What Key Stakeholders should do now!

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The Nigerian Bulk Electricity Trading Company (NBET) began the much awaited steps towards the formal registration of participants in the Nigerian Electricity Supply Industry (NESI). A good start was to negotiate the Power Purchase Agreement (PPA) between International Oil Companies (IOCs) and the defunct Power Holding Company of Nigeria (PHCN).

NBET as the bulk electricity trader is a credit worthy off-taker. It will see to the timely implementation and respect of contracts on purchase and distribution of bulk electricity between the generation and distribution companies. As a bulk procurer and seller of electrical power and ancillary services from IPPs and successor Gencos, NBET on its part, is expected to give confidence to Gencos and Discos in terms of its ability to offset payments for power procured from the Gencos and Discos’ payment for power sold to them. In the event that a company breaches the terms of the vesting contracts entered into for example by delay in payment for power sold to it, the bulk trader is expected to offset payments due to the Gencos from which it procured power through its replenishing capitalisation fund at least until the electricity market is adjudged matured enough for both Gencos and Discos to trade directly. However, the capitalisation base of the Bulk Trader has severally been put to question by IPPs on the ground that $1 billion was not enough for a sector that is aiming to achieve 20,000MW within a very short time. The concern is that the capitalisation status of NBET is low and it sends the signals to investors that it is not strong enough to financially care for the obligations in the privatised electricity sector.

For the TCN, which is under a management contract by Canadian firm, Manitoba Hydro International (MHI), its failure to manage the grid system, either as a result of inherent internal politicisation of roles, resistance to MHI’s contract or lack of corporate governance in planning and execution of crucial transmission projects to boost the country’s weak transmission network, will most likely pit it against generation and distribution companies, which would not tolerate unnecessary laxity as frequently displayed by the TCN. Following the poor management track records of the PHCN, which the TCN was part of, the tendency of the company to relapse in its responsibilities, which are crucial to the growth of the power sector remains a real source of worry to stakeholders in that there is a covert gang-up by its “old war horses” to see that MHI’s efforts at enthroning transparent management of operations in the company do not see the light of the day. This may likely affect MHI’s operation, and the company may end up achieving very little before the three-year contract elapses. There is also the issue of incremental source of funding for transmission projects, which the TCN is expected to manage under the watchful eyes of MHI. Unless Manitoba compromises in view of pressures against it, these projects are expected to improve the confidence level in NESI.

The NERC on its part has the overall role of ensuring that possible competition in the sector are kept healthy while sanctioning errant activities of market participants either by withdrawal or suspension of their operational licenses. The commission will frequently review activities in the sector chiefly to ensure its smooth transition while participants work towards efficiency in the sector.

The Federal government wants to resolve all outstanding labour issues before handing over the assets. Labour unions in defunct PHCN claim that what the government has paid so far is terminal benefits to most of the staff in the Generating companies and have now started with colleagues in the distribution companies. The Discos are going to take much longer time and money. But nobody has been paid pension and the unions are insisting that the government must pay everything before handing over. Another issue the Federal Government wants to look into is the availability of Nigeria’s gas to power the Nigerian Power System!!

With the successful conclusion of the sale of the generation and distribution companies and eventual takeover by new investors, Nigeria’s Power Sector will be revitalised and expectations are that electricity-starved Nigerians will soon begin to enjoy regular power supply.

It must be mentioned though that no matter what the challenges are, the new dispensation would be better than where the country was coming from.

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