The Senate on Wednesday moved to review an agreement signed by the federal government in 2015 with some power generating companies.
The companies are Azura and ACU gas.
This was sequel to a lengthy deliberation on the report of the Senate committee on power on addressing Nigeria’s power sector problems.
The lawmakers set up a team of legal experts to liaise with the executive to review details of the agreement. This was after they learned that the country allegedly loses between $30 million to $33 million to Azura for power generated – whether it is distributed or not.
PREMIUM TIMES had reported how the Azura power plant was set up to benefit from billions in give funding.
There has also been apprehension in government circles over the sovereign guarantee given to Azura-Edo IPP, a power-generating private company, by the Buhari administration in 2015 to enable it secure a $237 million loan to finance its 450MW project in Edo State, The Cable newspaper had reported.
According to the report, the country will have to pay Azura $1.2 billion if it decides to exit the Pull Call Option Agreement (PCOA).
Already, Nigeria is obligated to pay between $30 million and $33 million monthly to Azura for power generated, even if not “dispatched” – transmitted through the national grid by the Transmission Company of Nigeria (TCN).
Nigeria also reportedly pays roughly N700 million monthly as the exchange rate differential in the deal with Azura.
In addition to paying for power generated (or not), Nigeria is also footing a yearly N5 billion bill for gas supply to Azura, even though the cost of gas is already part of the tariff approved for the plant.
The chairman of the Senate committee, Gabriel Suswam, brought the details of the deal to the notice of the Senate during the deliberations.
Lawmakers took turns to condemn the deplorable state of Nigeria’s power sector and many called for annulment of the privatisation of the power sector. But Mr Suswam noted that the country will lose up to $1.2 billion if that is done.
He explained that President Muhammadu Buhari signed the deal with Azura to generate 450 megawatts of electricity and that the country was currently losing $30 million every month to the firms for power.
“The implication of the agreement is that even if we are unable to take that 450 megawatts, we will still pay full price for that 450 megawatts and that is what has been happening. The agreement is called ‘take or pay’.
“The same thing for the ACU Gas which is a gas agreement signed with Calabar Power Plant and it is guaranteed by the World Bank.
“Azura has about three generators. If only one is producing, it is not their fault; it is because TCN cannot evacuate the power. They are generating; they are ready to give power but unfortunately, we are not prepared. We signed that agreement and so if they can only give 100MW, we pay for the full 450MW; the same thing for ACU gas.
“The way we are so tied is that the danger in Azura and ACU gas is that if we default, they can draw down about $1.2 billion immediately from our foreign reserve.
The way out is for the Senate, the executive and the affected firms to address the injurious agreement but not breach it “to avoid the scary fine of about $1.2 billion,” he said.
Also in his report, Mr Suswam said since the privatised power sector is currently insolvent, the government should use its 40 per cent share to get it solvent by providing meters for the DISCOs to distribute to electricity consumers .
This, he said, will help the government overcome monthly subsidies cum interventions as it has been injecting into the sector within the last seven years, totalling N1.5 trillion now .
The Senate, thereafter, adopted recommendations made by the Suswam-led Committee.
The lawmakers also resolved to review the Electric Power Sector Reform Act, 2005 “to pave way for a new and more dynamic electricity Act that will consolidate all electricity related laws, consolidate the roles of the regulators and policy makers, bridge existing gaps in the legal and regulatory frameworks.”
The Senate adopted a recommendation on cost reflective tariffs which should only be implemented when majority of electricity consumers have been metered .
As a way of bridging the gap in remittances to the Nigerian Electricity Regulatory Commission (NERC), the Senate urged Ministries, Departments and Agencies of Government (MDAs) to make provision for payment of all outstanding debts and liabilities owed to DISCOs, as well as accommodate budgetary provision for anticipated consumption for the 2021 Appropriation year.
Kicking against the bill on criminalising estimated billing, the Senate called for the immediate removal of the increased custom duties of 35 per cent to allow Meter Asset Providers (MAP) clear meters stuck at the port.
Also, it said the Nigerian Electricity Regulatory Commission will be empowered to carry out its functions in a way that guarantees that it is not distorted. This, it added, is to curb political interference.
It also called on the federal government to consider recruiting 320 additional officials for the Nigeria Electricity Management Services Agency (NEMSA) “to carry out technical inspection, testing and certification of all categories of electrical installation across parts of the country, as well as provide nationwide metering inspection services.”