Electricity Consumer Bill Coming — NERC Boss
By Luka Binniyata
 4th DEC 2006

Dr. Ransome Owan, chairman, Nigerian Electricity Regulatory Commission (NERC) spoke on moves being made to improve power supply nationwide and the coming consumer bill of right.  Excerpts:

IS the Licence granted by the other company (Theme Energy), still subsisting by law, in view of the fact that the NERC has been formed by an Act to carry out such functions?
That is the question we are trying to find out. The law is clear that the commission has the right to grant a licence to anyone in the country to produce electricity. However, this is a unique case where it falls within another Free Trade Zone.

Have you issued out any licence for the Free Trade Zone?

No, we have not. However, anyone that wants to generate more that one Mw of power must come to the NERC for a licence. That’s what the law says. So they did the right thing by coming to apply, since they will be generating more than one megawatt of electricity. Theme Energy is for 50 Mw of power. It is just that another company is challenging that right.

Does the Ministry of Power and Steel still have the power to issue a licence?

If a valid licence exists and has been entered by government, then the validity of that licence cannot be contested.

Is proximity, or spacing of power station not part of the consideration for issuing a licence?

No! the law says that the siting of a power plant shall be neutral to geography. However, if there were to be exclusivity for any amount of time that should come from the commission. One of the key issues here is exclusivity of the siting of a power plant on the footprint of Onne Free Trade Zone. That is why we have created a record to take care of such issues once and for all.

Does that licence from Theme Energy accrue to it the excusive authority to be the sole provider of electricity to sell power in that zone? that is what we will be looking into. The law also says that the NPA and the Zonal Authority can issue a C-of-O to anyone trying to do their kind of approved business in the zone. It also implies that the authority can permit anyone to do business there.  So it is a matter of testing exclusivity claims by one party versus the right of another person to duly conduct business within that free trade zone.

What is the power need of that free trade zone that would push these parties into such a squabble?

According to what we gathered today, some studies have been conducted and the conclusion was that there was suppressed demand. Put in mind that this zone is not connected to the national grid.  Therefore, everybody is producing power for his own need. To lower cost, it was necessary to build a power plant that will help. And for the first phase of the plans of Alliance Energy, they will produce 50Mw and increased according to the needs. Because people haven’t signed up and the place not fully built, it is therefore difficult to estimate the power demand there.

How are the companies you issued licences doing today?

In the initial four licences we gave, everybody is doing fine. One of the smaller units I believe should come online, within the next 24 to 36 months. What we did in that initial phase – in the conditions of the licences, we have put some milestones that within six months we would like to see this happen, and the next subsequent months we would like to see you move to that stage. So they are still within those six months. And to the best of my knowledge, everybody is progressing well.
What is their total capacity?

About 4,700 Mw for those four companies. For small power plants of say, 50 Mw, you can construct it under say, three years, maybe two and half, once you have the finances, you should be commissioning after that time.

If it is between 350 or 500 Mw, that should take you about four years.
Why?

Just to do your dry or wet season test on the Environmental Impact Assessment. That will take you a year. A pipe for a major power plant like that that conveys water for the cooling systems is eight feet in diameter.
Now to an issue that concerns us very much… Last year you confirmed to us that PHCN has applied to you asking that their electricity tariff be raised. And you said you were looking into it, in view of the complex computation that it requires. What is the stand of the commission on that issue now?
And your tariff has not gone up? (laughter)

It has in a very clever way

No we have not increased the tariff of electricity. There is no increase in electricity tariff since the application was filed. The commission has not approved a tariff increase to the PHCN or its subsidiaries. That’s number one, and I want that to be on record. On what the commission is doing about tariff, when we said we were studying the request, it wasn’t just about the tariff. We were studying how to handle tariffs, so that consumers can be more comfortable and they can predict tariff and the cost they would have to pay as against guessing. And the instrument we want to introduce to take care of that is Multi Year Tariff Order (MYTO). The MTYO is a long time projection of tariff.  The focus would always be within the immediate five years. It could go up to 15 years. But our focus now is for the immediate five years.

All consumers will know what their tariff will be in the next five years. We will publish that number for five years. It will help you to plan your business well and to conserve energy. The only thing that will change, maybe on annual basis within that five years is if inflation becomes too high, if the price of oil and gas goes too high in a way that was not predicted, then, we will create a small adjustment to account for these differences. But, in the overall you will be able to know what your bill will be in the next five years. That’s the purpose of the MYTO.

In this Bill of Right, will there be room for compensation to aggrieved consumers?

In the toolkit of consumers Bill of Right, it may include compensation, for damages, because the utility is no longer NEPA so people can actually sue. People who feel they have their goods damaged can seek for compensation. This will actually be in the law courts, not the commission. In the UK, for example, if power is out, it has to be restored within three minutes. Beyond that the utility company will pay damages to the consumer. That is how far they have gone. We are not yet there, however, we will work on the restoration of power and keep them within a milestone. But remember that  change can create uncertainty, and it is also expensive. And the industry now may not have a strong  balance sheet because of where we are coming.

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