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GEPLAW Power Masterclass: Building Capacity in the Power Sector

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GEPLAW Power Masterclass: Building Capacity in the Power Sector

The law firm of George Etomi and Partners (GEPLAW) has in recent times carved an enviable niche for itself as a major player in the nation’s electric power supply – not least due to the vibrant and robust interventions of its energy practice group, and the position of its Principal Partner, Mr. George Etomi, as a director on the board of the Eko Electricity Distribution Company (EKEDC or Eko Disco). This vantage point has given the company and its principal officers a keen awareness of the huge knowledge gap that exists among members of the legal and other professions regarding the nitty-gritty of the nation’s power sector – and especially the issues around the country’s power generation, transmission and distribution value-chain. The vexed question of why Nigeria’s power output seems stuck within the abysmal range of between 3,000 megawatts and 5,000 megawatts was one which the company felt was worth interrogating.

It was with a view to plugging this knowledge and information gap among professionals from various walks of life that the firm held a Power Masterclass on Friday, October 4, 2019 at its Lagos offices.

In his welcoming remarks at the GEPLAW Power Masterclass, the Principal Partner of GEPLAW, George Etomi used the recent blowup over the failed P&ID gas deal (for which Nigeria was fined a whopping $9.9bn by a British arbitral court) as an example of the lack of correlation between good intentions and proper structure that has continued to bedevil the power sector in Nigeria.

Beyond the huge award against Nigeria, the P&ID project represents a massive lost opportunity for the country, as it was set to generate an additional 2,000 megawatts of power for the national grid; at present, estimates say that only 59% of the country’s population has access to reliable electricity supply.

Calling for economic diversification in general, and an accelerated pace of privatization in the power sector in particular, Etomi again used the recent deregulation in the country’s banking and telecommunications sectors to make the point that a lot of good things could happen when an economy allows itself to be opened up as a demonstration of political will by those in authority.

Noting that the reliance on fossil fuels as the principal source of energy is going out of fashion, Etomi disclosed that gas (of which Nigeria has one of the most enormous untapped reserves in the world) will play a dominant role in powering the world. He identified what he called ‘institutional knowledge’ especially among public sector workers – and the clamour by a number of entrenched interests for the re-nationalization of recently deregulated sectors, including power – as some of the chief barriers to the transition necessary to ensure adequate power supply as an aid to rapid economic growth and the unlocking of Nigeria’s massive potential, and said such a step back must not be allowed to happen.

The GEPLAW Power Masterclass, he ended by saying, was in response to what he called the ‘Uber-ization’ of knowledge’ – thanks to the internet – and the need to ensure that knowledge about the workings of the nation’s power sector was disseminated as widely as possible.

A partner in GEPLAW’s energy and infrastructure projects department, Mrs. Ivie Ehanmo took the GEPLAW Power Masterclass, which laid out the Foundational Concepts in the Power Sector, and the commonly-used terms in the industry. She began by identifying the current status of the sector as tending towards perfect competition – as opposed to a monopoly or an oligopoly. She took the participants through the history and evolution of the power sector in Nigeria, as well as the electricity value-chain, which she said went beyond energy supply and the resultant collection of revenue, to an integrated mechanism which is linked back to back by contracts. The ongoing reforms in the sector, she asserted, were motivated by chronic inefficiency, leakages, losses and lack of funds for further investments by government and other stakeholders – including private investors both local and foreign. The New Delhi model of privatization, which was the model adopted in the Nigerian process for its success on minimizing losses. She however, lamented that due to a multiplicity of factors, the entire power sector value chain was experiencing a liquidity crisis.

Ehanmo also touched on other topics such as the rationale for privatization; the timeline of the privatization process; the transition strategy, among others, as well as the meaning of terms such as MYTO (the Multi-Year Tariff Order); CRT (Cost-Reflective Tariffs); PPA (Power Purchase Agreement); NBET (Nigerian Bulk Electricity Trader); TEM (Transitional Electricity Market); VC (Vesting Contract); GPA (GenCo Performance Agreement), CAPEX (Capital Expenditure & Investment), NESI (the National Electricity Supply Industry), SHA (Shareholders Agreement), etc.

