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New NERC Commissioners should review regulatory practice—-Onyia

Prof. Chidi Onyia, the leader of the Power Sector Team at the UK Department for International Development (DFID) funded Nigeria Infrastructure Advisory Facility (NIAF), has called on newly appointed commissioners of National Electricity Regulatory Commission (NERC) to review all agreements on gas-to-power project.

In an interview, he said “the new sets of NERC commissioners will review all of them and adopt a new approach to regulatory practice that is evidence-based, rather than what it had been in the past. We are hoping that the government will go back and look at market processes in the sector”.

“Personally, I think the market and the regulatory practice have to be evidence-based. It cannot be based on second-guessing and secondary and third level data from the Discos to the Regulator, who should have a robust data management process that actually gives it real information. The CBN is a regulator and does not depend on data from banks to run its checks, as the data crosschecks what the banks submit, so they can flag anomalies.

He argued that “the Regulator has to invest in creating a data management framework that will help them achieve clear customer enumerations, so we know who the real customers are and what they actually should be paying, so that we can align the metering plan. As long as we don’t have clear data processes, we are going to have people passing the blame from end-to-end.

“As long as the liquidity issue is not resolved, the market will continue to struggle and that could create investor apathy, which is not what we envisaged for the sector. We expected that the market would create opportunities for capacity investments.

On how to tame the intractable gas-to-power crisis, Prof Onyia said “The transitional electricity market (TEM) was supposed to be a phase, where the market becomes a take-and-pay process, and people have to be liable to the agreements they signed. However, the agreements are not in place and now the gas suppliers are on best endeavour basis, meaning if they have, they will give and if you can pay, you do so.

“Because most of the gas coming into the sector is associated, the International Oil Companies (IOCs) need their money, but the main money comes from crude oil, though there are certain loopholes within the market that allows for such unbusiness-like behaviour and we think the current issue can only be resolved, when the market becomes disciplined. This entails the Bureau of Public Enterprises (BPE) and other entities serving on the board of the electricity companies holding their fellow board members responsible for what they need to do, where the regulator acts by holding the players accountable and where government is involved in the sector’s risks.

“We are saying if there is risk involved in taking gas to produce power, but because of vandalism that is not happening, the consumer should not be exposed to that risk. If there are problems based on the Discos not reducing their ATC&C losses and then causing a market shortfall, they should be held liable for that, same as gas suppliers for the agreements they signed.