Cummins Power Generation Nigeria Limited (CPGNL) has become the third company ordered to pay millions of naira in fines for infractions against its licence in an indication that the electricity regulator is now awakening to its responsibility of regulating Nigeria’s floundering electricity sector.
In an order published May 28, the Nigerian Electricity Regulatory Commission (NERC) ordered Cummins Power Nigeria Ltd to pay as much as N3 million in fines for non-compliance with the Electric Power Sector Reform Act and terms of its off-grid generation licences, as well compensate Ikeja Electric for lost revenue for encroaching on the DisCo’s distribution network.
This month alone, NERC has meted out sanctions on Abuja and PIPP LVI DisCos for different infractions. While Abuja DisCo has been ordered to pay N300 million in fines over cases of electrocution in its franchise areas and to conduct a detailed safety audit of its network to prevent further infractions, PIPP LVI, like Cummins, is on the hook for encroaching on Eko DisCo’s distribution network and tampering with its distribution infrastructure.
Cummins applied for an off-grid electricity generation licence in 2016 to supply power to the Nigerian Carton and Packaging Manufacturing Company Limited (NICAPACO), lIupeju, Lagos and was granted.
But Ikeja Electric filed a petition against the company on August 9, 2018 accusing it of encroaching on its network by supplying customers on Ikeja Electric’s priority feeders without the approval of the Commission. Ikeja Electric further objected Cummins’ application for an off-grid licence on grounds of encroachment into the DisCo’s distribution network and tampering with distribution infrastructure.
According to NERC, its investigation panel confirmed that Cummins had constructed distribution infrastructure without the Commission’s approval and ordered the company to defend its actions in January this year.
In its defence, Cummins said when it filed an application for a licence to supply power to NICAPACO, it did not receive an objection within the specified period and it did not receive any correspondence from NERC that any objections had been received. So it took NERC’s silence as acceptance, in line with the Executive Order 01 issued by the Vice President for the purpose of ease of doing business. Cummins thereafter entered into a supply arrangement with NICAPACO and commenced supply of off-grid electricity.
NERC ruled that the company’s response is an admission of the infractions it is accused of committing and ordered the immediate suspension of electricity supply to NICAPACO from CPGNL’s plants. NERC further ruled that Cummins decommission its distribution infrastructure to NICAPACO.
“CPGNL shall compensate IE for the loss of revenue for the period during which CPGNL supplied electricity to NICAPACO contrary to the terms of its off-grid generation licence.
“CPGNL is hereby fined the sum of NGN10,000 per day in accordance with section 75 EPSRA from the date of commencement of supply of electricity to NICAPACO contrary to the terms and conditions of its off-grid generation licence till the date of compliance with this order,” the Commission said.
If the fines were calculated from the day Ikeja Electric filed the objection since August 9, 2018, that will be close to 300 days, hence a fine of about N3 million.
The regulator said that PIPP breached a condition in section 7(1)(b) of the terms and conditions of its distribution licence which states that “the licensee shall not engage in the distribution or trading of electricity outside the approved distribution area specified in schedule 1 of its licence”.
NERC ordered the immediate suspension of electricity supply to the customers not covered by PIPP licence. The company will also compensate EKEDC for loss of revenue for each day electricity was supplied to the customers and NGN10,000 for each day electricity was supplied to the customers that were not on its network.
“This is an indication that is not going to be business as usual,” said Chuks Nwani, an energy lawyer. “The Commission is saying operators cannot take it for granted. It will now have the moral right to go after any erring operator.”
The sanctions on Cummins and PPIP stir once again the controversy surrounding operation of independent power producers in DisCos’ franchise areas. While NERC has ruled that there is no exclusivity over franchise areas, it is easy to contravene the provision of exclusive distribution network infrastructure.
Last year, there was a rash of lawsuits by DisCos, including Enugu DisCo over encroachment in Ariaria market by a private company under a programme supported by the Rural Electrification Agency. In this instance, NERC rejected the DisCo’s objection ruling arguing that it cannot deter power supply in areas it has not made the investment to improve its network.
Source: Business Day