B2507212-PHCN-HeadquartersNew owners of the Electricity Generation Companies (GENCOs) are threatening a legal action against the Nigeria Electricity Regulatory Commission (NERC).

They are not happy over the draft of interim rules and other regulatory issues that, in their view, seek to reduce the revenue of the companies instead of the provisions of the Multi-Year Tariff Order (MYTO).

The GENCOs collectively wrote a petition to the commission three days ago to reject the proposal, stressing that the NERC and the Bureau of Public Enterprises (BPE) were not keeping to the terms of the sales of the power entities.

NERC General Manager (Marketing and Rates) Abdukadir Shetimma revealed the content of the petition to the stakeholders at the two-day workshop with the purchasers of the Power Holding Company of Nigeria (PHCN) in Abuja.

He said: “Basically, what the comment is saying is that BPE and NERC are reneging from the terms of sale of the companies; they have paid for the companies you cannot be given any revenue less than what is in the MYTO. So, give us our monies in full or we will go to court. Basically, that is the kind of language or the conclusion or the comments by the GENCOs.”

Shetimma explained that the commission proposed the interim rules in the interim period since the transitional electricity market had not begun and cannot before the physical handover of the companies to the purchasers.

He said: “The Transitional Electricity Market (TEM) is a market where there will be trading by contract, there will be rules and all the rules in the market will be enforced and all the contracts will be in force. But that will not be in force because we have not met the conditions precedent to the Electricity Transition Market.

“And more importantly, the losses in the tariff are far from reality. The baseline losses and the population in the tariff have been questioned and we need to establish those baseline losses and factor them into the tariff so that there will be sufficient revenue in the entire value chain. We have to have a set of rules to guide the industry within this period when the losses will be validated, the tariff will be adjusted and the remaining few issues will be concluded. “

NERC, according to him, has proposed to commence the interim period on November 1 and end it on February 28.

He added that after all the conditions, which include the settlement of PHCN workers’ benefits, the Federal Government could declare the Electricity Transition Market on March 1, 2014.

His words: “We believe that the interim period is going to start from the first of November, and we expect that that day will coincide with the physical handover to the purchasers. And we expect it to end on February 28. And we will work for them to commence on March 1 or earlier than that.”

On how the sector would earn its revenue within the period, Abdulkadir said the revenue would be from the DISCOs’ monthly N20billion collections, the MYTO, which is N19.5 billion in the 2013 budget.

The General Manager, however, noted that from the amount set out in the MYTO 2, each DISCO will earn 100 per cent for salaries, fixed and valuable costs of 20per cent, return on capital 50 per cent and depreciation 10 per cent.

The GENCOs have already made their positions known in a petition on Tuesday.

The representative of Ughelli Generation Company, Janet Ubowu, who spoke in her personal capacity, said NERC had exposed them to the risk of underpaying their banks.

According to her, the commission is asking the purchasers to be patient should also understand that their banks lack such understanding.

Speaking on behalf of five distribution companies – Ibadan, Yola, Kano, Jos and Enugu – Robert Yates said that the companies demanded that the commission grants them 100 per cent salaries, 70 per cent fixed and variable costs, 60 per cent return on capital and depreciation 10 per cent of the revenue.

Besides, Smaila Zubello of Eko DISCO said: “We want NERC to understand that investors have commercial instincts. We cannot do things differently in breach of our bankers deal.”

On the PHCN workers’ fate, the representative of BPE, Mr. Amaechi Aloke, noted that the Federal Government would have paid off 38,000 staff out of the 45,000 who were verified by end of the year.

He added that for 20 years, the BPE has always asked the investors in privatised entities to retain the workers for six months, stressing that the case of the PHCN workers cannot be an exemption.


Information from The Nation was used in this report.