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The convoluted administrative hurdles on the path to securing license for operating a localized power distribution system independent of the national grid is stifling the plan by some states to generate and distribute electricity to their people.  Although some states had set up independent power plants which could generate enough power to meet their people’s needs, they have been unable to meet the tough conditions stipulated for the granting of license for an independent distribution system. And with the electricity reform bill making it difficult for promoters of independent power plants to recoup their investments when power is routed through the national grid, the bid to encourage private sector venture in power generation may be scuttled.

BusinessDay investigations revealed that while the electricity reform bill allows for independent power projects, it has no discernible provisions for private investors to get economic fees from power injected into the national grid. According to the provisions for securing license to operate an independent grid, states or regions desiring such license should get their Houses of Assembly to pass a resolution that they want to be off the national grid. This is to indemnify the Federal Government and the Power Holding Company of Nigeria (PHCN) from any responsibility in the event that the arrangement collapses. The state or region would have to present the tariff structure to the government for vetting ostensibly to stave off the introduction of exploitative charges. In addition, safety measures would have to be audited while the area of operation will be clearly defined before the license can be granted.

After this, a referendum would be conducted where the people concerned would agree that they would want to be serviced by an independent distribution system. Even when investors are prepared to use the national grid, the unclear provisions for recouping investments have made the option unattractive. The unsavory experience of the Lagos State government which pioneered the generation of independent power as well as the inconclusive arrangement entered into by the Rivers State government have served to warn off potential bids to use the national grid. While Lagos was frustrated by federal authorities after incurring huge costs, Rivers State is contending with unresolved payment terms as the arrangement it entered into with the Federal Government has not enabled it to get reasonable returns from the volume of power being ploughed to the national grid.

Goody Duru, managing director of Powtechnologies, said the statute books must be changed before regional or state power projects can come into existence. He said that without addressing the issue of recouping investments, no reasonable investment can be made in power generation by the private sector. “Certain laws tied the nation down and some of these laws must be amended before there can be anything in place,” Duru said. He said even Delta State that is going to great lengths to scale the hurdle in securing the power distribution license has ran into some troubled waters and may not succeed. Experts had argued that sustaining the national grid is antithetical to the goal of supplying adequate power to all parts of the country. “We do not have the technical and managerial capacity to operate a single system for the entire country.

Besides, it does not give room for private investors to be part of boosting power generation. If the grid is not decentralized, the alternative is that only the Federal Government can invest in this chaotic arrangement. Then we are heading nowhere,” an expert told BusinessDay.