In an exclusive interview with Naijaonpoint, former Chairman of the Nigerian Electricity Regulatory Commission (NERC), Dr. Sam Amadi, criticised the Federal Government’s decision to hand over control of electricity markets to state governments without conducting proper risk and readiness assessments.
Amadi, who oversaw the 2013 privatisation of the power sector, warned that the rushed and poorly coordinated transition could trigger widespread failures in state-run electricity markets within a few years.
He faulted both the Ministry of Power and NERC for what he described as “reactive, not proactive leadership,” stressing that many states lack the technical capacity, regulatory expertise, and governance structures to manage their own electricity systems successfully.
Here are the excerpts from the interview:
Naijaonpoint: Dr. Amadi, when you were NERC Chairman in 2013, you oversaw the privatisation of the DisCos and GenCos. Looking back, did you anticipate the kind of regulatory disputes we are now seeing between state electricity regulators and the Federal Government?
Dr. Amadi: There were no jurisdictional conflicts at the time. We had a few but of different nature. We had – not a full-blown conflict – some between Rivers State and the federal government. And it was mild. The [then] Governor of Rivers state, Rotimi Amaechi, as usual, said ‘I can have IPP [Independent Power Project] in Rivers State’ which Amaechi later sold.
He went to the President and said ‘Rivers has power plants, and we don’t have power. Why can’t I do my own DisCo and put the power in Port Harcourt? Why should my power go through the grid?’ so, [President Goodluck] Jonathan thought it was a good idea if a state says it wants to give power to its people. So, why should we prevent them.
Jonathan called us and made the point that this was what Rivers state Governor said. We had a meeting with him and said the way the Constitutional framework is designed, if we should remove Rivers state and Port Harcourt DisCo from the grid, we are going to take out a whole chunk of revenue. So, basically, it’s financially bad.
So, basically, by the existing law then, it could not be done. And so, Jonathan told the Governor that the regulator says this can’t be done. Obviously, the Governor didn’t like it. It ended there.
We didn’t anticipate what is happening now [between Enugu regulator and NERC] in the sense that then, there was clarity. Federal Government was responsible for distribution, regulation, and transmission. States can bicker by saying ‘Why should you centralize the grid?’ but there were no conflicts because there were no jurisdiction to conflict.
When we were planning to privatize, states also said they made investments in the grid which is true. So, we did an asset review and NERC ordered states to submit all their investments. The idea was after we privatize, there should be an assessment and states can have share. So, that was the only issue.
What is happening now is a new conflict arising because there is now shared jurisdiction. States can now regulate. Nobody argues. Maybe there are issues around what will happen to subsidies. So, these are new disputes.
Naijaonpoint: Still on that question, let’s assume you’re still the Chairman of NERC, how will you handle this new issue?
Dr. Amadi: it looks like the regulatory regime is different in the sense that we had maybe greater control of everything around us. Maybe because of relationship, the President entrusted us and I was responsible. Now, I’m not sure how much the regulator is in charge of everything.
Number two, I don’t think the regulator and the minister were proactive, in my view. Look, you had a totally new regime – through {President Muhammadu} Buhari, we had the Constitutional Amendment and through [President Bola ] Tinubu who signed the law. Tinubu signed a new Electricity Act that changed the game, a totally new landscape.
The regulator’s job and the Ministry of Power would have been to dealing with possible conflicts, streamlining what this transition means. So, how would that relationship be defined? If I was the Chairman of NERC, by now, I would have rolled out regulations that would define how TCN, a federally-licenced transmitter would relate with states. That’s Number One.
The regulator’s job and the Ministry of Power would have been to dealing with possible conflicts, streamlining what this transition means. So, how would that relationship be defined? If I was the Chairman of NERC, by now, I would have rolled out regulations that would define how TCN, a federally-licenced transmitter would relate with states. That’s Number One.
Number Two, there are governance issues that are coming now. You talk about subsidies. The federal government puts subsidies on generation. And generation is national. So, for these states to start to grow their own power, it will take some years.
They are going to be relying on central dispatch power station which means that power has been contracted for 25 years under a price. So, DisCos are takers. How do you ensure that the prices that the states will now pay will be such that it would not affect the liquidity of the value chain?
If Enugu says their price for 1kw/h is N10, and Imo says its own is N5. Lagos, everybody says their own. What guarantee do the distribution companies who are not serving for the states get their money?
