Business
Abuja Disco fiasco signposts general crisis
By ADEBAYO OBAJEMU
The crisis in the power sector escalated a couple of weeks ago when the federal government sacked the management of Abuja Electricity Distribution Company. There have been varied reactions to the action of the federal government.
In the mix, the Nigerian Electricity Regulatory Commission(NERC) and Bureau of Public Enterprise (BPE) assumed responsibility for Federal Government decision to change the composition of the Board of Abuja Electricity Distribution Company(AEDC).
This development is widely seen as an attempt by the two agencies of the government to deflect criticism and absolve the government of blames.
Recall that KANN Utility Company(KANN) holds 60 percent of majority share in AEDC, the licence utility firm that serves end-use customers in Kogi, Nassarawa, Niger and FCT.
Before the sack, management of KANN had been engaged in sundry crises over its unwillingness and lack of capacity to settle its obligations to NERC, BPE, and other stakeholders including acquisition loan it secured from UBA in 2013 during the privatisation process of the power sector.
In a statement jointly signed by Sanusi Garba, Chairman, NERC and Alex Okoh, Director General BPE, it was disclosed that the recent change in the composition of the Board of AEDC was owing to protracted dispute among competing factors of AEDC’s majority shareholders and investor such as KANN Utility Company(KANN).
The statement revealed that the quarrel ultimately morphed into a dispute with the lender that made available the acquisition loan to KANN for the acquisition of the majority share during the privatisation exercise in 2013, over KANN’s inability to service its debt to the bank.
It stated that, “During the course of the intractable crisis, AEDC not only struggled to meet its obligation to the market under the terms and condition of its licence but was no also unable to meet its obligation to key stakeholders in the organisation including staff culminating in the industrial action by members of the Nigeria Union of Electricity Employee(NUEE).
“Eventually, this resulted in a total service disruption on 6th of December 2021 for over 14 hours in AEDC network areas. The provision of electricity supply in AEDC’s network area was only restored after the intervention of the Minister of Power, NERC and BPE following an agreement with the Union on the terms for suspension of the industrial action on Dec, 6, 2021.
“Stakeholders including NERC, CBN AND BPE had on several times worked to broker an amicable resolution between the contending parties .
“The protracted resolution of the dispute exacerbated the state of affairs at AEDC resulting in an industrial actions and a total blackout in the service area for over 14 hours.
“It then became apparent that decisive steps were required to address the matter and BPE agreed with the lender’s request to exercise its power as Receiver/Manager over KANN by exercising it power over 60 percent equity in AEDC as a means to recovering the acquisition loan granted by the bank,” the statement said.
NERC however noted that contrary to report in the media, the action to appoint an interim team to manage AEDC was not done on the basis of a directive from the FG, but on the basis of legal processes arising from failure of core investor in AEDC to meet its obligation to a lender.
The Commission said, the Receiver/Manager has agreed to the appointment of an interim management team in conjunction with BPE as part of measure designed to address business failure event and ensure continuity of service to end-use customers in the service area.
However, the action of the federal government immediately after it came public attracted a volley of criticism from stakeholders and analysts.
The unilateral action of the federal government they say is illegal and amounts to a serious breach of the extant law.Energy lawyers and stakeholders say power to suspend any player in the Nigeria electricity market is solely resides with the Nigerian Electricity Regulatory Commission(NERC) and not executive.
According to them, the FG’s action which was communicated through the Ministry of Power is nothing but politically overriding the statutory role of the regulator (NERC) and a flagrant abuse of political authority over corporate entity.
Dr. AdejareAina, a lawyer versed in energy law told BusinessHallmark that “Government should have acted through the regulator and take advantage of section 74 and 75 to sanction licensee if seen to have willfully or unreasonably contravened or breached any provision of Nigerian Electricity Supply Industry(NESI Act) that is applicable on such related matter.
He averred that the provision of that section of the Act, expressly makes it clear that sanctions can only be served by NERC on licensee, if it is unable to fully and efficiently discharge the duties and obligations under as provided by the Act.
In his own reaction, Dr. OlufemiOmoyele, director of Entrepreneurship at Redeemers University agreed with Aina’s position, adding that “Even before sanctions are served, the licencee should have been duly notified by the regulator under the subsection (2) of section 44, notify the licensee in writing of its intention and give reasons for doing so, and shall allow the licensee an opportunity to defend itself, within 60 days, following the delivery of such a notification.”
In adding his voice to the issue, Dr. Sam Amadi, former NERC Chairman and energy lawyer, in a live telecast on Arise Television said that the issues around removal of management structure are within the statutory purview of the NERC that is the regulator and not the executive.
He however agreed that the board or management of AEDC can be sacked after a thorough investigation may have been carried out and a court notices served on the entity.
“There was chaos among the shareholders over operational agreement, so the due process is to use the court to enforce any regulatory order.
“AEDC is a market driven entity and that the Nigerian government, as a minority shareholders through the Bureau of Public Enterprise (BPE) that is a trustee of the Government on the Board of the company. The government should respect the right and autonomy of the corporate firm.
“This is unconstitutional and unlawful use of executive discretion. AEDC is not having a corporate crisis, so there is no need for political interference. There is no collapse of operation arising from such management tussle.
“The company is only having issue with its workers under the aegis of the National Union of Electricity Employees (NUEE), over non-payment of arrears of pensions, allowances, salaries and promotion.
“This issue can only be addressed by the Regulator. If the action will affect service delivery then regulator can step in by serving the Board appropriate sanction.
“There is no collapse of operation arising from corporate tussle. The company is not having a bankruptcy issue. If a board becomes incompetent to the extent of affecting service delivery then the regulator can intervene by apply a section of the NESI Act.
Mr. GbengaBiobaku,Senior Partner, GbengaBiobaku& Co, energy and business lawyer, in his own reaction emphatically stated that the development will send negative signal to the international investors who may be planning to take advantage of the attractiveness of business environment in the country.
According to him, a public establishment fully privatized ceases to be a public firm but a private entity. “Government holds a minority share of 40 per cent shares in the privatised 11 distribution companies, the owner of 60 percent make general decision. He said the government has no legal right to suspend the Directors of such firm indiscriminately”, he said.
Mr.Biobaku further averred that, “There are processes that can be adopted for removal of such which must be done within the ambit of the law guiding the specific market.
However, Henry Adaji, an analyst said “The regulatory Commission is fully in support of the actions. So there is no legal tussle in such case as the NESI Act is clear about the role of the regulator that is any agency of the Federal Government.
“It becomes an illegal action if at the end of the day, NERC says it is not aware of the decision or not consulted before the decision is made. We will need to have an understanding of the internal working framework before the suspension of the management.
“The Board may have been served memo, queries for infraction and undercurrent crisis that may have affected their service delivery to the customers under their network area.
“All Corporate law are subjected to state authority. There are conditions that are guided by the state,” Dr. Ajulo noted.
Ajulo however said that NERC should be given the opportunity to clear the air on the matter, adding that until that is done the decision of the FG government cannot be faulted by any court.
The Chairman of NERC,SanusiGarba , was not available to react on the matter, every message sent to the Commission was not responded to as at the time of filling this report.
Many have however expressed fear that what happened with the Abuja Disco may replicate itself in other distribution companies, further creating uncertainty in the sector that is already beleaguered. It would be recalled that Yola disco had abandoned its license citing insecurity and insolvency.
Several other discos have one financial issue or the other to battle with.
Omoyele says that the coming weeks may prove testy for the electricity sector given the planned removal of the subsidy.
