NERC opposes splitting of TCN



• To place limit on estimated billing
• Moves to end government involvement TCN successor firm
• Uncertainty as Manitoba’s contract ends July 

THERE is no end in sight yet to the many travails that have rendered almost comatose, electric power supply and distribution to Nigerians as the Nigerian Electricity Regulatory Commission (NERC) has protested the hurried ‘unbundling’ of the Transmission Company of Nigeria (TCN).

It also says the appointment of chief executive officers for the two successor companies created on May 18, 2015 is illegal.

The Ministry of Power had on May 18 ‘split’ the Transmission Company of Nigeria (TCN) into the Independent System Operator (ISO) and Transmission Service Provider (TSP) and gone ahead to issue guidelines “for the smooth operation of the functions of TSP and the ISO as conveyed by the Presidential approval vide letter Ref. No: PRES/143/VP/732/89/MPWR/139/81/SGF/4/541 dated 8th May, 2015.”

The ministry then appointed Mrs Osuhor Ngozi as the managing director of the ISO, and Atiku Abubakar, an engineer, as managing director and chief executive of the TSP.

But at a stakeholders’ consultation on the terms and conditions for ISO in Abuja, NERC Chairman, Sam Amadi and top management of the commission refused to recognise Osuhor, insisting that Nigeria does not yet have an ISO as the process for establishing such as stipulated in the Electricity Power Sector Reform (EPSR) Act had not been followed through. Corroborating Amadi’s position, Manitoba Hydro International (MHI) of Canada, which has a three-year management contract for TCN, stressed that what should be put in place is a ring-fencing of the two operations of TCN pending conclusion of the unbundling process.

Further highlighting the proposal for the establishment of ISO, representative of NERC, Mr. Ahmed Tukur told the meeting that: “NERC is empowered to decide the terms and conditions for the transfer of functions of market operations to the Independent System Operator (ISO).

Preparatory to the establishment of an ISO, NERC in line with the terms and conditions requested the surrender of the transmission licence to allow for the issuance of two separate licenses for Transmission and System Operation.

“This action facilitated the ring-fencing of the functions of the SO and MO from TSP to forestall any interference by TCN in market and system operations.

Reorganising TCN to enable the MO and SO operate as separate entities will enable the system operate optimally and facilitate the achievement of the objectives of the Roadmap for Power Sector Reform. The new ISOP is expected to provide non-discriminatory and efficient system operation and market administration services to all participants.

The roles and responsibilities of the ISO is planned to include both system and market operations. By NERC’s proposal, the ISO would also own the national and regional control centres but will not operate the transmission substations.

The final results from the series of consultations and engagements on the ISO are expected to be largely guided by the policy direction of the new government of President Muhammadu Buhari. Similarly, NERC is working on placing a ceiling to the amount distribution companies can charge under estimated billing as a way of encouraging the Discos to meter its customers.

NERC presented the proposal on capping estimation in the Nigerian Electricity Supply Industry (NESI) to stakeholders in Abuja yesterday.

Amadi spoke on the consultations. His words: “Let me clear that we want to start today to open up these propositions for industry comments.

We hope that after today, stakeholders will send much more deeply considered views on these issues. “Let me also say it that as regulator, NERC has no pre-concluded views on any of these issues.

The ISO is provided for in the EPSR Act. It is now left for the industry, whether it is appropriate at this stage, what would be the model, the nature it would take, who should own it, the management structure and how it should operate largely in line with the market rules and the Electricity Power Sector Reform Act.

“As a regulator, NERC has not concluded on any of these issues that are posed today for industry consultation and consideration.

So, I will encourage us to grapple with these and offer our views, knowing that there would be other forums for the consideration of these issues. Second, we open it for contribution in terms of papers and comments.

Third, depending on the preponderance of views, set up an industry study group with responsibility to put up the final technical brief which the Commission in consultation with stakeholders will consider again before an appropriate order or regulation is issued.”

