Wednesday, December 7, 2011

Nation in darkness - Government grants license to independent electricity producers

In a practical move to take the nation out of darkness through private sector-driven scheme, the Federal Government yesterday issued a total of 20 licences to independent power producers in the country.

And going by the provisions of a new set of regulations being finalised by the Nigerian Electricity Regulatory Commission (NERC), state governments would from January 2012 have the power to generate and distribute electricity in their states.

The independent power producers are expected to add a total of 6,258 megawatts (mw) of electricity to the national grid within the next 36 months. A distribution licence was also issued to Aba Power Limited in Aba.

To give further confidence to the new entrants, the government also issued a special trading licence to the Nigerian Bulk Trading Company Plc., assuring the operators that the bulk trader had started operations and would procure whatever power they produce. The Federal Government has also announced a N20 billion take-off fund to the Nigerian Bulk Trading Company Plc.

Perhaps, the most remarkable of the licences was the one issued to Zuma Energy Nigeria Limited to produce 1200mw from coal deposits in Itobe, Kogi State. The licence represents a concrete manifestation of government’s resolve to utilise the nation’s mix for power generation.

Eight of the licences were for off-grid generation, 10 are grid-connected licences and two for embedded generation.

Chairman of the NERC, Sam Amadi, stressed that five other licencees were undergoing scrutiny for the possible issuance of similar licences.

He described the issuance of the licences as a landmark event for the sector, noting that the approval to the bulk trader to start operations was also a major boost to the reforms in the sector.

Chairman of the Independent Power Producers Association of Nigeria, Prof. Jerry Gana, expressed joy that some of the impediments that had hindered independent power producers from operation in the last one year had been resolved by the government.

He urged the owners of the licences to ensure speedy start of work “such that Nigerians will begin to enjoy stable power sooner than expected.”

He charged the Federal Government to fund the bulk trader, stressing: “That is our key agency. We sell to them when they produce and they make the investment worthwhile.”

Presenting the licences, Minister of Power, Prof. Barth Nnaji, expressed joy that government had addressed most of the challenges independent power producers were facing in the country.

“From the budget of the Ministry of Power, we are giving N20 billion to the bulk traders so that they will have money to pay for power from power producers. We are also giving N20 billion to NELMCO to assist in buying over most of the liabilities of the government power operators in preparation for the privatisation.    The privatisation is moving forward and we expect that by the second or third quarter of next year, we should have concluded the process and handed the sector over to private concerns,” he said.

On the challenges with the electricity workers, Nnaji said:  “The Federal Government is addressing all the concerns of Labour. We want to, once again, assure them that it is from their midst that the workforce for the sector would come. The operators will, no doubt, require the immense experience many of them have gathered over the years.”

The minister charged the independent power producers to take advantage of government’s efforts in addressing their challenges to give power to Nigerians.

The issue of power generation and distribution had pitched the states against the Federal Government. The states had felt discouraged by their inability to generate and distribute power in their states.

The NERC will present the document on this to the National Economic Council (NEC) at its next meeting. After its review by stakeholders, the regulation is to be sent to the Ministry of Justice for gazeting. The regulation will set the standards for independent electricity distribution network operators. Before now, the Federal Government held on to the exclusivity of power generation and distribution for commercial purposes apart from some big industries that were given the licence to produce limited units for industrial use.

Chairman of NERC, Amadi, who spoke at a stakeholders’ meeting on the review of the draft document in Abuja yesterday, noted that states which had the capacity to generate electricity would now be able to do so from January.

The regulations, he added, would ensure that “all the cost associated with transmission is bypassed. It is embedded with the distributor locally. It can cure acute shortages of power in the short and long run. A state that has the capacity can have partnership with private sector, set up a power plant to carter for the need of the state.”   He said the regulation was motivated by the agitation of states that had clamoured for the devolution of the exclusivity of the Federal Government to generate power.

“Instead of running parallel lines through the cities, you can have power embedded in your state, if you have enough capacity. For instance, Rivers has sufficient capacity. Instead of taking it to the grid, you can have power embedded in the state and the surplus you can sell to the grid if you like. What is required is that you have sufficient capacity to distribute that power. That is why we are bringing these new regulations. The cost of evacuating power to the grid and later transmitted back for use locally will be removed.”


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