Mr. Samson Ozah, an associate with GEPLAW, took a presentation on the Legal and Regulatory Context of the Nigerian Power Sector, in which he identified the Constitution of the Federal Republic of Nigeria in general – and in particular the EPSR Act of 2015 – as the primary legislation governing the sector. He listed a number of policy and regulatory agencies currently overseeing the sector, such as the Federal Ministry of Power; the National Electricity Regulatory Commission (NERC); the Electricity Commission of Nigeria (ECN) and the Presidential Task Force on Power. The 2010 Electricity Roadmap launched by former President Goodluck Jonathan, he said, also provided some policy guidance of the way forward for the Nigerian power sector. While identifying the Transmission Company of Nigerian (a government-owned body) as the ‘weakest link’ in the electricity value chain (although this assertion was hotly contested by a representative of TCN present at the training), Ozah reminded participants that sub-national bodies such as states and local government areas were now free under current regulations to participate in the electricity supply value chain, to match the unbundling of NEPA (the National Electric Power Authority, as it then was) into smaller units. He also the key players and institutions in the sector to include gas supply companies, electricity supply companies, transmission and wholesale companies, electricity distribution and consumption companies, transporters, GenCos, DisCos and, of course, consumers. Tariff, he also said, was the proverbial elephant in the room, lamenting that this was the case partly because reforms in the power sector only came after reforms in the telecommunications and banking – when they should have preceded them in an ideal situation.

Mrs. Ivie Ehanmo returned to the podium to discuss the mechanism of the Multi-Year Tariff Order (MYTO), its periodic reviews (both major and minor), and the ways in which it has succeeded, or failed, in meeting its revenue targets. In January 2020, for example, new tariffs will take effect, which would essentially reset the market for a new tariff plan. The huge losses the industry has incurred over the years, she said, do not capture certain kinds of debt, such as that owed by MDAs (ministries, departments and agencies) at both national and sub-national levels.

In yet another presentation during the GEPLAW Power Masterclass, Ehanmo also spoke to the chronic liquidity crisis currently facing the sector, and why tariffs are still not cost-reflective. She blamed this state of affairs partly on the disparity between initial revenue assumptions at the outset of the privatization process and the reality, as well as the non-resolution of the aforementioned MDA debt. She also identified the ‘deep-rooted culture of non-payment’ of electricity bills among consumers as a major challenge, as well as the scourge of electricity theft. This liquidity crisis, she said, was the reason why banks in Nigeria are so unwilling to lend to DisCos (distribution companies) today.

A good start towards solving the liquidity crisis – and indeed all other problems currently besetting the sector, Ehanmo asserted, would be to institute a cost-reflective tariff regime over 10 years, in a bid to enhance market stability. Other measures, she suggested, must be geared towards reliable transmission; adequate gas supply; and reducing losses.  The fluctuating foreign exchange environment – especially as it affects the naira, Nigeria’s currency, plus the volumetric and political risks associated with the industry, and other wider factors, she said, were among the risks faced by the sector and its players (operators, regulators, customers).

Mrs. Ehanmo suggested that these risks must be properly allocated. Government, for example, must bear the lion’s share of responsibility. Government must also support NESI in other ways by correcting the misalignment of the value chain and establishing transparency in its revenue flow. Other future mitigants, she said, include a strong and reliable policy and regulatory framework. While there is no silver bullet as far as solutions were concerned, she added, all solutions must of necessity be dependent on cost-reflectivity of tariffs.

