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Osinbajo intervenes in power firms’ crisis

By on October 21, 2015

Vice President Yemi Osinbajo is currently intervening in the seeming crisis rocking the power sector in order to prevent the declaration of force majeure by electricity distribution companies that are seriously agitating for an increase in tariff.

Chief executive officers of power distribution companies as well as the executive director of the Association of National Electricity Distributors confirmed to our correspondent that some of the Discos had declared force majeure because they had been incurring losses since they took over the power firms.

The losses, according to them, are mainly because the current electricity tariff approved by the Nigerian Electricity Regulatory Commission is not cost-reflective, a development that has impacted negatively on their operations.

A force majeure is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties prevents one or both parties from fulfilling their obligations under the contract.

In July, the Federal Government took over the Yola Electricity Distribution Company following the declaration of force majeure by the core investor in the firm, Integrated Energy Distribution and Marketing Company.

The Executive Director, ANED, Mr. Sunday Oduntan, told our correspondent that Osinbajo was intervening in the issue, stressing that the Discos had threatened to declare force majeure if the power regulator failed to consider a cost-reflective tariff for them.

He said, “The vice president is helping us on this issue. He is intervening and trying to get things done properly, and I believe this government is serious to ensure that there is power supply. The only thing is that all other stakeholders, particularly NERC, should get their acts together and know what they are doing, because presently, it is like the commission does not know what it is doing.

“All we want is a cost-reflective tariff. Our people should realise that we need a cost-reflective tariff or else this industry will die. It is not primarily about tariff increase, but all we are saying is that the tariff should be cost-reflective or else this industry will collapse.”

Last week, The PUNCH had exclusively reported that the power firms had sought an increase in tariff by an average of 49.4 per cent, as they intensified their demand for a cost-reflective tariff structure. NERC, however, stated that it would review their demands thoroughly before approving any of the requests for tariff increase.

The Chief Executive Officer, Abuja Electricity Distribution Company, Mr. Neil Croucher, told our correspondent that although the threat by some Discos to declare force majeure was a bump on the path of the privatised power sector, the current intervention by the vice president was actually calming frayed nerves.

He said, “With Yola, it was a special case and a bit different to what other Discos are experiencing. I believe it is quite some of the bumps on the road that we experience in the business. However, you are actually right, there were a number of Discos that did give notices of force majeure events, but I believe that the manner in which the government has been addressing that issue has been totally appropriate.

“The vice president himself has given wonderful guidelines and I’m very confident that this one bump on the road will be smoothened out and the process can’t fail. The Discos felt that we had deviated from what was originally intended and presented in the information memorandum that was given to bidders and we have deviated from the transaction agreements.

“And we felt that we needed to realign the process, but I believe the government’s reaction has been totally appropriate and I’m confident that if we are not back on course yet, we will be back on course soon.”

 

[Punch]