Sack of Abuja Disco mgt: Energy lawyers, stakeholders divided over FG’s decision

• Oredola Adeola & Yinka Oladele

In an unprecedented move that ruptured the calm in the power sector, President Muhammadu Buhari yesterday moved against the management of the Abuja Electricity Distribution Company (AEDC), in the wake of the industrial action embarked upon by the workers of the power company.

The government move announced by the Ministry of Power with the alleged support of the Bureau of Public Enterprise (BPE), has thrown up a public discourse as to the legality of the government’s action in view of the fact that the troubled firm is a private company.

This step taken by the government is seen as a response to the industrial action of workers, which has paralysed electricity supply in contiguous states of Kogi, Niger, Kebbi and Nasarawa and the Federal Capital , all are coverage areas of the Abuja Electricity Distribution. Company.

Many experts and stakeholders have reacted to the development, and the pattern of reactions has shown that opinions are divided on the issue, as some have read political underpinnings to the sack of the management.

Although government still has 40 per cent share in the utility company, the President action, in the view of some experts is usurpation of the powers of the Nigerian Electricity Regulatory Commission (NERC).

Eminent energy expert, Prof. Wumi Iledare, according to media reports, stated that the government’s move was incomprehensible when taken against the background that the firm was registered under the Companies and Allied Matters Act.

He averred that the government needed to revisit the Electricity Supply Act of 2005, adding that the edifice of the sector is threatened by the action of the government while emphasising that what the current administration has done has “implications for the electric power market structure.”

Reacting to the development, in a chat with EnergyDay, professor Adeyanju Solomon of the department of electrical engineering, Kogi State University said: ” What this government has done is to scare away investors not only in the energy space, but in all sectors, because institutional investors- both foreign and local will interprete government’s action to mean a serious danger to their investments.”

Sharing this opinion, professor Adeagbo Moritiwon, a political economist told EnergyDay that this move by the Buhari administration ” is the greatest disservice to Investments flow since the return to democracy in 1999.”

He warned that in the eyes of the law, the president has taken over the powers and functions of National Electricity Regulatory Agency without amendment of the Act setting up the agency.

Dr. Olufemi Omoyele, director of Entrepreneurship at Redeemers University, said “this decision by government will ridicule our Investments drive, it will not encourage foreign investors to come because of insecurity of Investments.”

Speaking to EnergyDay, a legal practitioner and consumer advocate, Dayo Omidiri said government has acted in the best interest to protect consumers under coverage areas of AEDC, stating that” the development should be praised.”

Another lawyer and consumers advocate, Kunle Olubiyo who was also mem­ber, Presidential Ad-Hoc Com­mittee on Review of Electricity Tariff in Nigeria (in August 2020), said for him this welcome action of government should be sequeled by what he called an open book review of the power sector.

“It is a welcome development and a right step in the right di­rection. Further to this, this ac­tion should in the next few days be followed in the immediate in December, 2021 an open book re­view of the power sector which is more or less like a forensic audit in the midterm January, 2022 review of the power sector privatisation exercise

The intense criticism of Federal Government over its decision to unilaterally suspend the Management Board of Abuja Electricity Distribution Company(AEDC), have continued unabated.

More energy lawyers and experts have revealed that the power to suspend any player in the Nigeria electricity market is vested in the Nigerian Electricity Regulatory Commission(NERC) not the executive.

They disclosed that the action of President Muhammadu Buhari and the Ministry of Power that communicated the decision to AEDC, amounted to politically overriding the statutory role of the regulator (NERC) and an abuse of political authority over corporate entity.

According to them, the government through the regulator can 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.

They argued that the provision of that section of the Act, says 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.

They added that even before sanctions is 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.

Sam Amadi, former NERC Chairman and energy lawyer, in a live telecast on Arise Tv monitored by our correspondent, disclosed that the issues around removal of management structure is within the statutory purview of the NERC that is the regulator and not the executive.

He insisted that the Board or Management of AEDC can be suspended under the market rule, after a thorough investigation may have been carried out and a court notice is served on the entity.

He said, “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 applying a section of the NESI Act.

Amadi therefore noted that the action of President Buhari will create a political risk on the businesses in the country and affect investor’s confidence.

He said NERC is the only government entity with power to appoint interim board over a firm that has shareholders, and this can only happen if there is a corporate crisis. He noted that private firm’s management incompetency cannot be addressed by executive but by a regulator.

He insisted that the new interim governing board, is illegal and will not solve the crisis affecting the company. He added that the FG is exercising overriding control over a corporate entity and the regulator, that is a bridge between govt and the private firm.

The former NERC Chairman said, “FG decision will be annulled and can be nullified if the affected Board approach the court.

“If any of the actors in the sector is incompetence and is found wanting, the government should have set a benchmark and set criteria for service code which can now be used against the organisation, if any of the firms could not meet the threshold of establishment code.

“You can only take away licensee through a market-based approach and transparent process but not political intervention. We need to set standard to access their performance,” the Energy Lawyer said.

Mr. Gbenga Biobaku,Senior Partner, Gbenga Biobaku & Co, energy and business lawyer, disclosed that the decision of the Federal Government to sack the Management Board of AEDC will send negative signal to the international investors who may be planning to take advantage of the attractiveness of business environment in the country.

He disclosed that when a public establishment is fully privatized, it is no longer 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.

Mr. Biobaku said, “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.

“Whatever actions the Government seeks to take should be guided by the regulatory framework. The decision to suspend the management of an electricity distribution company is illegal and has tendency to send a wrong signal to international investors about how we govern corporate establishment in Nigeria.

“NERC as a regulator should have been given the freedom to use its power to sanction the firm. The duty of the regulator is well spelt out in NESI Act. If there are issues they can exercise their power to address it without creating a legal vacuum.

“Appointing an interim Board is illegal and would amount to serious legal backlash, if the affected parties decide to sue the government.

“If the company approach the court they are entitled to take legal actions for government’s refusal to follow the due process of law. This has happened in the oil and gas industry and some of the companies involved have won.

“This kind of action is dangerous for the development of the economy and the law. It is unlawful and tax-payer’s funds will be used to defend such action,” the energy lawyer said.

Dr. Olukayode Ajulo, Principal Partner,Kayode Ajulo & Co. Castle of Law, a commercial law firm, revealed that the Federal Government can’t be blamed for sacking the management board of AEDC. According to him, it behooves on NERC to show whether it was fully consulted or otherwise before such decisions are made.

According to him, if by now NERC is silent about the decision of the Presidency, then it goes to show that the 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 an 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.

“The Federal Government as a convening authority under the constitution of the Federal Republic of Nigeria, has power to hire and fire any organisation that does not meet the regulatory objective of the particular industry.

“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,Sanusi Garba , 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.