‘Why law firm invented Power Sector Master Class’

By John Austin Unachukwu

Pioneer Chairman of the Nigerian Bar Association (NBA) Section on Business Law (SBL) Mr. George Etomi has said his law firm invented the GEPLAW Power Master Class to remove ignorance and lack of skills in the power sector.

He told The Nation that it was when his firm started providing advice on power that it became clear how very little people knew about the sector.

He spoke in Lagos during the last edition of the GEPLAW Power Master Class

Etomi said: “This is understandable because it was a government monopoly and all that there was to know was limited to the civil servants who ran it. We had to take crash courses, work side by side with international law firms that were more experienced than us but most importantly worked tirelessly to upgrade our knowledge of the industry. We believe Nigerians are best placed to solve our problems and we have taken that challenge up in the power sector.

“We are very encouraged by the huge success of the maiden edition and we will do our best to keep the momentum. We plan to have it in three segments for beginners, intermediate and advanced courses.

“The industry is as wide as it is versatile and holds the key to the diversification of our economy. Therefore the more knowledge in the field is democratised, the faster we can attain our target to be self sufficient as a country. If you think that we are talking about on 5,000 megawatts as a country, you can imagine how vibrant our economy will be when we move into the 25,000 megawatts and beyond league. It is an ocean of opportunities and we are happy to be part of its development.”

Etomi, a director at Eko Distribution Company (EKEDC or Eko Disco), continued: “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 to plug the gap among professionals that the firm held a Power Masterclass in Lagos.

GEPLAW Principal Partner, George Etomi used the blowup over the failed P&ID gas deal (for which Nigeria was fined a whopping $9.9billion 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  per cent of the country’s population has access to reliable electricity supply.

Calling for diversification and an accelerated pace of privatisation in the power sector in particular, Etomi cited the deregulation in the banking and telecoms sectors, saying 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 said 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-nationalisation 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 the massive potential, and said such a step back must not be allowed to happen.

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 privatisation, which was the model adopted in the Nigerian process for its success on minimising losses. She, however, lamented that due to a multiplicity of factors, the entire power sector value chain was experiencing a liquidity crisis.

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

Samson Ozah, an associate with GEPLAW, took a presentation on the Legal and regulatory context of the power sector. He identified the Constitution of Nigeria in general – and in particular the EPSR Act of 2015 – as the primary legislation governing the sector.

He listed some policy and regulatory agencies 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 (TCN), a government-owned body, as the ‘weakest link’ in the electricity value chain, 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 the National Electric Power Authority (NEPA), 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 discussed the mechanism of MYTO, its periodic reviews, 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.

©2018 VivaLasGidi

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