Policy inconsistencies inimical to electricity market reforms — Seun Faluyi

Energy expert, Mr Seun Faluyi has lamented that policy inconsistencies, process delays and labour union influences are major issues that can disrupt and create market confusion in the power sector reforms.

Faluyi, Managing Consultant, Aloe & Squires, Nigeria made this revelation while speaking on Electricity Market Reforms: Lessons for Africa – Insights from the Nigerian Power Sector Reform at the just conclude Africa Utility week and clean power conference in Cape Town, south Africa.
According to him Process delays can be costly and painful and the Labour union influences should not be underestimated in any Electricity Market Reforms in Africa.

He noted that Other issues  that can aid good Electricity Market Reforms in Africa include dynamic  business plans, immediate attention on human performance issues and required  Strong financial and  risk management capabilities.

He said that  Regulatory conflicts can be intense but regulatory independence cannot be assumed as Price based regulation can be restrictive

Faluyi emphasized that reforms are beneficial for the development of the electricity market. Deregulation in the market does not mean removing the rules for the market. It means re-regulation. As market conditions change, market rules need to change to effectively regulate the participants in the market.

‘The demand in many countries is growing faster than governments can satisfy on their own. Inviting private sector players requires the development or rules to protect consumers who would be vulnerable to abuse by private monopolies. Governments can still play a role in serving and protecting the interests of its citizens without necessarily owning the infrastructure that is used to serve them. ‘This will require striking a balance between the interests of the citizens who want government to provide at little or no cost and the interests of infrastructure providers who want to maximize their growth and returns on investment, he stated

He indicated that a balance can be achieved by recognizing that the market is not homogenous and that market rules can be used to protect the most vulnerable while allowing freer market relationships between willing buyers and sellers.

“The physical flow of power in the network is governed by technical rules and standards. The commercial flow of power also needs market rules and standards so as to ensure that the flows do not cease.” Faluyi said.

He said that in  Africa in particular, the big challenge is the inherent struggle between minimizing the costs to consumers and maximizing the ROI to suppliers so that they can continue to invest in maintaining or expanding the network? The tipping point or price would depend on the class of customer and the value that they place on what they are getting. Some require basic services of just availability and may be tolerant of lower standards or quality or reliability.

Source: Guardian and Offshore Dimensions Limited