Electricity Act 2023: Solution to power supply challenge?
The Electricity Act 2023 signed into law by President Bola Tinubu may be the game changer needed for the desired stability for the supply of electricity in the country. In the course of the week, no fewer than three states were awarded regulatory powers to run their states’ electricity regime. Experts agree that if well harnessed, the country may be on the path of having stable power supply and by extension, leading to an improved economy. But how prepared are the states in this unfolding dispensation? Muyiwa Lucas and Sunny Nwankwo write.
Nigerians and blackouts courtesy of the parlous state of electricity supply are no strange bedfellows. For decades, attempts at providing stable power supply have remained a hydra-headed problem, notwithstanding the unbundling of the power sector.
The licensing of 11 electricity Distribution Companies (DisCos) by the federal government was thought to be a panacea for efficiency in the sector with the aim of providing stable power. But, sadly, a decade after this initiative, it has not been a rosy journey. Majority of the DisCos have turned out to be very inefficient and unable to deliver on their mandate, therefore keeping the nation wallowing in darkness and affecting the economy.
Since last December, from Lagos to Edo; Jigawa, to Enugu; Kaduna to Calabar, and many other states, tales of electricity woes adorn the landscape. However, the situation took a further dip in the last three months, leaving Nigerians to decry the almost total power outage in their respective areas, which has almost paralysed business activities.
Electricity Act 2023
On June 8, 2023, President Tinubu signed the Electricity Act (EA) 2023 into law. The Act repeals the Electric Power Sector Reform Act 2005 (EPSRA) and aims to consolidate the laws relating to electricity in the country across the entire value chain of the Nigerian Power Sector, including the integration of renewable energy to Nigeria’s energy mix. In addition, the Act aims to encourage state government participation in the power sector and increase private sector investment.
The government’s desire to liberalise the sector and was very clear in the Act, as it opened up electricity generation, transmission, and distribution at the National level, empowering States, companies and individuals to generate, transmit and distribute electricity.
Under the Act, States can issue licenses to private investors who may operate mini-grids and power plants within their territory. The Act, however, precludes interstate and transnational electricity distribution. The Act also permits private investors to obtain generation licenses, transmission licenses, system operations licenses, trading licenses, and distribution and supply licenses. It also offers a range of incentives, including tax incentives, to investors in the power sector.
The electricity market in Nigeria was previously centralised and the move to decentralisation was achieved when presidential assent was granted to the amendment of relevant portions of the Constitution of the Federal Republic of Nigeria on March 17, 2023.
Paragraph 14(b) Part ll of the Second Schedule to the 1999 Constitution provides that “a House of Assembly may make laws for the State with respect to generation, transmission, and distribution of electricity to areas not covered by a national grid system within that State.” But this was amended to “a House of Assembly may make laws for the State with respect to generation, transmission, and distribution of electricity to areas within that State.”
This amendment granted legislative autonomy to federating states in the country by empowering the sub-national governments to legislate on the generation, transmission and distribution of electricity within each respective state.
Section 2(2) of the EA, takes due legislative cognisance of the powers conferred on the federating states with the amendment to Paragraph 14(b) Part Il of the Second Schedule to the 1999 Constitution.
Implementing the Act
Residents and businesses in states like Enugu, Ekiti, Ondo, may have become the early beneficiaries in the EA 2023. After complying with requirements for request as provided for in the Act, earlier in the week, some States began to key into the provisions of the Electricity Act and in line with the amended Constitution of the Federal Republic of Nigeria (CFRN).
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On Tuesday, the Nigerian Electricity Regulatory Commission (NERC) transferred regulatory oversight of the Enugu electricity market to the State Electricity Regulatory Commission. This was immediately followed by approvals for Ekiti, Ondo states.
Still, the NERC also directed the transfer of regulatory oversight of the electricity markets in Ekiti and Ondo states to the Ekiti State Electricity Regulatory Bureau (EERB) and the Ondo State Electricity Regulatory Bureau (OSERB), respectively.
