The Nigerian Energy Regulatory Commission (NERC) has announced the official completion of regulatory authority transfer to four states: Enugu, Ekiti, Ondo, and Imo, a major step toward decentralizing energy Regulation in Nigeria. This move is part of the implementation of the 2023 Electricity Act, which seeks to increase state-level control over the generation, distribution, and general management of the energy market. The commission disclosed that as of January 10, 2025, it is in the process of transferring oversight to 10 states, with six—Oyo, Edo, Kogi, Lagos, Ogun, and Niger—still pending.
With the regulatory transfer, the market structures of distribution operations in the impacted states have already changed and more changes are anticipated later this year when the remaining states integrate their sub-companies. Nigeria’s power sector is undergoing a radical change with the 2023 Electricity Act, which gives states the ability to regulate electricity inside their borders, after operating under a centralized paradigm since 2013. It is anticipated that this change will improve service delivery, increase energy access, and encourage competition in the industry for better economic and developmental outcomes.
SERC’s role in managing state-level power investments and networks.
This development is expected to encourage localized solutions to persistent issues in the industry, such as unstable power supplies, inefficient distribution, and poor infrastructure. By empowering individual states with more regulatory authority, the federal government hopes to establish a more efficient and competitive Electricity Market that caters to the unique requirements of every state. Upon completion of the regulatory transfer, the State Energy Regulatory Commission (SERC) will have the authority to issue licenses and establish regulatory frameworks for mini-grids, independent electricity distribution networks and their operators, and independent electricity transmission networks and their operators within their respective states
Moreover, the transfer will give the SERC the authority to control state-level investments in electricity utilities. In cases when the activity is completely confined within a state, the SERC will be the sole regulatory body, ensuring that all power generation, transmission, distribution, and supply within the state comply with locally set rules and regulations. This framework requires distribution networks functioning within a state to have well-defined borders and function as stand-alone systems that are completely separate from networks in nearby states.
Empowering state regulators through boundary metering.
To facilitate this, state regulators will have to ensure that boundary meters are installed at all points the electrical network crosses from one state to another. This strategy falls in line with the 2023 Electricity Act’s overarching objective of decentralizing electricity regulation, giving states the authority to handle their particular energy issues and promote regional solutions for increased electricity access and dependability. Nevertheless, this regulatory transfer policy also denotes dual regulatory oversight of the NERC and state regulators, in some circumstances.
As contained in section 63(7) of the EA, the Commission maintains its position as a central regulator with regulatory supervision over interstate/international generation, transmission, supply, trading, and system operations. The EA requires any state that plans to create and regulate intrastate energy markets to provide a written notification of its procedures, before NERC can transfer regulatory power over electricity operations in the state to the State Regulator. It is important to note that nothing in the Electricity Act does not nullify any laws enacted by a state’s House of Assembly pertaining to any aspect of electricity generation, transmission, system operation, distribution, supply, and Retail within that state.
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It includes laws regarding the establishment, promotion, and management of state electricity power stations; the creation of state electricity markets; the establishment of state electricity regulatory authorities or entities with the power to regulate such markets; collaborations between states, local governments, and the federal government for rural electrification; partnerships with distribution licensees to ensure electricity access in rural, unserved, and underserved areas; and laws supporting the development of a State Integrated Electricity Policy and Strategic Implementation Plan.