Nigeria’s power sector designed to fail —Amadi, ex-NERC chair
Former chairman of the Nigerian Electricity Regulatory Commission (NERC), Professor Sam Amadi, has said that the nation’s power sector was ab initio designed to fail, “because the government had failed to corporatise and commercialise the sector before privatising.”
Professor Amadi said this in a number of tweets he made in response to the position of a former Commissioner of Market Competition and Rates of NERC, Mr. Eyo Ekpo, over the process that led to controversial tariff review carried out in 2015. They differ on the subject matter.
The duo had taken to the social media on Wednesday to give account of issues that led to the reduction and increase in electricity tariff towards the end of the former President Goodluck Jonathan-led administration.
Ekpo had taken to his twitter handle to accuse the former NERC chairman of not consulting the Market Competition and Rates Division, the department responsible for proposing and implementing rates before making the tariff change.
He explained that a sudden reduction of the already ‘cost reflective’ tariff by 30 per cent further crippled the electricity distribution companies.
He also blamed the former chairman for playing politics with the entire process, as this was done at the peak of the 2015 general elections.
“Let me remind him (Amadi) first, that he initiated that tariff change immediately after I commenced my leave on 19 February, 2015. Second, he completely bypassed the Market Competition and Rates Division, which I headed and which alone had responsibility for staffing, proposing and implementing rate-making decisions on behalf of NERC. He needs to explain these two strange facts when he has the time.
“Now, going to the crux of the matter, I will start with another reminder. Again, before the commission took the tariff reduction, three days before the 2015 presidential elections, Sam Amadi and I had an exchange of emails that I initiated. The internet does not forget. In that email, I queried his bypassing my division in initiating the most important tariff decision NERC would ever take.
“I nevertheless proposed alternative ways to solving the (imaginary) problem that he said justified the tariff change. At the time, it was said that a certain customer class (steel plants in the Benin Disco area) had complained about higher tariffs. I suggested a way to deal with that complaint and advised him that my real objection was not about the tariff change itself because if that turned out to be a wrong decision, it could be corrected.
“I advised him that the customers and the general public would assume (correctly) that this tariff decision was politically-motivated, coming as it did, just a few days to the 2015 presidential elections. Consequently, the decision would result in a massive loss of NERC’s credibility with all its stakeholders – customers, licensees, government and staff – with the result that its decisions would never again be accepted in good faith; they would always thereafter be second-guessed and the vital relationships that uphold the industry would rupture. In the most cavalier manner, he waved aside my objection,” Ekpo lamented.
However, Amadi also took to his twitter handle to counter the claims, stressing that it was merely coincidence that the tariff review came before the elections in March, 2015, contrary to plans.
“If we are minded on political outcome, we would not have signed such a high tariff on January 1, when presidential election was a few weeks ago. What urgency could have forced us to do so? If we were concerned about politics, we would have rushed and reviewed the tariff before the election.
“But we adjourned to March when presidential election would have been over. No one knew election was going to be postponed as of January 2, 2015, until January 8. So, we could not have adjourned to March in anticipation of the election which outcome would have been clear before March. I buried my mum on February 1 and attended a wedding on February 8, only to hear about postponement of election to March,” he said.
According to him, the commission under his leadership had followed due process as, prior to the removal of collection losses which led to the reduction in tariff, a public hearing was called where stakeholders in the power sector, comprising Manufaturers Association of Nigeria (MAN), Bureau of Public Enterprises (BPE), CEOs of DisCos, among others, were present.
He said: “At the meeting, staff of MCR made presentation; CEOs made presentations; consumers made presentations. @NERCNG met as expanded executive committee and established a technical committee made up of four engineering fellows in the commission and two of Eyo’s MCR to review how similar jurisdictions like India, Chile and Ghana treat collection losses.
“The committee presented its report and clearly asked the commission to remove collection losses and require every disco to proof such losses. Eyo was in the meeting and expressed his contrary views on record.
“The proposal was presented at industry meetings of CEOS, BPE, MOP and NERC. Expectedly, the DisCos and BPE opposed the proposal. As required of regulators, we took evidence and conveyed a commission meeting where commissioners voted to approve the removal.”
Amadi, in his thread of tweets, insisted that the power sector was designed to fail because the government did not take necessary measures before privatising.
“We privatise senselessly without paying attention to context and corporate governance and regulatory regime; we sold to investors who lacked capacity, etc. Eyo should remember that we had conducted three tariff hikes before December 2015. Did any of these hikes result in any significant improvement in revenue or service quality? No. Why? Because the problem of the sector is not mainly tariff.
“Cost reflective is important, but excessive tariff hike is problematic, because it cannot be collected and in a country with poor supply, the propensity to pay is low,” he explained.
Amadi further disclosed that the commission, prior to privatization, conducted ‘fit and proper’ test on all the preferred bidders, stressing that “only one (or none) of the bidders had the requisite financial and technical competence to effectively manage the network.