The state governments of Edo, Delta, Ondo, and Ekiti collectively referred to as “BEDC State Governments” have taken a formal step to communicate with the Nigerian Electricity Regulatory Commission (NERC), signalling their intention to assert their shareholder rights in the Benin Electricity Distribution Company (BEDC).
They claim the initiative is a response to the “operational challenges and failures in service delivery” within their respective states.
In a unified correspondence addressed to Engr. Sanusi Garba, the Chairman of NERC, dated March 18, the initiative launched by the states represents a pivotal move to address longstanding discrepancies stemming from the privatization process of 2013.
Sources with knowledge of the matter reveal to Nairametrics that the direct shareholdings of Delta and Edo State in BEDC is 14% and 8.4% respectively. Ondo and EKiti States also own 6.6% and 5.2% respectively in BEDC. The FG owns 5.8% giving the states and federal government a combined stake of 40%.
Key highlights of the letter
On Expressing their Intent: The letter was written as a formal notification to NERC of the collective intent of the State Governments where BEDC operates regarding their residual equity in BEDC.
The State Governments expressed dissatisfaction with the operational deficiencies and service delivery failures of BED stating that the provision of reliable electricity is a core priority and essential for the welfare and development of their states’ populations.
- “After a thorough evaluation of the operational deficiencies and service delivery failures to our states, the BEDC State Governments intend to exercise our shareholder rights in BEDC, to ensure the efficient provision of electricity services to our citizens. The provision of reliable electricity to enhance the welfare and development of our people is a core priority of our governments, as such, we cannot afford to overlook the critical importance of ensuring that electricity distribution services provided by BEDC meet the needs and expectations of our populace henceforth.
On active board and management participation: They also expressed their intention to exercise their rights as shareholders to address these concerns. This includes an active role in decision-making at both the board and management levels to improve operations and service delivery, as well as to extend electricity access to unserved and underserved communities.
- “In exercising our shareholder rights, the BEDC State Governments intend to actively participate in the decision-making processes of BEDC both at the Board and Management level of the Company, with the goal of strengthening the operations of the Company to enhance service delivery, improve operational efficiency, increase electricity access to unserved and underserved communities, and ultimately, transform the electricity sector within our States.”
Addressing historical oversight: The also stated that their letter seeks to address what they see as a “historical oversight” as they have not given any Power of Attorney to the Federal Ministry of Finance Incorporated (MOFI) or the Bureau of Public Enterprises (BPE) concerning their shareholding post-privatization of BEDC.
- “Please note that our demand is not capricious and merely wishes to correct a historical lapse. We wish to emphasize that at no point did the BEDC State Governments give any Power of Attorney (POA) to either the Federal Ministry of Finance Incorporated (MOFI) or the Bureau of Public Enterprises (BPE) with respect to our shareholding in the PHCN Successor Benin Electricity Distribution Company, or the post-privatized entity.
Planned takeover of BEDC: They also noted NERC’s intent to possibly take regulatory control of BEDC by March 31, 2024, and thus requested formal notification before any regulatory actions are taken, such as the appointment of new directors and a management team.
They also urged NERC to begin the process of unbundling BEDC along state boundaries, which implies a desire for more localized control over electricity distribution that aligns with state borders.
- “It has come to our notice that the Commission intends to exercise a regulatory takeover of BEDC by March 31st, 2024. The Commission is kindly requested to formally notify the BEDC State Governments before taking any regulatory action to appoint new Directors and a Management Team for the Company. We also urge the Commission to immediately commence the process of unbundling BEDC into its operational areas along State boundaries.
Sources familiar with the industry perceive this action as a critical first stride towards remedying the missteps of the past and steering the sector toward a more equitable and efficient future.
Backstory
The letter from the state commissioners of power to the Nigerian Electricity Regulatory Commission (NERC) seems to be a direct and urgent response to the planned regulatory takeover of the Benin Electricity Distribution Company (BEDC).
This urgency is predicated on the controversies surrounding BEDC, which have seen a series of legal and corporate maneuvers.
- Historically, BEDC has been at the center of a protracted conflict involving its management and Fidelity Bank, which led to a takeover initiated by the bank.
- This action by Fidelity Bank was deemed a contractual intervention as a result of BEDC’s indebtedness to the bank.
- The bank’s move to finalize the takeover, which also involved other electricity distribution companies, was part of a restructuring agreement with Vigeo Power Limited, a core investor in BEDC.
- This has been contested by Vigeo Power Limited, leading to a court injunction restraining the takeover. Despite this, there were reports of continued attempts to enforce the takeover, with BEDC management firmly resisting, emphasizing the illegality of such actions without due process and in disregard of the court injunction .
The letter suggests that the state governments are seeking to exercise their powers, possibly buoyed by the new Electricity Act, which may offer them legal grounding to assert more influence over the operations of BEDC and, by extension, other DisCos.
An Industry stakeholder who spoke to Nairametrics stated that this newfound assertiveness can have far-reaching implications for the wider electricity sector.
- “If states begin to take a more active role, it could lead to a restructuring of DisCos along state lines, potentially improving efficiency, governance, and responsiveness to regional electricity needs.”
It also represents a shift toward a more decentralized approach in managing Nigeria’s power sector, with state governments having a stake in ensuring the DisCos operate effectively within their jurisdictions.
About BEDC
BEDC is responsible for the retail distribution of electricity in Delta, Edo, Ekiti, and Ondo States with a geographical coverage of 57,353 square kilometres.
- The company serves an estimated 4 million households, and an effective customer population of 1,291,181 as of September 2023.
- It is also the 5th largest distribution company in Nigeria.