I’m not seeing clarity. I’m seeing reactive, not proactive leadership. The Minister, in my view failed most. This is a Ministerial responsibility. It is a policy, regulatory issue. By now, we would have had a document that states who are doing their new regulatory markets will have as guide what should be done.
The states can innovate and do whatever they like. But they will know that this is still a national economy because it is still from the national grid.
Naijaonpoint: You mentioned that the Minister failed the most. The Forum for Commissioners of Power and Energy in Nigeria (FOCPEN) called for Ministerial intervention in the Enugu-NERC face-off over this tariff issue. So, what are you proposing that the Minister should do in specific terms?
Dr. Amadi: Before even the announcement is made, I [if I were Minister of Power] would have sat down with the regulators, Commissioner for Power in Enugu and the entire regulatory team. First, understand their methodology. What did they do? If there is a gap, where is it coming from? If there is a conflict, where is it? If they have done everything properly as I presume, then you ask: how will this impact the sector?
Then the Minister will say: If you do this, this is the risk. This is where we will like to see change. First, he has to understand them, talk to them. Understand what they are doing. This talking over each other does not go to the issue. Even NERC statements do not go to the issue.
They should look at the model and say ‘This model has a problem. This is how it is going to affect the sector and in the macro level’. Even though what they have done is within their powers, the Minister would trigger a communication with the Governor which would now lead to regulatory adaptation.
So, first is leadership. How many times has the Minister discussed with the regulator before now? They could have preempted… that’s the point I’m making.
It simply says states can have their own regulatory market – states that have never done anything before with electricity. They didn’t even quantify what are the skill levels they are building? Many states don’t have the capacity to do this job. Look, it took federal government a lot. Even now, we still don’t have enough capacity to manage that sector well.
That is why we are having crisis. Crisis is evidence of capacity failure. If crisis persists, it means that the capacity to manage that crisis is somehow deficient? And all our learning, me as chairman of NERC for five years and the stiff learning curve that I went through, I feel like people are pretending to know how to own this sector.
Regulatory industry is knowledge based. And knowledge comes from what you know and what you experienced. So, there is a deficiency of knowledge here.
So, for states to pretend that on one night, everybody can just run a regulatory commission – copy and paste a law, and then NERC gives you discharge then you go and set up your market, that is a recipe for disaster. It’s what you call predictable surprise. So, when I was speaking to the Niger state regulator, I said I expect states to collapse in the next few years.
Why? Because, typical Nigerian politics, states will now create their network, appoint cronies, political associates, and people they like. This is about jobs. ‘I am the Chairman of Ibibio state Electricity Commission’. It’s an office when the national that have spent a lot of money have not gotten it right. What will happen is, there will be a sober moment when we say ‘there is a danger to avoid here.
Can we simulate and design prototypes of what a state regulatory market can be in the context of a national? How has it happened in some other countries in the world like India, Canada, US where there are sub-electricity markets? From that knowledge, you design some safeguards, what to avoid, and then the federal government through the Governors’ Forum will organize structured trainings.
As we are talking today, there is no such training. I recently said what differentiates electricity markets is the capacity to learn. By this I mean deliberate learning, this means you have to provide a structure and capacity for people.
I think the Federal Government’s failure is that it didn’t lead. It just said we have had a law, states started copying out. And nobody did a risk assessment and readiness assessment.
NERC didn’t even do anything. All you need for NERC to give you a release is: you write a letter, show you have a law, say you have appointed a regulator, and NERC is obliged under the Act to give notice to DisCo to prepare a subsidiary company for your state. Once that is completed, you are released.
My question is what was missing? When we give them this certificate, what happens? The federal government should have grandfathered the states, scheduled them, pre-empt problems, provide guides, and then when you do your design of your methodology, you feedback through a proper channel.
So, there is leadership failure at the level of the minister primarily and at the level of NERC subsidiarity.
Naijaonpoint: Still on this regulatory issue, there still people that say there is need for the amendment of the Electricity Act based on some of these problems you identified. What do you say to that? And there are those who say amending it now would diminish investor confidence.
Dr. Amadi: I don’t think it should be amended. I spoke with [Senator Enyinnaya] Abaribe, chairman of Senate Committee on Power. I think there is also a lobby coming back to create lost jobs for NERC and for Federal Government. If states opt out, NERC will only have FCT which is a federal government governed territory and inter-state electricity market and transmission. So, some people want to carve out some jobs. I don’t think it’s the right thing to do.
The good think about this Act is that it has launched us on what I call controlled experimentation. We are doing a mediocre uniformity. Everything is the same.