In ceding the powers to Enugu state, the NERC noted that “the Government of Enugu State complied with the conditions precedent in the laws, duly notified NERC and requested for the transfer of regulatory oversight of the intrastate electricity market in Enugu.”
NERC, in the Order, directed the Enugu Electricity Distribution Company PLC (EEDC) to incorporate a subsidiary (EEDC SubCo) to assume responsibilities for intrastate supply and distribution of electricity in Enugu State from EEDC. It further ordered that the Company shall complete the incorporation of EEDC SubCo within 60 days from April, 22 and the Sub Company shall apply for and obtain a licence for the intrastate supply and distribution of electricity from the Enugu Electricity Regulatory Commission (EERC), among other directives. All transfers envisaged by this order shall be completed by October 22, 2024.
Similarly, the Commission explained that Ekiti and Ondo states have both complied with the conditions precedent in the laws, duly notified NERC and requested for the transfer of regulatory oversight of the intrastate electricity market in the states.
The commission noted that the transfer order has directed Benin Electricity Distribution Company (BEDC) and Ibadan Electricity Distribution Company Plc (IBEDC) to incorporate subsidiaries BEDC SubCo and IBEDC SubCo to assume responsibilities for intrastate supply and distribution of electricity in Ekiti and Ondo states from BEDC and IBEDC.
“A transfer of regulatory oversight notification shall be issued by the Commission to the companies in the register whose activities are limited within Ekiti and Ondo States, informing the entities of the transfer/assumption of regulatory oversight for their activities by EERB and OSERB. All cross-border transactions involving the national grid shall be subject to the approval of the Commission in accordance with the CFRN and ΕΑ.
“EERB and OSERB shall have the exclusive responsibility of determining and adopting an end-user tariff methodology applicable within its area of regulatory oversight. Where the SubCos receive electricity from grid connected plants, the contracts and tariffs applicable for generation and transmission services shall be approved by the Commission. The final end-user tariffs approved by the Bureaus shall be the exclusive tariffs that apply in Ekiti and Ondo States and all tariff policy support for end-use customers in the states shall be the responsibility of the Ekiti and Ondo State governments,” the order stated.
However, based on the EA 2023, the NERC retains the role as central regulator with regulatory oversight on the inter-state /international generation, transmission, supply, trading and system operations.
“All transfers between the Benin Electricity Distribution Companies (BEDC), Ibadan Electricity Distribution Company (IBEDC), and EERB and OSERB, envisaged by this order shall be completed by 22 October 2024. The directive shall take effect from 1 May 2024 in accordance with the Electricity Act 2023.
“Hence the act mandates the Commission to develop a transition plan and timeline for the transfer of regulatory oversight of the intrastate electricity market from NERC to EERC, EERB and OSERB upon receipt of a formal notification from the states,” a statement by the NERC chairman, Sanusi Garba and commissioner in charge of Legal, Licencing and Compliance, Dafe Akpeneye, said.
Hope, promise, reality
Laudable as this initiative is, how well will the transfer to states translate to improved power supply?
The high hopes brought by Geometric Power Limited following the commissioning of the Aba Independent Power Project (IPP) by Vice President Kashim Shettima last February give great hopes to the residents.
The Geometrics project includes the 188-megawatt Aba Independent Power (IPP) thermal plant located in the Osisioma Industrial Layout of Aba and the Aba Power Electric Company set up to distribute power to the Aba Ring-fenced Area which comprises nine of the 17 local government areas in Abia State.
Both Geometric Power and the National Control Centre (NCC) at Oshogbo in Osun State had reached an understanding on how electricity will be supplied to all parts of the Aba Ring-fenced Area in Abia State
With 7MW injected into the system weekly, all 47MW from the first General Electric (GE) turbine will be supplied to consumers. This will double the quantum of electricity currently supplied to the Aba Ring-fenced Area by the Niger Delta Power Holding Company (NDPHC), which has been just 25MW for months.
The Geometric Power leadership is optimistic that the 47MW from the third GE turbine will be sent to the national grid, since Aba and its environs may not absorb more than 94MW right now.