Another facilitator, Mr. Akinola Ogunsakin, spoke on the Commercial Framework of the Power Sector. He dwelt at length on the commercial and technical implications of agreements such as the TCN (Transmission Connection Agreement); GSA (Gas Supply Agreement); and PPA (Power Purchase Agreement) between various industry players. He also touched on the NESI’s dispute resolution mechanism – via the customer complaint units of individual DisCos, or via the Customer Complaints Forum of NERC, as provided for by the Customer Complaints Regulation, in particular the Standards & Procedures Regulation of 2006, as well as NERC’s Dispute Resolution Panel under market rules and its Business Rules as regards power sector disputes. In the end, however, Ogunsakin said, dialogue has proved over time to be the best way of resolving disputes.

The last presentation of the GEPLAW Power Masterclass, by Ms. Dianabasi Okop, was on Off-Grid Power Supply (which she defined to mean electricity supply that is not connected to the national grid) and the legal and regulatory structure under-girding it. This, she said, could be gotten form renewable, solar, geo-thermal and hybrid sources. She outlined the challenges faced by providers and consumers of off-power supply to include low and uncertain feedstock; weak infrastructure; lack of cost-reflective tariffs; environmental pollution; inadequate metering infrastructure; and regulatory instability.  Okop also outlined the off-grid-related regulatory path in Nigeria, from the first body of laws in 2016 to the latest amendments in enacted in 2017 by NEMSA (The Nigerian Electricity Management Services Agency) the main regulator for off-grid power structures in the country. She went on to list the different kinds of off-grid power providers in the country, and what they should look out for in the execution of their mandates to their customers – especially as they relate to NERC and other regulators of mainstream, on-grid power supply structures.

The GEPLAW Power training session, which was highly interactive, also featured lively Q&A sessions, as participants expressed their interest or concerns about a wide variety of issues and trends in the Nigerian electricity supply value chain.

By common consent, it was a highly illuminating session indeed, as participants expressed their interest in attending more sessions of this kind – and playing more active (or advisory) roles in the nation’s electric power supply industry – in the not too distant future.

See photos below:

             


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GEPLAW Masterclass for Lawyers: Building Capacity in the Power Sector

The law firm of George Etomi and Partners (GEPLAW) has in recent times carved an enviable niche for itself as a major player in the nation’s electric power supply – not least due to the vibrant and robust interventions of its energy practice group, and the position of its Principal Partner, Mr. George Etomi, as a director on the board of the Eko Electricity Distribution Company (EKEDC or Eko Disco). This vantage point has given the company and its principal officers a keen awareness of the huge knowledge gap that exists among members of the legal and other professions regarding the nitty-gritty of the nation’s power sector – and especially the issues around the country’s power generation, transmission and distribution value-chain. The vexed question of why Nigeria’s power output seems stuck within the abysmal range of between 3,000 megawatts and 5,000 megawatts was one which the company felt was worth interrogating.

It was with a view to plugging this knowledge and information gap among professionals from various walks of life that the firm held a Masterclass on Friday, October 4, 2019 at its Lagos office.

In his welcoming remarks, the Principal Partner of GEPLAW, George Etomi used the recent blowup over the failed P&ID gas deal (for which Nigeria was fined a whopping $9.9bn by a British arbitral court) as an example of the lack of correlation between good intentions and proper structure that has continued to bedevil the power sector in Nigeria, as well as the mismatch between the policies of government and the needs of the private sector in its quest to complement the public sector in providing adequate power supply to Nigerian homes, offices, factories, etc. Calling for economic diversification in general, and an accelerated pace of privatization in the power sector in particular, Etomi again used the recent deregulation in the country’s banking and telecommunications sectors to make the point that a lot of good things could happen when an economy allows itself to be opened up as a demonstration of political will by those in authority.

