Twenty-four hours after completing his tenure, immediate past chairman of the Nigerian Electricity Regulatory Commission, NERC, Sam Amadi, spoke with PREMIUM TIMES about his challenges, achievements in office as well as his ambition. In a two parts interview with Business/Economy Editor, BASSEY UDO, Mr. Amadi said he left behind a credible NERC leadership, electricity market.
Excerpts:
PREMIUM TIMES: Your tenure as chairman of NERC ended yesterday. You have come to the point where Nigerians and posterity would pass their verdict. What would you say that would be?
AMADI: I want to write a book. The tentative title of the book is ‘Mission (Un) Accomplished”. That means mission either accomplished or unaccomplished, depending on what people choose to see my tenure in office.
I see myself as lucky to have managed the country’s electricity sector when all these reforms were happening. This is a mission accomplished, because I set out to create a credible leadership in NERC and the electricity market; to make NERC an effective regulator capable of accomplishing its regulatory mandate.
Before we came, the Nigerian electricity market was totally without credibility. Former commissioners were hounded out of office on allegation of corruption. Even the Multi-Year Tariffs Order (MYTO) was not being implemented properly.
Clearly, we needed to make a clean break from a NERC that was conflict-ridden, dysfunctional, and lacking in standard procedures and credible processes. That was why NERC was the first to sign on to the Freedom of Information Law.
NERC has remained the only agency to publicly declare the codes of conduct for the commissioners to commit to good conduct, namely zero tolerance for corruption, and good conduct.
We have created a transparent process where resolutions and decisions of the commission are warehoused. So, we achieved the first pillar of creating a clear and transparent regulatory market.
We have also created a regulatory framework for the industry and a step by step process for tariff review. Everybody knows what the rules are, and the ones NERC would follow.
We have succeeded in establishing a credible electricity market. Today, the World Bank and US EXIM Bank say the Nigerian electricity market is the most transparent and credible in Africa, because it is bankable and reliable.
Today, we have licensed over 144 independent power producers capable of generating 32,000 megawatts, MW.
The tariff order, methodology and pricing framework, interconnectivity agreements, grid codes, standard codes and the various embedded generations are now creating more investments in the industry. We have created a local content regulation to promote local participation in service delivery.
We may not achieve reliability, but we have established the framework. We have now de-risked the value chain. Now, we know what to do with gas supply. We have a commercially viable gas price at $2.50 and 80 cents for transport. The regulatory problem of gas pricing has been cured.
Before privatization, the Nigerian DISCOs were bankrupt and unable to pay for the power collected. There was no bulk trader as an off-taker, because the DISCOs were not credit-worthy to buy power. All licenses could not achieve financial closure.
In 2012 the Nigerian Bulk Trader Company was created as a government capitalized owned off-taker to guarantee DISCOs and GENCOs for power supplied.
Today, some of these licensed companies have signed power purchase agreements and built market support instruments – credible tariffs, solid regulatory frameworks, codes standards and footprints of consistency.
There is massive confidence that investors can trust the country’s electricity market and micro-economic fundamental change to re-index.
Again, its mission unaccomplished for me, because we are yet to produce the level of electricity we want, and Nigerians are yet to enjoy a minimum of 20 hours of electricity supply daily.
But in the next three or four years, if the country produces 10,000 MW, I hope somebody would remember that happened because we built a strong foundation for the industry.
PT: Which of these missions posed the most challenge to realize?
AMADI: I would say building an effective and credible NERC; and perhaps, achieving regulatory mandate towards adequacy and reliability.
Three months ago, we set up a task force to improve the electricity market. We wanted to understand the bottlenecks and clear the system. We thought the problem was with gas supply. But when we had gas, generation reached about 5,000MW.
However, there was another problem of load rejection. Because the DISCOs’ network was frail, available power could not be taken, and the generators could not ramp up power.
The generators had to tell gas suppliers that they could not take all the gas supplied to avoid incurring more liabilities.
Today, the country has lost about 1,000 metric tons of gas when about 4,800 MW was generated few months ago.
For the generators to rapidly improve those networks, they need massive investment of capital. Without financial viability and strong network, sustainable electricity system cannot be guaranteed.
The operators require huge financing, either through funding from financiers or revenue recovery by increased tariffs collection.
PT: But, that would mean extra burden on the consumers?
