An Overview of NERC’s Activities
Since pre-independence, the Nigerian electricity sector has been characterized by epileptic and unreliable power supply, thus, creating a harsh environment for economic development and most especially, foreign investment. This has led to the witnessing of a number of reforms by the Nigerian electricity sector aimed at restructuring, unbundling and privatising the sector in a bid to be more productive.
Reforms of the Nigerian electric-power sector began with the passage of the Commercialization and Privatization Decree №25 of 1988. The Decree provided for full and partial privatization of government establishments. However, this reform did not achieve much in repositioning the electric sector as a viable tool for economic growth. Against this backdrop, another reform began in 2000 with the formation of the Electric Power Implementation Committee (EPIC), prepared the National Electric Power Policy (NEPP) in 2001 and the Electric Power Sector Reform Bill which later became an Act in 2005. The Electric Power Sector Reform Act, 2005 (EPSRA) is the legal, administrative and regulatory instrument of the sector.
Provisions in the Electric Power Sector Reform Act (EPSRA)
Section 31 to 61 of the EPSRA makes provisions for the establishment, functions and powers of the regulator of the Sector; the Nigerian Electricity Regulatory Commission.
As enshrined in Section 32, Sub-section 1–2, the objectives and functions of the Commission include;
· To create, promote, and preserve efficient industry and market structures, and to ensure the optimal utilisation of resources for the provision of electricity services;
· To maximise access to electricity services, by promoting and facilitating consumer connections to distribution systems in both rural and urban areas;
· To ensure that an adequate supply of electricity is available to consumers;
· To ensure that the prices charged by licensees are fair to consumers and are sufficient to allow the licensees to finance their activities and to allow for reasonable earnings for efficient operation;
· To ensure the safety, security, reliability, and quality of service in the production and delivery of electricity to consumers;
· To ensure that regulation is fair and balanced for licensees, consumers, investors, and other stakeholders,
For the furtherance of the objects referred to above, the Commission shall perform the following functions‐
- Promote competition and private sector participation, when and where feasible;
- Establish or, as the case may be, approve appropriate operating codes, safety, security, reliability, and quality standards;
- Establish appropriate consumer rights and obligations regarding the provision and use of electric services;
- License and regulate persons engaged in the generation, transmission, system operation, distribution, and trading of electricity;
- Approve amendments to the market rules;
- Monitor the operation of the electricity market; and
- Undertake such other activities which are necessary or convenient for the better carrying out of or giving effect to the objects of the Commission.
In addition to the above, Section 82 of the EPSRA empowers NERC to ensure continuous competition and prevent the abuse of power, thereby, having the power to levy fines on any licensee engaged in such practices.
THE REALITY OF THE NESI
In line with these provisions, one would expect the Commission to be highly efficient in the discharge of duties. However, the reverse has been the case over the years. Some stakeholders have alleged that this is as a result of the non-independence[1] of the Commission, while some are of the opinion that this is rather as a result of the incompetence of the appointees[2]. This article will attempt to analyse the various opinions and proffer workable solutions to bring about an effective regulator.
- The Incompetent Appointees School of Thought:
Since the completion of the privatisation process, NERC has been ineffectual in discharging its regulatory functions largely as a result of lack of coordinated sector data and the lack of regulatory experience of the appointees. The Commission is also believed to lack the capacity to ensure compliance with its regulations and orders. Currently, there is an absence of coordination and inconsistency across industry stakeholders leading to; blame-trading, an overlap of responsibilities and unclear boundaries among organizations[3].
The technical and commercial alignment of the NESI value chain is fundamental. To resolve this escalating issue, there is first a need for the regulator to establish and implement corporate governance policies, followed by appropriate regulations for all relevant parties. Also, the Regulator should be re-jigged to play its leadership role by deploying necessary resources to ensure effective management of the NESI and subsequent changes in the Market. NERC can carry out these responsibilities by owning the single-point responsibility of providing Power Industry Data. A case where the regulator is dependent on the regulated for data is not sustainable in any market.
A long term solution to the sector crisis could be for the National Assembly to amend section 34(2) of the EPSRA to allow the appointment of Commissioners with not less than four years’ experience in electricity regulatory market. This will enable new-appointees to ‘hit the ground running’ thereby reducing the current practice of ‘learning on the job’.
- The Non-independent Regulator School of Thought:
Stakeholders who believe the sector is bedevilled by the non-independence of the Regulator have argued that the role of a truly independent regulator cannot be overemphasised. For adequate and effective reform of the electric-power sector, an independent regulatory body is inevitable.
Although the lawmakers created a regulatory body with the necessary powers, the body is not free from the control of the government and in effect, not insulated from politics. This is evidenced in Sections 33, 34, 38(2) 51, 56(5) and 59 of the EPSRA, which mandates the Regulator to consider general policy directions issued by the Minister to the Commission, and also subjects the Finance, appointment and removal of the Commissioners at the mercies of the Minister, and Senate arm of the National Assembly.
The question, therefore, is how independent is NERC?
Although it may be argued that the foregoing sections are necessary to act as a check on NERC, it should be noted, however, that the Commission is very likely to be a victim of abuse by the Minister and the Senate, who may utilize them for wrong reasons. For a sector like the power sector which is germane to the economic development of the nation, the relevance of a truly independent regulator cannot be over-emphasized.
Conclusion:
The creation of NERC is a bold step in the right direction, but its seeming dependence on the Federal and Legislative arm of government is likely to render it incapable of carrying out the kind of regulation required in a liberalised electric sector. Thus, minimal supervision from the government, backed by appropriate policy statements is required. Furthermore, over 14 years after the enactment of the EPSRA, there is a need to review the EPSRA in line with global trends.
References
[1] https://ssrn.com/abstract=3283101
[2] https://guardian.ng/energy/addressing-consumer-challenges-in-nigerias-electricity-market/
[3] NESG Power Sector Roundtable, 2019.
