By Peter Ogbobine
The Electricity Act of 2023 (“Act”) marked a significant departure from the previous legislation governing Nigeria’s electricity sector, specifically the Electric Power Sector Reform Act, EPSRA, of 2004. The Act consolidated various statutes, including ESPRA, and introduced several key provisions related to regulatory frameworks, tariff regulation, market structure, consumer rights, investment incentives and grid management.
However, the Act’s most notable feature is the recognition it grants to each federated state through its State House of Assembly. States now have the authority to pass statutory laws concerning electric power – whether related to generation, transmission, or distribution – within their geographical boundaries. This empowerment allows states to establish their own regulatory frameworks, albeit subject to existing laws.
Before the Act, Nigeria’s electricity value chain was predominantly centralised at the federal level, even after the privatisation of generation and distribution sub-sectors in 2013. The transmission subsection remained under government control, yet the country continued to grapple with power challenges.
In response to these challenges, the Act boldly aims to diversify and devolve the provision of electric power to states. One avenue for achieving this is through the development of mini-grids within each state. These mini-grids can be established by Independent Electricity Transmission Network operators or Independent Electricity Distribution Network Distributors.
The benefits of granting states control over their electricity value chain are manifold. States can customise regulations to address their unique energy needs, foster local innovation, and enhance overall energy reliability and efficiency. By decentralising power provision, the Act seeks to create a more resilient and responsive energy system across Nigeria.
Certainly! State-level regulation in the electricity sector can indeed vary significantly from one state to another, depending on the governance structure and legal framework in place. Many states have developed plans to establish their own electricity market laws and are seeking approval from the Nigerian Electricity Regulatory Commission, NERC, to create independent regulatory bodies separate from the federal-level NERC.
State-level regulations typically cover the following areas:
1. Regulatory Agency Establishment: States create regulatory agencies responsible for overseeing various aspects of the electricity value chain, including generation, transmission, distribution, retail, consumer protection, interstate cooperation, stakeholder engagement, and enforcement within their borders.
2. Potential Conflicts: It’s inevitable that conflicts may arise between state and federal regulations. These conflicts could stem from differing priorities, objectives and interpretations of authority. The interplay between NERC and state regulations can be complex and may require collaborations, negotiation, and legal irresolution to align goals to enable the delivery of reliable, affordable and sustainable energy services to consumers at both federal and state levels.
3. Preemption by NERC Regulations: In cases of conflict, NERC regulations generally take precedence over state regulations. However, balancing state autonomy with national consistency remains a challenge.
4. Technical Preparedness: Implementing state-level provision of electricity requires careful planning and technical expertise. State governments must exercise caution and ensure they are adequately prepared to manage the complexities of electricity supply.
5. Composition of Regulatory Agency: The process of providing electricity is highly technical and capital intensive. State governments in setting up their respective state regulatory bodies must avoid as much as possible any form of prebendalism by ensuring that such bodies are manned by competent technocrats with cognate experience in the electricity sector.
Overall, overpowering states to participate actively in the electricity sector can lead to more tailored solutions, improved reliability, and sustainable energy services for consumers. Collaboration between NERC and state regulatory authorities is crucial to achieving these goals. States are therefore encouraged to immediately commence the implementation of state level provision of electricity in collaboration with NERC.
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