Noting that the reliance on fossil fuels as the principal source of energy is going out of fashion, Etomi disclosed that gas (of which Nigeria has one of the most enormous untapped reserves in the world) will play a dominant role in powering the world. He identified what he called ‘Institutional Knowledge’ especially among public sector workers – and the clamour by a number of entrenched interests for the re-nationalization of recently deregulated sectors, including power – as some of the chief barriers to the transition necessary to ensure adequate power supply as an aid to rapid economic growth and the unlocking of Nigeria’s massive potential, and said such a step back must not be allowed to happen. The Masterclass, he ended by saying, was in response to what he called the ‘Uber-ization’ of knowledge’ – thanks to the internet – and the need to ensure that knowledge about the workings of the nation’s power sector was disseminated as widely as possible.

A partner in GEPLAW’s energy and infrastructure projects department, Mrs. Ivie Ehanmo took the Masterclass, which laid out the Foundational Concepts in the Power Sector, and the commonly-used terms in the industry. She began by identifying the current status of the sector as tending towards perfect competition – as opposed to a monopoly or an oligopoly. She took the participants through the history and evolution of the power sector in Nigeria, as well as the electricity value-chain, which she said went beyond energy supply and the resultant collection of revenue, to an integrated mechanism which is linked back to back by contracts. The ongoing reforms in the sector, she asserted, were motivated by chronic inefficiency, leakages, losses and lack of funds for further investments by government and other stakeholders – including private investors both local and foreign. The New Delhi model of privatization, which was the model adopted in the Nigerian process for its success on minimizing losses. She however, lamented that due to a multiplicity of factors, the entire power sector value chain was experiencing a liquidity crisis.

Ehanmo also touched on other topics such as the rationale for privatization; the timeline of the privatization process; the transition strategy, among others, as well as the meaning of terms such as MYTO (the Multi-Year Tariff Order); CRT (Cost-Reflective Tariffs); PPA (Power Purchase Agreement); NBET (Nigerian Bulk Electricity Trader); TEM (Transitional Electricity Market); VC (Vesting Contract); GPA (GenCo Performance Agreement), CAPEX (Capital Expenditure & Investment), NESI (the National Electricity Supply Industry), SHA (Shareholders Agreement), etc.

Mr. Samson Ozah, an associate with GEPLAW, took a presentation on the Legal and Regulatory Context of the Nigerian Power Sector, in which he identified the Constitution of the Federal Republic of Nigeria in general – and in particular the EPSR Act of 2015 – as the primary legislation governing the sector. He listed a number of policy and regulatory agencies currently overseeing the sector, such as the Federal Ministry of Power; the National Electricity Regulatory Commission (NERC); the Electricity Commission of Nigeria (ECN) and the Presidential Task Force on Power. The 2010 Electricity Roadmap launched by former President Goodluck Jonathan, he said, also provided some policy guidance of the way forward for the Nigerian power sector. While identifying the Transmission Company of Nigerian (a government-owned body) as the ‘weakest link’ in the electricity value chain (although this assertion was hotly contested by a representative of TCN present at the training), Ozah reminded participants that sub-national bodies such as states and local government areas were now free under current regulations to participate in the electricity supply value chain, to match the unbundling of NEPA (the National Electric Power Authority, as it then was) into smaller units. He also the key players and institutions in the sector to include gas supply companies, electricity supply companies, transmission and wholesale companies, electricity distribution and consumption companies, transporters, GenCos, DisCos and, of course, consumers. Tariff, he also said, was the proverbial elephant in the room, lamenting that this was the case partly because reforms in the power sector only came after reforms in the telecommunications and banking – when they should have preceded them in an ideal situation.

Mrs. Ivie Ehanmo returned to the podium to discuss the mechanism of the Multi-Year Tariff Order (MYTO), its periodic reviews (both major and minor), and the ways in which it has succeeded, or failed, in meeting its revenue targets. In January 2020, for example, new tariffs will take effect, which would essentially reset the market for a new tariff plan. The huge losses the industry has incurred over the years, she said, do not capture certain kinds of debt, such as that owed by MDAs (ministries, departments and agencies) at both national and sub-national levels.

