The Nigerian Electricity Regulatory Commission (NERC) has officially transferred regulatory oversight of the Enugu electricity market to the Enugu Electricity Regulatory Commission (EERC).
This transfer, effective from May 1, 2024, marks the first time NERC has delegated such authority to a state-owned regulatory body.
This strategic shift was detailed in a memo released by NERC, bearing signatures from its Chairman, Sanusi Garba, and Commissioner for Legal, Licensing, and Compliance, Dafe Akpeneye, dated April 22, 2024.
State regulation of Electricity
These changes were set into motion in March 2023 when former President Muhammadu Buhari signed amendments to Nigeria’s constitution that removed power generation, transmission, and distribution from the exclusive legislative list, effectively ending the federal government’s sole jurisdiction over these areas.
- Under the new legal framework established by the Electricity Act 2023, states now have the authority to manage and regulate their electricity markets.
- The amended Paragraph 14(b) Part II of the Second Schedule to the 1999 Constitution empowers state governments to legislate on electricity provision within their territories.
According to NERC, the Enugu Electricity Regulatory Commission (EERC) now holds the exclusive authority to set and adopt end-user electricity tariffs within Enugu State, tailoring these charges to local conditions and requirements.
- While EERC manages local tariff methodologies, any electricity sourced from grid-connected plants and the related tariffs for generation and transmission services must still receive approval from the Nigerian Electricity Regulatory Commission (NERC), ensuring alignment with national energy policies.
- Ultimately, the final tariffs approved by EERC for consumers in Enugu will be definitive for the state, with the Enugu State Government responsible for supporting and implementing tariff-related policies, ensuring that electricity pricing is both fair and attuned to the specific needs of the state’s residents.
The memo from NERC states, “This regulatory instrument may be cited as the Order of Transfer of Regulatory Oversight of the Electricity Market in Enugu State from NERC to the Enugu State Electricity Regulatory Commission (EERC). This Order shall take effect from May 1, 2024.”
What this means for EEDC
Under the new regulatory order, the Enugu Electricity Distribution Company PLC (EEDC) is mandated to establish a subsidiary, known as EEDC SubCo, under the Companies and Allied Matters Act.
- This subsidiary will be responsible for the localized supply and distribution of electricity exclusively within Enugu State.
- EEDC must finalize the incorporation of EEDC SubCo within 60 days from the order’s effective date, after which the subsidiary is required to secure a license from the Enugu Electricity Regulatory Commission (EERC) for its operations.
- Additionally, EEDC is tasked with clearly defining the geographical boundaries of its network within Enugu State, ensuring that it operates independently of networks in neighboring states by installing boundary meters at all crossing points.
This move is aimed at establishing a self-contained and well-defined electricity distribution framework within the state, enhancing management and regulatory oversight.
What this means in general
The devolution of regulatory powers to states like Enugu represents a significant shift towards a more localized management of electricity services.
- This means that states can now tailor their energy policies to better suit the specific needs of their residents, promoting more efficient and sustainable energy use within their jurisdictions.
Role of NERC Moving Forward: NERC will continue to play a pivotal role as the central regulator for inter-state and international electricity transactions, ensuring compliance with national standards and managing overarching issues that transcend state borders.
- This includes the regulation of large-scale power generation plants, high voltage transmission networks, and the overall system operation of the national grid.
State Regulation Specifics: States will specifically regulate the generation, transmission, and distribution of electricity within their territories.
- This includes licensing local power projects, managing state-owned power assets, and overseeing retail electricity distribution and pricing.
- The states will also be responsible for promoting rural electrification projects and integrating renewable energy sources into their local grids.
NERC’s move to cede control to EERC signifies a significant shift in Nigeria’s approach to energy regulation, potentially serving as a model for other states in the federation.
Enhanced Market Participation
The recent shift in regulatory control from the Nigerian Electricity Regulatory Commission (NERC) to state-level entities represents a monumental change in the landscape of Nigeria’s electricity sector.
This transition, according to Odion Omonfoman, Chief Executive Officer of New Hampshire Capital Limited, heralds a new era of competition and localized management that could significantly enhance service delivery and foster economic growth.
With the new regulations, states are empowered to license new entities as distribution and supply licensees. Omonfoman anticipates that this will lead to an increase in market participants.
- “This change is likely to spur a wave of local investments in state electricity markets, as investors seek opportunities within these newly regulated environments,” he stated. The implication is that with more players in the market, there will be greater innovation and investment, driving improvements in efficiency and service quality.
Regarding the effects on existing utilities, Omonfoman believes that while they will continue to hold significant market presence, they will need to adapt to maintain their competitive edge.
- “State regulators will focus not on usurping business but on ensuring that these services are improved,” he noted. The objective is to push for better service delivery that surpasses current standards, which will benefit consumers by providing more reliable and potentially cost-effective electricity services.
I commend the initiative of NERC decentralising the energy management supervision and regulation to States for effective regulation. However, there’s much more to be in consideration of how the national commonwealth was handed over to some tyrant and shylock few who now profit much more from where they didn’t sow better than some end users. The directors of EEDC are exploiting some consumers. In some situations, certain directors uses the opportunity to exploit and frustrate perceived enemies. NERC need to review their regulatory overview and possibly investigate the excesses of those directors at the state like Enugu. Example: certain managers of spme transformers targets some perceived enemies by either appropriating outrageous bills to such enemies and in some cases their so called managers do not pay for the use of energies, whereas they allocate excessive bills to their perceived enemies! Something has to be done urgently!!!