The Director General, Bureau of Public Enterprises (BPE), Dr. Vincent Onome Akpotaire, has said the Nigerian Electricity Regulatory Commission (NERC) must be allowed to perform its mandate without interference for the country’s power privatisation programme to be successful.
Specifically, he said NERC must be allowed to fix tariffs in line with the Electric Power Sector Reform Act (EPSRA) without interference from any quarters.
He said if the tariffs are considered high, the government could decide to mitigate the effects by taking up a percentage of the tariffs instead of outright cancellation.
Speaking in Abuja at a two-day stakeholders interactive dialogue/workshop organised by the joint committees of the National Assembly recently, Akpotaire further cautioned against the blame-game in the power sector and appealed to the executive and the legislative arms of the government as well as other stakeholders to come together to find solutions to the sector’s challenges.
He further explained that the loss levels at the point of privatisation of the power sector, especially the Aggregate Technical, Commercial and Collection (ATC &C) loss of Nigeria was about 50 per cent on the average which could not be fully passed to consumers immediately to avoid rate shock and consumer rebellion.
This, according to him, clarified why the federal government is being asked to subsidise the Nigeria Electric Supply Industry (NESI).
On why the Central Bank of Nigeria (CBN) gave a loan of N213 billion to the privatised power companies, he said, “Multi-Year Tariff Order 2 (2012) that was put in place when investors took over on November 1, 2013, had assumed AT & C loss level of 25 per cent.
“The agreements signed with the investors gave NERC and the Distribution Companies (DISCOs) one year to determine the true AT & C loss levels which was subsequently found to be about 50 per cent on the average.
“Based on the new ATC & C loss levels, a new tariff was issued by NERC with effect from February 2015 but the shortfall that accumulated because of the wrongly assumed ATC & C of 25 per cent from November 1, 2013 to December 31, 2014 amounted to N213 billion.
According to him: “Consumers were liable to pay the N213 billion immediately but the CBN intervention by way of a loan to the DISCOs, enabled NERC to spread the recovery of the money from the consumers over a ten year period.”
In a statement by BPE Head, Public Communications, Mr.. Alex Okoh, which was made available to THISDAY, Akpotaire said though the federal government owns 40 per cent of the DISCOs, it was not part of the management because it was not funding its shares on the boards.”
He said: “The Performance Agreement executed with investors has assigned operational risks to investors. The PA provides that a core investor who fails to achieve agreed targets stands the risk of losing his/her equity at the payment of US$1 by the federal government.”
On reasons why the core investors in the DISCOs were not investing heavily in line with the covenants they signed with the government, he said the transaction structure compelled investors to raise money and pay for their 60 per cent equity in DISCOs using their own balance sheet and that upon take over, the investors were expected to leverage on the acquired companies’ clean balance sheets to raise additional funds for investments.
However, he pointed out that financial institutions have refused to lend money to the DISCOs until a cost reflective tariff is approved in line with the agreements; and the CBN loan to the industry removed from the books of the DISCOs.