In yet another presentation, Ehanmo also spoke to the chronic liquidity crisis currently facing the sector, and why tariffs are still not cost-reflective. She blamed this state of affairs partly on the disparity between initial revenue assumptions at the outset of the privatization process and the reality, as well as the non-resolution of the aforementioned MDA debt. She also identified the ‘deep-rooted culture of non-payment’ of electricity bills among consumers as a major challenge, as well as the scourge of electricity theft. This liquidity crisis, she said, was the reason why banks in Nigeria are so unwilling to lend to DisCos (distribution companies) today.

A good start towards solving the liquidity crisis – and indeed all other problems currently besetting the sector, Ehanmo asserted, would be to institute a cost-reflective tariff regime over 10 years, in a bid to enhance market stability. Other measures, she suggested, must be geared towards reliable transmission; adequate gas supply; and reducing losses.  The fluctuating foreign exchange environment – especially as it affects the naira, Nigeria’s currency, plus the volumetric and political risks associated with the industry, and other wider factors, she said, were among the risks faced by the sector and its players (operators, regulators, customers).

Mrs. Ehanmo suggested that these risks must be properly allocated. Government, for example, must bear the lion’s share of responsibility. Government must also support NESI in other ways by correcting the misalignment of the value chain and establishing transparency in its revenue flow. Other future mitigants, she said, include a strong and reliable policy and regulatory framework. While there is no silver bullet as far as solutions were concerned, she added, all solutions must of necessity be dependent on cost-reflectivity of tariffs.

Another facilitator … spoke on the Commercial Framework of the Power Sector.He dwelt at length on the commercial and technical implications of agreements such as the TCN (Transmission Connection Agreement); GSA (Gas Supply Agreement); and PPA (Power Purchase Agreement) between various industry players. He also touched on the NESI’s dispute resolution mechanism – via the customer complaint units of individual DisCos, or via the Customer Complaints Forum of NERC, as provided for by the Customer Complaints Regulation, in particular the Standards & Procedures Regulation of 2006, as well as NERC’s Dispute Resolution Panel under market rules and its Business Rules as regards power sector disputes. In the end, however, … said, dialogue has proved over time to be the best way of resolving disputes.

The last presentation of the day, by Ms. Dianabasi Okop, was on Off-Grid Power Supply (which she defined to mean electricity supply that is not connected to the national grid) and the legal and regulatory structure undergirding it. This, she said, could be gotten form renewable, solar, geo-thermal and hybrid sources. She outlined the challenges faced by providers and consumers of off-power supply to include low and uncertain feedstock; weak infrastructure; lack of cost-reflective tariffs; environmental pollution; inadequate metering infrastructure; and regulatory instability. Okop also outlined the off-grid-related regulatory path in Nigeria, from the first body of laws in 2016 to the latest amendments in enacted in 2017 by NEMSA (The Nigerian Electricity Management Services Agency) the main regulator for off-grid power structures in the country. She went on to list the different kinds of off-grid power providers in the country, and what they should look out for in the execution of their mandates to their customers – especially as they relate to NERC and other regulators of mainstream, on-grid power supply structures.

The training session, which was highly interactive, also featured lively Q&A sessions, as participants expressed their interest or concerns about a wide variety of issues and trends in the Nigerian electricity supply value chain. By common consent, it was a highly illuminating session indeed, as participants expressed their interest in attending more sessions of this kind – and playing more active (or advisory) roles in the nation’s electric power supply industry – in the not too distant future.

See photos below:

           


Deji Sasegbon’s Latest Dictionary: Place your order now. Call:08076095047, 07036688678, 08035629991

 


Newswire, we present the world of law and the issues that engage them. This edition is yet again,  ‘Mind-blowing’. Go get your copy(ies) Now!

Do you need to be heard? Or your articles published? Send your views, messages, articles or press release to: newswiremagazine@yahoo.co.uk  >>> We can cover your (LAW) events at the first Call: 08039218044, 08024004726

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