The Nigeria Electricity Regulatory Commission (NERC) has so far completed transfer of regulatory oversight electricity market to four states which have fulfilled the mandatory prerequisite conditions.
The four states which have fulfilled compliance out of 10 states which applied for transfer of regulatory oversight of its electricity markets are Enugu, Ekiti, Ondo, and Imo States.
According to NERC in a post on its social platform X handle and website,
the remaining six states which fulfillment of the conditions are still pending include: Oyo, Edo, Kogi, Lagos, Ogun and Niger states.
The actual transfers, according to NERC, commenced on 10 January, 2025.
An example of an Order listing out the preconditions for the transfer of regulatory oversight functions of electricity market to states, jointly endorsed by NERC Vice Chairman, Musiliu 0. Oseni and the Commissioner
Planning, Research and
Strategy, Yusuf Ali, is as below:
ORDER NO: NERC/2025/001
BEFORE THE NIGERIAN ELECTRICITY REGULATORY COMMISSION
ORDER ON THE TRANSFER OF REGULATORY OVERSIGHT OF THE ELECTRICITY
MARKET IN NIGER STATE FROM THE NIGERIAN ELECTRICITY REGULATORY
COMMISSION TO THE NIGER STATE ELECTRICITY REGULATORY
COMMISSION IN COMPLIANCE WITH THE ELECTRICITY ACT 2023
(AMENDED)
Title
1.
This regulatory instrument may be cited as the Order of Transfer of Regulatory
Oversight of the Electricity Market in Niger State from Nigerian Electricity
Regulatory Commission (“NERC’ or the ‘Commission”) to the Niger State
Electricity Regulatory Commission (RSERC’7.
Commencement
2.
This Order shall take effect from 10 January 2025.
Context
3.
The Commission exercises regulatory oversight of the Nigerian Electricity
Supply Industry (“NESI”) as the apex sectoral regulator in accordance with
powers conferred by the Electricity Act 2023 (“EA” or the “Act”).
4.
The electricity market in the Federal Republic of Nigeria was previously
centralised and the move to decentralisation was achieved when presidential
assent was granted to the amendment of relevant portions of the Constitution
of the Federal Republic of Nigeria (“CFRN”) on 17 March 2023.
5.
Paragraph 14(b) Part II of the Second Schedule to the 1999 CFRN which
provides that “a House of Assembly may make laws forthe State with respect
to generation, transmission, and distribution of electricity to areas not covered
by a national grid system within that State’ was amended to “a House of
Assembly may make laws For the State with respect to generation,
transmission, and distribution of electricity to areas within that State”.
- This amendment granted legislative autonomy to federating states in the
Federal Republic of Nigeria by empowering the sub-national governments to
legislate on the generation, transmission and distribution of electricity within
each respective state.
7.
Section 2(2) of the EA, which provides as hereunder, takes due legislative
cognisance of the powers conferred on the federating states with the
amendment to Paragraph 14(b) Part II of the Second Schedule to the 1999
CERN
Nothing in this Act shall invalidate
a.
any law passed by the House of Assembly of a Slate with respect to
all aspects of generation, transmission, system operation, distribution,
supply and retail of electricity within that State;
b.
any law passed by the House of Assembly of a State regarding the
establishment, promotion and management of State electricity power
stations;
c.
any law passed by the House of Assembly of a State to sanction the
establishment of a state electricity market the establishment of a state
electricity regulatory authority or any entity by whatever appellation
with powers to regulate such markets;
d.
any collaboration between States and Local Governments and the
Federal Government for rural electrification, or between States and
Local Governments and distribution licensees to ensure electricity
access to rural, unserved and underserved areas, promote investments
in electricity or provision of electricity within States or Local
Government Areas; or
e.
any law passed by the House of Assembly of a State to sanction the
establishment of a state electricity market and State Integrated
Electricity Policy and Strategic Implementation Plan.
8.
Under the new legal framework for NESI, the Commission retains the role as
central regulator with regulatory oversight on the inter-state/international
generation, transmission, supply, trading and system operations as
contemplated by section 63(7) of the EA which provides that “notwithstanding the provision ofsubsection (1), it shall be the responsibility
of the State Electricity Board or any State authority by whatever appellation,
to grant licence for mini-grids, IEON/IEDNOs and IETN, IETNOs and provide
the framework for the operation of such licensees, including framework for
investment in electricity utilities within the State: Provided that the Commission
shall retain regulatory powers over mini-grids, lEDN/IEDI’lOs and
IEIN/IETNOs in any State ofthe Federation where such a State
a.
has no legal and institutional framework in place for the regulation of
mini-grids, IEDNs, IfTNs or related electricity services; or
b.
the operation of such lEDN,/IEDNOs, IETN/IETNOs or electricity
generation, transmission and distribution undertaking within any State
of the Federation relies on any part of the national grid for Its
operations ‘t
9.
States that intend to establish and regulate intrastate electricity markets are
expected to comply with the provisions of section 230 of the EA which
provides that
(2)
A state of the Federation may at any time
a.
Enact a law by whatever appellation to provide for the
establishment of a state electricity market;
b.
Establish a state electricity regulatory authority for the State (the
“State Regulator”) and appoint a governing body and staff for
the said entity;
c.
Deliver a formal notification of the events in paragraphs (a) and
(b) above and request the Commission to transfer regulatory
authority over electricity operations in the state to the State
Regulator; and
d.