AMADI: Extra burden? Yes, increased tariff is more pay. But the consumer is paying more to get more value. If we have proper tariff that allows for investment and incentive for efficiency, it will ultimately work for improved services by creating commercial viability.
The first and second years, the tariff by consumers will not pay fully for the investment DISCOs make for service delivery.
But, in the third and fourth year, they will be able to have full recovery of that cost, as the tariff and costs become fully aligned. NERC has benchmarked the tariff within a certain threshold, so that the increase by the DISCOs is reasonable and fair.
The tariff framework imposes obligations on the DISCOs, namely on metering to the customers; no over-estimation. This means that the customer has to pay the last bill, and in case of a dispute, use it as a benchmark till he is fully satisfied with the resolution of the dispute with the operator. That is unlike in the past where the customer was expected to pay his bill or disconnected.
Under the new framework, NERC had said that if after six months the DISCO does not meter the customer, no matter how much improvement on power supply, the consumption would be capped at a charged not beyond a certain amount.
As a regulator, NERC has always argued that fixed charge should not be removed arbitrarily, but through a regulatory process. But, it has discovered that everybody can be on the same page.
Customers have to pay their bills, while DISCOs will not be guaranteed revenue without service. Under the new framework, the revenue of the DISCOs is now tied to 100 per cent availability of electricity supply.
If for its negligence a DISCO allows its transmission line to collapse, it would lose revenue per kilowatt hour for the period that line remains unfixed. This is one of the biggest things NERC has done. It is a big game changer in the electricity market.
In the next two to three years, this will make the DISCOs more efficient; the customers much more comfortable to pay bills, while creating a better relationship between consumers and the operators. This will help the regulator and government introduce much more critical and drastic measures required to move the market to a more efficient level.
PT: Would you say in all sincerity that you have left the industry now better than you met it?
AMADI: NERC has really done excellently well. The indicators are clear. The success of a regulator is measured by its credibility. Nobody in this industry, even if an unfair minded enemy of Sam Amadi, can accuse NERC of corruption. The regulator must not only have integrity, it must live above board.
In the last five years, there is no single evidence of misappropriation, corruption or allegation of abuses. NERC has made big ticket decisions running into billions, particularly in licensing. Nobody can accuse NERC under my leadership of a single whiff of corruption.
PT: What about the multi-billion severance package you and members of the Commission were recently alleged to have approved for yourselves?
AMADI: That allegation and questions about how much one earns are that because there is nothing else to use to tarnish our image. This is what is called tenure battles to achieve hostile takeover, where parties interested in taking over office create unfounded reputation issues to make the shareholders look at the company in certain way, to force management to accept a buy-out.
This is rough tackle tactics. All those hoopla about N2.7 billion, N2.5 billion or N2 billion is because, basically, there was nothing to bring up. The best way for them was to say these guys are fat cats that must be wrestled down by all means.
PT: But, why was it so difficult for you to disclose your pay, if there was nothing to hide?
AMADI: Because we wanted to make a choice between responsible leadership and populism. I am a civil rights activist. When I go on the other side I can do that.
PT: Now that you have crossed over to this other side, can you talk about it now?
AMADI: Yes, if I am on that side fully. But, I can’t talk about what people earn. I sympathize with those making that call. It is lazy and unreasonable. In this country, we suffer from three things – lack of rigour and role occupant ethic as well as excessive populism.
If one is a clergyman, there are certain ethical behaviours that go with clergymen. If one is a rock star, there is also a role.
A regulator’s role is that of reasonability, responsibility and rationality. Why would anybody disclose his salary when it is already in the public domain? In NERC’s reports, two copies are sent to the National Assembly, including all those details. In all fairness, asking for such disclosures is being silly and comical. I am not for drama.
NERC is bound by the Freedom of Information, FOI, law. We said if a request is made through FOI, we’ll give to them. That’s the procedure. If anybody wants to know the salary of any public official, the person can go the website of the appropriate government agency and download it.
PT: Are you saying that Nigerians who keep asking to know the pay package of National Assembly members are also playing to the gallery?
AMADI: The issue is the process. If one really wants the information, one should write to the Clerk of the National Assembly requesting that. If the lawmaker is in a public hearing over an issue, he would most likely dismiss the request to disclose what he earns.
