The Federal Government may soon delve into the case involving the Lagos State Government and the Power Holding Company of Nigeria, PHCN, Ikeja Electricity Distribution Company Plc, Eko Electricity Distribution Company Plc and Transmission Company of Nigeria, TCN over alleged breach of electricity supply obligations to the territory and people of Lagos State as well as wrongful invoicing of the government.
This follows NERC’s recent ruling on issues raised by the respondents which were targeted at establishing the legality of NERC to look into the case as part of its statutory functions.
The Lagos State Government had taken the matter to NERC in 2009 alleging a breach of electric power supply obligations to the territory and people of Lagos State of Nigeria and wrongful invoicing of the state.
The case dates back to 1999, when the Lagos State Government in an attempt to provide an uninterrupted power supply to residents of Lagos State conceived the idea of an Independent Power Project, IPP and invited Enron Corporation of the United States of America to undertake the project.
It was learnt that due to the legal and regulatory frameworks as well as operational parameters of the sector at that time, the contractual parties were the Lagos State Government, the defunct National Electric Power Authority, Federal Government of Nigeria, Enron Nigeria Holding Limited and Enron Nigeria barge Limited which was later replaced by AES by way of assignment of interest of Enron parties.
Under the agreement, Enron was required to generate power and sale it to the National Electric Power Authority, NEPA, the forerunner of the present PHCN which was to transmit and distribute it to consumers in specific areas of Lagos in addition to power generated from other sources under arrangement of that period.
Also, under the amended BPPA dated 20th June 2000, the Lagos State was also required to pay and take delivery of the power like NEPA under clause nine of the agreement.
Consequently, the state government entered into a Contribution Agreement with NEPA on June 30, 2000 which demanded it to pay 21.15 per cent of the amount invoiced to the Authority under the BPPA. The state government later directed the Federal Ministry of Finance to make direct deductions from its monthly Federal Allocation to NEPA on June 14, 2000 to service the transaction..
The instruction, it was learnt was later to serve only as a form of additional security for payment of Lagos State Government under the BPPA. In June 2001, the IPP became operational and NEPA started to purchase electricity under the BPPA.
However, the petitioner alleged that the Respondent failed to deliver any or all the power to consumers as specified in the PBBA. The Lagos State Government further alleged that despite the breach, NEPA sought to collect from the State Government, contributions to the BPPA capacity tariffs in line with the Contribution Agreement.
The PHCN that took over from NEPA also continued to invoice the state government while the Federal Ministry of Finance continued to make such deductions at source in favour of PHCN despite the cancellation of the Lagos State Government. The Lagos State Government therefore filed an instant petition seeking redress against the alleged breaches as well as an end to the alleged illegal deductions.
Specifically, the state government who was represented by its Attorney General, Mr. Supo Shasore, SAN, sought a declaration that the first, second, third and fourth respondents breached their electricity supply obligations to the government and people of Lagos State and to all electricity consumers within the state.
It sought an order directing the respondents to deliver to the petitioner the contracted power in addition to power to which the state was entitled prior to the execution of the Barge Power Purchase Agreement, BPPA, or in alternative a declaration that by virtue of the technical condition of the infrastructure available in Nigeria, it was impossible to deliver said power to Lagos State. The petitioner also sought all other orders as NERC may deemed fit in the circumstances.
However, the respondents who were represented by Mrs. Julia Utulu with Aliyu Ibrahim challenged the action. Specifically, they sought for an order striking out the petition for lack of jurisdiction of the commission to adjudicate over the matter or in the alternative for an order of the commission staying further in the present petition pending referral of the dispute between the petitioner and the respondents to arbitration.
The respondents argued that the subject should be struck out because the subject matter was a bridge of contract and does not fall within the contemplations of and purview of the provisions of section 32 of the Electric Power Sector Reform Act, 2005 (Cap e7, Laws of the Federation of Nigeria 2004).
They argued that the petition involved a dispute between a Federal Government agency and a state government, as such; the commission was not the appropriate forum for the adjudication of the dispute involving them. The respondents also argued that there was an arbitration clause contained in the agreement dated 30th June 2000 between the petitioner and the respondents.
But the Chairman, Dr. Ransome Owan and Commissioners, Dr. Alima Abdul-Razaq and Grace Eyoma made it emphatic in their ruling that: “In our opinion, the ends of justice and proper development of the Nigerian electricity market would not be well served if the Commission abdicates its statutory responsibility by granting stay rather than proceeding with this matter.
In the ruling copied from NERC’s website, the Commission further stated that: “It is our decision therefore to dismiss the Respondents/Applicants’ Objection and to proceed with hearing. If the Commission deems it necessary, it may, at the hearing of the Petition, refer any aspect of the Petition it may deem fit to the appropriate judicial or arbitral panel.’’
It also stated that: “The Commission maintained that this is not an appropriate case for the Commission to abdicate jurisdiction or grant stay of proceedings pending arbitration because of an arbitration clause. On the foregoing cases, the objection of Respondents/Applicants challenging the jurisdiction of the Commission to consider the Petition of the Petitioner/ Respondent or in the alternative seeking stay of proceedings pending is hereby dismissed and denied.”
Information from National Mirror was used in this report.