Electricity supply crisis looms, as BPE rejects ‘force majeure’ declared by DISCOs

A crisis looms in the power sector as electricity distribution companies, DISCOS, have declared a ‘force majeure’ over a recent government policy on Eligible Customers Regulations by the Nigerian Electricity Regulatory Commission, NERC.

‘Force majeure’ is usually issued by parties in contract to activate a clause to inform customers that due to unforeseen circumstances beyond control they may prevents one or both parties from fulfilling their obligations under the contract.

Following the new regulation by the Minister of Power, Works and Housing, Babatunde Fashola, the DISCOs have said they may not be able to continue distributing electricity in the country under prevailing terms and conditions until NERC rescinds the law.

On May 15, 2017, the minister issued a policy directive to NERC declaring four categories of eligible customers in the Nigerian Electricity Supply Industry, NESI in accordance with Section 27 of the EPSR Act.

Under the new regulation, which provides for standard rules to facilitate competition among power industry players in the supply of electricity, the minister mentioned categories of customers who can buy power directly from the Generation Companies, GENCOs.

They include end-users whose consumption is not less than 2MWhr/h, and were connected to a metered 11kV or 33kV delivery point on the distribution network, subject to a distribution use of system agreement for the delivery of electrical energy.

The others are those connected to a metered 132kV or 330kV delivery point on the transmission network under a transmission use of system agreement for connection and delivery of energy, and consumers in excess of 2MWhr/h on monthly basis and connected directly to a metered 33kV delivery point on the transmission network, under a transmission use of system agreement.

Customers in these categories must enter into bilateral agreement with the distribution licensee licensed to operate in the location, for the construction, installation and operation of a distribution system for connection to the 33kV delivery point.

The other category cover those with minimum consumption of more than 2MW/h over a period of one month and directly connected to the metering facility of a generation company.

At the presentation by NERC of the regulation a fortnight ago in Abuja, Mr. Fashola said the policy would encourage opening up of third party access to electricity transmission and distribution infrastructure towards full retail competition in the electricity market.

The minister described the new regulation as essential for the growth of the power sector, as it would improve the capacity of electricity distribution to consumers, particularly those willing to make investments in distribution assets to recover their cost.

A top official of the Association of Electricity Distributors, ANED, told PREMIUM TIMES on Tuesday that its members may not be able to continue to deliver electricity to consumers in the country under the new regulations.

“Nothing is going to happen during the period the ‘force majeure’ is in place until government decides to do something, by ordering the NERC to withdraw the regulation,” the official who requested that his name should not be disclosed, said.

But the Director General, Bureau of Public Enterprises, BPE, Alex Okoh, on Tuesday frowned at the issuance of notice to declare force majeure by the DISCOs, saying there was no basis for it.

In a letter to the DISCOs, Mr. Okoh challenged them over claims of a change in law and political force majeure pursuant to certain clauses in the performance agreement they signed with the BPE.

While rejecting the notice by the DISCOs to declare force majeure, the BPE boss pointed out that neither the Eligible Customers policy directive nor the Eligible Customer Regulations had prevented them from fulfilling their obligations under the performance agreement.

“Pursuant to the Electric Power Sector Reform Act 2005, the Minister of Power, Works and Housing is empowered to issue the policy directive specifying the class or classes of end-use customers that shall constitute Eligible Customers, while NERC is similarly empowered to issue Eligible Customer Regulations,” Mr. Okoh said.

“Given that the Declaration and the Regulations were lawfully and validly issued by the Minister and NERC, and there has been no change in the law giving rise to a political force majeure event, we are unable to see the basis for the issuance of the notice,” the BPE boss stated

“As the contracting party, on behalf of the Nigerian government to the agreements, which governed the privatisation of the power assets to the core investors, we reject the notice to declare force majeure,” the BPE said.