SPOTLIGHT Part of the responsibilities was also to come up with the issue of correct pricing to give the correct market signal for private sector to come and invest. So, we set about setting up new tariffs, new rules for the market for private sector to intervene. Why is the price regime not working? Would you say that the Distribution Companies (DisCos) have failed?
“...for over 5 years, 10 NIPP have been unable to go to financial close due to market liquidity issues”
D
r. Ransome Owan is the Group Managing D i r e c to r o f A i te o Power, Infrastructure and Real Estate. Aiteo, a vertical integrated energy company plays in the upstream, midstream and downstream energy space. Prior to his present appointment, Dr Owan was the pioneer Chairman and CEO of the Nigerian Electricity Regulatory Commission. He s tarted the commi ssion in November of 2005, after the law was passed on March 15, 2005 of the same year. He and his commissioners were responsible for putting together all the rules and regulations that are now currently guiding the growth of the power sector in Nigeria. Today, he’s a practitioner of electricity regulation and reforms in the US, having done so in the state of New Jersey, Pennsylvania, Delaware, Virginia and District of Columbia. He holds an MBA in Management from Hofstra University in Long Island, New York, and Master of Science and Ph.D in Energy Management and Policy from the Ivy League University of Pennsylvania in Philadelphia, USA. He has been in the energy business for over 30 years, having worked in electric companies and in consulting companies. 38
Majorwaves Energy Report
In this interview with Majorwaves Energy Report, he speaks on a number of issues plaguing Nigeria’s energy sector, proffering solutions. What was the blueprint you came up with while heading the NERC and how did it pan out? The Power Sector Reform Act was the genesis for the reform process on how to transition the Power Holding Company of Nigeria from a governmentowned monopoly into a private sector led business. Our goal was to create market conditions that will attract the private sector to intervene in the market place. So, we set about how to break up the monopoly from 1 company, 18 companies were produced. The Transmission Company of Nigeria (TCN), which is still a monopoly and a government-owned entity and the distribution business was broken up into eleven Distribution Companies and five generating companies. And that’s how we licensed and transitioned PHCN into 18 limited liability companies. The companies were restructured and prepared for privatization.
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Part of the blueprint was to ensure capital inflow in the Nigerian power sector and overtime, ease government out of providing electricity for its citizens”.
SEPTEMBER 2019, Vol 2 No 6
I think one of the issues that happened is a disconnect and interference in the marketplace by the so-called Invisible Hand. We set up a price mechanism that would recognize what the true cost of electricity should be. And in other to prevent rate shock, we offered some subsidies into the marketplace.
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But the goal was to work with TCN and generation side to ensure that generation, while it was increasing, the price would also be going up gradually” that was gradualism of price increase. And in the course of time, we should come into equilibrium, the intersection of supply, demand and correct pricing and customers would see value for it. However, it hasn’t worked well quite like that. Why hasn’t it worked? Because some of the scheduled 6-moth tariff reviews were missed by the regulator. Therefore, the minor adjustments that were meant to keep - a couple of them have been missed in intervening years. Also, the major reviews were also not done on time and haven’t been done. You can imagine that if every 6 months you are supposed to tariffs and that is not done, then market operators will have difficulty of cost recovering. You cannot recover what the regulator has not approved. Then, sometime around 2015, there was a national rate freeze of R1 (life line rates) and R2 customers. These are residential and small customers. The national rate freeze was during a hot political season and the rates were not allowed to be changed. That also created a gap in the revenue of the Discos and other market operators. www.majorwavesenergyreport.com
