The Nigerian federal government has paused the granting of Electricity regulatory authority to state governments. As per the recent review in the Electricity Act, approved by former President Buhari and later amended under the President Tinubu administration, granted states the power to establish their own electricity markets to manage the power sector. States in the federation have the authority to grant licenses for electricity generation, transmission, and distribution within their borders, enabling them to create regulatory bodies to oversee and advise on electricity activities at the state level.
Prior to this, the Nigerian Electricity Regulatory Commission (NERC) had initiated the transfer of its regulatory authority to states such as Enugu, Ondo, and Ekiti that have expressed interest in taking on these powers. However, Minister of Power, Adebayo Adelabu, announced that the progress for the Electricity Market has been paused, during his speech at the 8th Africa Energy Market Place (AEMP) Nigeria event in Abuja. This decision was made in order to guarantee that state governments and stakeholders in the power sector have a clear understanding of the operation requirements.
Pilot phase should be conducted to transfer power to states.
Adelabu believed that having multiple regulatory agencies established by states would only add to the existing problems in the market, which is currently overseen by a single regulator. He suggested starting with a pilot phase to transfer regulatory power to the states and assess its effectiveness before making any permanent changes. This cautious approach would allow for adjustments to be made as needed. Adelabu stressed that it is crucial for states to have a deep understanding of taking over regulatory oversight of the electricity market in order to ensure its survival and long-term success.
He emphasized the significant role Lagos State plays in the national electricity distribution, accounting for over 40% of consumption and questioned the ability of the state to handle the immense responsibility of regulating such a vast power market. If a state assumes regulatory control, it will also be responsible for bearing the costs of Tariffs and Subsidies. Many stakeholders fail to recognize the level of resources needed to establish regulatory authorities in all 36 states, as well as the Federal Capital Territory (FCT), he added.
There are significant challenges that must be overcome.
For states to be involved in regulatory oversight they are required to establish a solid framework to combat energy theft, vandalism, and ensure there is enough funding for ongoing Infrastructure investments and maintenance. Additionally, Prof. Barth Nnaji, the former Minister of Power and current Chairman of Geometric Power, pointed out that while the new law has decentralized the electricity value chain, there are significant challenges that must be overcome. He mentioned that the states still need to depend on the national regulator until they are capable of completely managing and excelling on their own.
Prof. Nnaji opined that every state government aiming to implement regulations must consider various factors including cost recovery. According to him, individuals who invest in infrastructure should be able to recuperate their expenses, necessitating collaboration between the federal government and states to provide necessary guidance. He emphasized the importance of developing adequate capacity, pointing out that the extensive expertise accumulated by the Nigerian Electricity Regulatory Commission throughout the years cannot be swiftly recreated across all the 36 states.
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More so, replicating the actions of the national regulator would pose challenges for state governments due to the issue of capacity. State governments often mistakenly believe they have the capability to handle the generation, transmission, and distribution of power on their own. Moreover, there are Distribution Companies (Discos) operating under private ownership within the sector, resulting in the Discos owning the electrical wires. It is essential for the states to recognize the limits and work together with these established companies.