The CEO of Geometric Power Plant, Prof. Barth Nnaji during the Commissioning of the plant, assured of uninterrupted power supply to electricity users and that the excess supply would be channeled to the National Grid since the three gas turbines will be more than the 100Megawatts it is currently consuming.
Stakeholders speak
Yet, stakeholders the though commend the decentralization for its benefits, but they insist that it also has its down side. For instance, the chief executive officer, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, praise the decentralisation initiative for the relief it will bring to the national grid.
“It won’t pose a strain on the national grid because there will be several mini grids. The whole idea of this decentralisation is to take burden off the national grid. Rather, it will bring sanitay to the grid because the essence is to move away from over concentration on the grid. Many of the existing structures are already in the hands of these Discos and many of them are operating across states,” Yusuf said.
However, Yusuf, a former Director-General of the Lagos Chamber of Commerce and Industry (LCCI), argued that there may be a need to rethink on the aspect of the Act. He warned that it will be neater to have a centralised body regulating this sector because many of the states angling for autonomy of electricity lack the capacity to handle it.
“Many of the states don’t have the capacity to regulate the electricity business. This is a sector that requires a lot of engineering and technical knowledge, so I am deeply worried about the capacity of the states in the electricity business. Perhaps there may be the need to have a rethink in that segment of the law so that we don’t create unnecessary confusion in the electricity sector,” he said.
Yusuf opined that the fact that there is a central regulatory body does not undermine the general policy direction of decentralising electricity generation or distribution.
“You can take a que from the Nigerian Communications Commission (NCC), that handles everything about communication which is centralised under the commission whether you are operating privately or at state or national levels, there is a uniform standard. The same is with the broadcasting commission, whether privately, state or national. I think the same thing should apply to electricity. Many of these states do not have the capacity to control it and that may affect the quality of the service. We know what some of the sates can be in terms of regulation as all manner of sentiments can come into it. People with no capacity will now be regulating this major investment.” He said.
He is weary that there may be a clash of roles between the NERC and state regulators operating side by side. “The risk of a clash or overlapping directives is real. And conflict of roles and this may cause a challenge for investors because there may be different laws clashing especially in areas of taxes and levies,” he submitted.
An Energy consultant and CEO of Powerfull Technology Limited, a solar financing company based in Lagos, Ifeanyi Ukwuoma, in an article published in a national daily, argued that the existing operational framework of on-grid and centralised power generation and transmission serves as the primary bottleneck restraining the development of Nigeria’s power sector.
According to him, from frequent grid collapses to erratic power output, the evidence overwhelmingly points to a centralised system struggling to meet the demands of a rapidly growing population. He further noted that the crux of the electricity problem in the country is closely related to the country’s reliance on a single grid-connected generating and transmission system. This centralised approach, he explained, mandates that all electricity generated across the country must traverse the national grid before reaching its intended destinations. For instance, the energy generated by the 1,320MW Egbin Power Plc in Lagos State must first funnel into the national grid, with only a portion subsequently channelled back into Lagos. Consequently, Lagos, like the rest of the country, relies heavily on the national grid for its electricity needs, a reliance that often falls short of meeting demand.
“This imbalance becomes glaringly evident when juxtaposed against Lagos’s substantial power generation capacity relative to its grid allocation. The irony is palpable as Lagos generates a surplus of 1,320MW while receiving a mere 1,000MW from the national grid. Such inefficiencies underscore the urgent need for a decentralisation in Nigeria’s electricity market structure,” Ukwuoma argued.
Likening the situation to devolution of power from the central government to its federating units in political circles, the energy consultant agreed that the same policy is what the country needs in its power sector.
“The imperative for decentralisation in the power sector cannot be overstated, particularly in the context of empowering federating units such as states to generate their own electricity as a viable alternative to the current centralised model. Yet, realising this vision necessitates a concerted effort to establish an enabling constitutional and legal framework, coupled with an autonomous regulatory body capable of integrating decentralised generation resources into a bankable commercial framework,” he submitted.