OBG talks to Sam Amadi, Chairman, Nigeria Energy Regulatory Commission

Interview: Sam Amadi

What do you consider to be the biggest obstacle to the implementation of power sector reform?

SAM AMADI: Vested interests from all over pose the biggest obstacle for power sector reform. First there are the workers legitimately concerned about their employment statuses post privatisation. Then there are the businesses who would like to have a windfall on state assets and the new political lobbyists who want to highjack the emerging order. Each of these interest groups is likely to distort the regulatory and policy framework of the reform to work to their own advantage, and to the detriment of consumers and the public. We have even seen this behaviour in the UK and US.

How has the roll-out of the Multi-Year Tariff Order (MYTO) affected private investors’ interests?

AMADI: In MYTO2, we successfully expanded our methodologies to include variables like the cost of meters and metering, better feedstock supply plans and a more accurate capital and operational spending formula. Our projections are also more contextualised and realistic than those of MYTO1. These improvements have encouraged hesitant investors who were once apprehensive of the sector’s revenue recovery plans. On the consumer care side, MYTO2 has also expanded to accommodate the interests of very poor energy users, reducing the national energy poverty average.

We are also about to roll out the Power Consumer Assistance Fund, which is intended to ensure that every part of the country remains economically viable and competitive in the electricity industry, and thus, attractive for electrification and allied service purposes. Therefore, MYTO2 has been a win-win project, as it incentivises and spurs sectoral investments, while better protecting the consumers.

What can Nigeria do to attract more Independent Power Producers (IPPs) to the sector?

AMADI: Investors want to see regulatory certainty in Nigeria’s energy market. Our power sector reform is institutionalised and there is a general consensus in the country to protect it.

The regulatory environment has recently undergone major improvements ensuring transparency, predictability, and unbiased and incorruptible decision making, which are essential qualities for investors. We are working with the government to address certain concerns, like the development of gas pipelines and infrastructure for prompt and uninterruptible feedstock supply.

Also, we are providing incentives to new IPPs to diversify into the now-proven huge coal potential of our country, so as to ease the over-reliance on gas.

In what ways does energy efficiency limit demand and how can it be encouraged?

AMADI: Instead of matching increased energy demands with heightened production, it is best to educate consumers on energy conservation methods. In line with that, the president has recently launched a national campaign to replace incandescent light bulbs with energy-efficient ones. The consumer affairs department at NERC is also working with viable stakeholders on developing energy saving initiatives.

How do renewable resources feature in the government’s priorities to increase generation capacity?

AMADI: We are currently developing frameworks for renewable energy feed-in tariffs, but the high cost of renewable technologies has made it difficult for substantial progress to be made thus far.

It must be noted that the problem of grappling with the cost of renewables is not particular to Nigeria. In the US, UK and even in Germany, which is most advanced in renewable resources, integrating renewables’ higher-than-average cost has been very difficult. We are hoping that renewable technology is quickly advanced, so that costs are lowered to competitive levels with conventional energy sources. There is no doubt that renewables, given their low carbon emissions and inexhaustible nature, are the future of the global energy industry.