On a ceiling on estimated billing, Amadi noted: “NERC has championed and encouraged aggressive metering of consumers, which is a core responsibility of distribution companies.

We have started with the N2.9 billion metering subsidy released during the days of PHCN. During the Multi Year Tariff Order-2 (MYTO 2), we also put 18-month period during which all consumers should be metered.

‘‘Eight months later, we discovered that a 50 per cent increase in salaries and allowances negotiated by government as part of privatising the Discos had increased operational cost and in their view, made it difficult to carry out aggressive metering .

Because those excuses were largely justified, we created the Computer Assisted Postmortem Identification (CAPMI) to encourage consumers who could not wait for when the new owners roll out their meters to sign off for metering and pay and get rewarded or compensated through energy credit based on the fixed charge. “The CAPMI programme was voluntary.

There was some progress before the new owners took over and ever since, we have been monitoring performance of CAPMI and other metering initiatives of the Discos.

But within the same period, consumers continued to complain about exorbitant bills arising from estimation. We have investigated, monitored and started some administrative action against some of the distribution companies.

As a way of stopping estimated billing, we came out with a methodology to bring out some degree of scientific or objective assessment of unmetered consumers. We have also realised that perhaps the methodology might be difficult to operationalise.

“So, this new initiative is to build up on the previous aimed at shifting the economic incentive for metering back to the Discos instead of the consumers.

The idea is to cap the revenue that would come from unmetered consumers on the basis that that could encourage the distribution companies to do more to provide meters to those consumers. Regulation is not a popularity contest as there would be issues around this proposal.

That is why it is presented before every one of us to allow us to profit from the wisdom of industry operators, fellow regulators, policy makers in the industry, as well as consumers who themselves are responsible or are the ‘victims’ of estimation arising from lack of metering. I do hope that you will clearly make your views known.”

Meanwhile, uncertainty is trailing the fate of Manitoba Hydro International (MHI) of Canada which has a three-year management contract for the Transmission Company of Nigeria. Managing Director TCN, Mack Kast, told The Guardian that: “MHI is working diligently to renew the contract.”

The TCN management board had recommended that the contract with Manitoba should be renewed, but with the ministry hurriedly unbundling TCN before May 29, it may mean that the Canadian firm might just be marking time until July when its contract officially ends.

In the contentious memo splitting TCN into TSP and ISO on May 18, the Ministry of Power had noted: “… the subsisting management contract of Manitoba Hydro International (MHI) will continue to operate until the incoming administration takes a decision on its status. Accordingly, the managing director from MHI will provide overall oversight over both entities i.e.

TSP and ISO until further notice. The MHI management will also be required to split the current staff of MHI to provide needed technical support to both entities as it pertains to their specific functions.”

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1 Comment
  • Paddy8

    Independent MO cannot be successful unless country has created self sufficiency in generation , transmission,distribution. This depends on several factors- (1) fuel security (2) massive increase in gas generation and multi fuel generation facilities (3) stability in gas supplies, gas transmission (4) adequacy and stability in transmission net work (5) adequacy and stability in distribution network (6) countrywide metering (7) consolidation in distribution networks- integration of direct distribution and embeded generation distribution (8) significant reduction in transmission/distribution losses (9) most importantly country wide network of electricity systems to ensure 24×7 supplies pan Nigeria. If we do not achieve this any MO will end up in speculative trading and thus, we could face situations like California in 2000 and 2001 when large companies like Enron collapsed because of fraud, large generation companies fell into Chapter11 because of trading losses.TCN`s basic responsibility now is to build,strengthen, manage country wide transmission network and they should focus their attention only in these areas.In my view, present government has no other priority than to build generation, transmission, distribution capacities to make affordable power available on24x7 throughout Nigeria.NERC has given extraordinary leadership in guiding the electricity industry so far and any efforts to confront their authority will undermine the electricity system in Nigeria.As regards MHI my views are (1) why not an international tender that could attract large national transmission companies from China, India etc? (2) better still why not move towards building a Nigerian company to manage the Transco- with technical support from large international transcos in the short run?