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Law amendment gives states power autonomy

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By Abraham Adekunle

States can now generate, distribute and transmit electricity.

President Buhari has signed into law a constitutional amendment that allows states across the country to licence, generate, transmit and distribute electricity. On March 17, 2023, the Special Assistant to the President on New Media, Mr. Tolu Ogunlesi, posted on Twitter microblogging platform that Nigerian states can now have some sort of power autonomy in areas that were not covered by the national grid, pre-amendment. “This is genuine realistic restructuring through the constitution,” he wrote.

This amendment will impact business, states’ internally generated revenues, prepaid metering for households and businesses as well as the distribution companies (DisCos). Now that states have been granted the power to generate, distribute and transmit electricity, all states will be allowed to develop their electricity market frameworks which will be specific to their capacity and realities. Nigerian Electricity Market Lawyer, Ivie Ehanmo told the press that as electricity markets advance within states, with commensurate improvements to the current grid bottlenecks on a national scale, the decentralized electricity market structure will enable the opportunity for states to sell power to the national grid.

This development will decrease pressure on the national grid.

The lawyer also noted that residents will be able to undertake transactive energy, where producers and consumers of energy are able to transact with each other directly. Decentralization of the electricity market will also allow for better accountability and transparency and will promote and foster competition in the market. This will in the long run influence electricity tariffs toward a downward trajectory. She added that a decentralized structure will decrease pressure on the grid and allow for cheaper power to be supplied to vulnerable and life-line customers in unserved and underserved areas.

According to Ehanmo, this will promote grid flexibility and reduction in grid expansion costs. In addition, the amendment will allow states to expand and explore their available energy mixes to undertake adequate system planning and demand forecasting. For instance, Lagos intends to deploy and utilize Off-Grid Solutions (OGS) to electrify unserved and underserved areas via the use of clean energy products. This will create room for the state to deploy carbon pricing mechanisms, particularly carbon offsetting, by trading the clean energy attributes of electricity generated from renewable energy sources, thus earning revenue for the state, improving the living conditions of residents within the State, and supporting the country in meeting global climate change obligations.

Socioeconomic status of states will be improved.

A power sector analyst, Bayode Akomolafe believes that the amendment means a new level of accountability and responsibility for state governments. Each state government has the tool and power to improve the socioeconomic status of their state through the deployment of energy resources as seen fit. He sees this constitution amendment as a gradual devolution of power from the Federal Government to the State Governments. “The state government will need to start building internal capacity for a regulatory framework, policies, and infrastructure to improve electricity resource development,” he said.

He said that this can be achieved through the engagement of sectoral experts, the private sector, national organizations and transnational networks for technical and non-technical support and development. Presently, state governments now have the power to utilize the electricity resources in their state for electricity generation subject to the approval of the Nigerian Electricity Regulation Commission (NERC) and other relevant federal agencies. In the same vein, the Chief Executive Officer (CEO) of Revive Earth, Chukwuemeka George Eze, told the media that the policy amendment means more Internally Generated Revenue (IGR) for states, which is a great opportunity to diversify their power generation and distribution, and a more reliable supply network.

This is an opportunity for DisCos to improve capacity.

This amendment also creates an opportunity for distribution companies to improve capacity and increase revenue flow if suitable strategies are deployed and new growth plans are implemented. Akomolafe said that this also means that the regional monopoly of DisCos will end as new state players will emerge. This resulting competition will provide consumers with options which is a catalyst for improved service delivery. He foresees a collaboration with smaller players, as the state players can leverage DisCos’ existing technical and commercial infrastructure and capacity for accelerated growth.

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