulator accused the four Discos of breaching the terms of their licensing.
It also accused the Discos of being quite clumsy in responding to its query on their regulatory defiance, adding that such actions were affronts to its job of keeping the electricity market sane and beneficial to everyone on the value chain.

NERC said it communicated the fines to the affected Discos after they failed to provide reasonable grounds on why enforcement actions should not be taken against them.

According to the agency, it expected them to pay the fines within two weeks, beginning from the day the directives were sent to them after being signed by its acting Chairman, Dr. Anthony Akah and General Manager, Legal, Licensing and Enforcement, Mrs. Olufunke Dinneh.
The fines, it added will also attract five per cent daily interests until remedial steps are taken by the Discos.

Two of the erring Discos – Port Harcourt and Enugu were sanctioned for their failure to submit quarterly reports on their key performance indicators, whereas Ibadan and Ikeja were fined over failure to attend to customers’ complaints referred severally to them.
For Ibadan, which initially got a N2.8 million fine for failing to serve its customers’ interests in April 2016, a fresh regulatory fine of N21.2 million was subsequently slammed on it for similar offence after it was discovered that it refused to address various electricity customer complaints referred to it by its Forum Office.

The Forum Office by NERC’s standard, is the second level in its redress mechanism.
It is where complaints from electricity customers that were not resolved at the customer care unit of Discos are referred to for acceptable settlement. If the Forum Office fails to reach an acceptable settlement on any issue, it is then transferred to NERC which sets up an ad-hoc panel to determine the case.

NERC however said that Ibadan Disco failed to comply with the decisions of the Forum Office from February 23, 2015 when the first directive was given to it till August 5, 2016 when it had to take a regulatory action against it.

“Following the failure of IBEDC to comply with the request and directive, the Commission issued a notice to commence enforcement to IBEDC, on June 9, 2016 to show cause within 10 days, why enforcement action should not be taken against it on four grounds of misdemeanour.
“The four grounds of violation according to NERC’s Directives 156 include Section 63 (1) of the Electric Power Sector Reform (EPSR) 2005 and condition 50 of the electricity distribution licence terms and conditions, both stipulate that a licensee should obey every directive of the Commission.

“Others include condition four of the distribution licence terms and conditions and Section 11 (6) of NERC Customer Complaints Handling: Standard and Procedure Regulations (CCSHP) 2006. Both require a licensee to supply information requested of it by the regulator as well as implement decisions of the Forum on electricity customer issues within the time specified in the directives of the Forum,” it said in a detailed statement that announced the fine.

According to the agency, the Ibadan Disco was found to have violated all these four grounds after it refused to comply with the Forum’s decisions in respect of installations of electricity transformers and energising communities.
The Disco, NERC stated, claimed it had no funds to undertake the request which it categorised as capital intensive in nature. It added that the Disco hung on such excuse to sidestep the directive of the Forum Office.

The Disco also failed to comply with the timeline within which to implement the directives of its Forum as well as the reporting compliance obligation as stipulated in the CCHSP regulation 2006.
NERC said on this: “As such, the Commission in Directives 156 said that breach under Section 63 (1) of the EPSRC Act attracts N10, 000. 00 per day; breach under Section 11 (6) of the CCHSP attracts N10, 000 per day; breach under condition four of the distribution licence terms and conditions attracts N10, 000. 00 per day and that breach under condition 50 of the distribution licence terms and conditions attracts N10, 000 per day.

“All sanctions will start counting from February 23, 2015 when the first directive was given by the NERC Forum Office till August 5, 2016 when the Commission’s directives 156 was signed by the Commission’s acting Chairman, Dr. Anthony Akah and General Manager, Legal, Licensing and Enforcement, Mrs. Olufunke Dinneh.”

It further stated: “The fines imposed notwithstanding, IBEDC shall comply with all the directives of the NERC Forum and shall communicate to the Commission its electricity transformer implementation roll out plan, and the date of the commencement within two weeks from August 5, 2016.”

For the three others, NERC said that Ikeja Disco was found guilty on three grounds of violating its licensing terms and conditions, EPSR Act 2005 and CCHSP, all of which compel it to obey every directives of the Commission, treat customers complaints within a stipulated time frame as well as oblige the regulator every information sought from the company.

It added that Ikeja was fined N10, 000 per day on each of the three grounds of misdemeanor with effect from April 22, 2016 till July 25, 2016 when the directive was signed.

According to NERC “failure to pay the fines within stipulated time shall attract additional interest of five per cent per day until the total fine is paid.”
Both Enugu and Port Harcourt Discos were found liable of failing to submit quarterly reports on their key performance indicators which NERC said ran contrary to terms and conditions of their licence and Section 63 (1) of the EPSR Act 2005.

NERC said: “By failing to submit third quarter report in 2015, the Commission hereby fines PHEDC N10, 000 per day from July 15, 2015 to July 25, 2016 giving a total of N3, 760, 000; by failing to submit fourth quarter report in 2015 the Commission fines PHEDC N10, 000 per day from October 15, 2015 to July 25, 2016 giving a total N2, 840, 000; by failing to submit first quarter report in 2016 the Commission fines PHEDC N10, 000 per day from January N10, 000 per day giving a total N1, 920, 000.

“Grand total of the fines payable by PHEDC within the next two weeks beginning from July 25, 2016 when the directive was signed is N8, 520, 000.”
It explained that Enugu was fined a grand total of N13, 190, 000 for failing to submit quarterly reports on four different instances. The Disco also reportedly failed to heed its warnings and overtures to submit the reports, hence the fine.

“By failing to submit second quarter report 2015, the Commission hereby fines EEDC N10, 000 per day from April 15, 2015 to July 25, 2106 giving a total of N4, 670, 000; by failing to submit third quarter report in 2015, the Commission fines EEDC N10, 000 per day from July 15, 2016 to July 25, 2016 giving a total of N3, 760, 000; by failing to submit fourth quarter report in 2015 the Commission fines EEDC N10, 000 per day from October 15, 2015 to July 25, 2016 giving a total of N2, 840, 000; by failing to submit first quarter report in 2016 the Commission fines EEDC N10, 000 per day from January 15, 2016 giving a total of N1, 920, 000,” the commission explained.

Ending deep-rooted practice
From the existing regulations formulated by NERC over the years, it is certain that the agency has a robust dispute resolution mechanism that can withstand the enormous task of bringing Discos to act right in their business of distributing electricity to consumers.

By mandating the Discos to set up functional customer complaint units, NERC made a defining step which it further refined with the establishment of Forum Offices across the distribution networks to track service complaints by consumers and settlement of same by the Discos.

While such practice of dealing responsibly with electricity consumers is alien to the Discos, having inherited it from the largely corrupt Power Holding Company of Nigeria (PHCN), NERC has as a responsibility to continue to demand for appropriate service delivery from the Discos to move the sector to the next level.

As stated by Akah, the fines imposed on the erring companies were in line with NERC’s schedule of fines and the EPSR Act 2005.
Akah had also noted that it was prejudicial but part of NERC’s mandate to ensure a balanced electricity market.

Source

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