Deliver a formal notification of the events in paragraphs (a) and
(b) to the relevant successor electricity distribution licensee (the
“Successor Company”), with a copy to the National Council on
Privatisation (“NCP”) through the Bureau of Public Enterprises,
requesting them both to ensure that the Successor Company
takes the steps set out in subsection (3).
(3)
Within 45 days of receiving formal notification of the enactment of the
law under subsection (1), the Commission shall draw and deliver to
the State Regulator a draft order setting out a plan and timeline for the
transition of regulatory responsibilities from the Commission to the
State Regulator, which transition shall be completed not later than 6
months from the date on which the formal notification in subsection (I)
was delivered to the Commission.
Where a Stale lakes the steps provided in subsection (2), the Successor
Company shall upon receiving formal notification from the Commission
a.
Within 2 months of receiving the said notification, incorporate a
subsidiary electricity distribution company under the Companies
and Allied Mailers Act (the #Additional Successor Company”);
and
b.
Transfer the assets, liabilities, employees and the relevant
contractual rights and obligations of the Successor Company in
that Slate (the “Transfer”).
(5)
The Transfer shall
a.
Not constitute a fraud on the creditors of the Successor
Company; and
b.
Be undertaken by agreement as to the treatment of relevant
liabilities, between creditors, the Successor Company, the
Additional Successor Company and, where necessary, the
Commission, the State electricity regulatory authority and any
other relevant 3” party; and
c.
Shall not impose a condition on the Government of a State to
take on any of the liabilities of the Successor Company or
guarantee their repayment.
(6)
The provisions of subsection (2) shall be implemented notwithstanding
the provisions of any general or specific enactment of the National
Assembly or any applicable law, rule or contract that requires notice,
consent, approval or registration of such transfer and no stamp duty
and capital gains tax shall be chargeable or levied by the relevant tax
authorities in respect of the Transfer.
(7)
On completion of the Transfers under subsections (2) and (3),
whichever occurs later in time, the Commission shall have no further
regulatory responsibility whatsoever for electricity market activities
carried on entirely within the State to which regulatory responsibility
has been transferred and for which the Additional Successor Company
has been incorporated and conferred with assets, liabilities,
employees, rights and obligations.
(8)
An Additional Successor Company incorporated and licensed by a
State Regulator as provided shall on completion of the transfers under
subsections (2) and (3), and the issuance of a license, be under the
regulatory oversight of the State regulator and shall have no further
obligation to pay any form of license Fees to the Commission.
(9)
Notwithstanding the provisions of section 63(1) and subsection (5,1, the
generation, transmission, system operation and distribution of
electricity in a State that has not exercised its option under subsection
(2) shall continue to be regulated by the Commission in accordance
with the provisions of this Act until such a time as that State exercises
the option.
(10) The Commission and all State regulatory authorities shall have a
continuing obligation to foster and maintain a beneficial interinstitutional relationship amongst themselves and accordingly they
shall establish an inter-governmental body to promote harmonious
relationships with each other individually and as a group for
coordinating the development of principles, standards and rules for the
reduction of regulatory risk in the Federal and State electricity markets
in the country.
10.
The Government of Niger State has initiated the implementation of the
provisions of the recent amendment to the CERN and the EA; and complied
with the condition’s precedent in the aforementioned laws, is desirous of
assuming regulatory oversight of the intrastate electricity market in Niger
State; has duly notified the Commission and requested for the transfer of
regulatory oversight of the intrastate electricity market in Niger State in
compliance with the provisions of the EA.
11.
Section 230(3) of the Act mandates the Commission to develop a transition
plan and timeline for the transfer of regulatory oversight of the intrastate
electricity market from NERC to NSERC upon receipt of a formal notification
from the State.
Objective
12.
This Order seeks to
—
a.
Commence the process of the transfer of regulatory oversight for the
intrastate electricity market in Niger State from the Commission to
NSERC in accordance with the CERN and the EA.
b.
Provide a transition plan for the transfer of regulatory oversight for the
intrastate electricity market in Niger State from the Commission to
NSERC in accordance with the CERN and the EA.
c.
Address ensuing transitional mailers arising from the transfer of
regulatory oversight for the intrastate electricity market in Niger State
from the Commission to NSERC.
THE COMMISSION HEREBY ORDERS AS FOLLOWS
A.
Abuja Electricity Distribution Company Plc (“AEDC”) is hereby directed to
incorporate a subsidiary (“AEDC SubCo”) under the Companies and Allied
Matters Act for the assumption of responsibilities for intrastate supply and
distribution of electricity in Niger State from AEDC.
B.
AEDC shall complete the incorporation of AEDC SubCo within 60 days from
the effective date of this Order and, AEDC SubCo shall apply for and obtain
a licence for the intrastate supply and distribution of electricity from NSERC.
C.
AEDC shall identify the actual geographic boundaries of its distribution zone
and carve out its network in Niger State as a standalone network with the
installation of boundary meters at all border points where the network crosses
from Niger State into another state.
D.
AEDC shall
i.
Create an Asset Register of all its power infrastructure located within
Niger State;
ii.
Evaluate and apportion contractual obligations and liabilities
attributable to AEDC’s operations of its subsidiary in Niger State;
iii.
Identify all the applicable trading points for energy offtake for the
operations of AEDC SubCo in Niger State.
iv.
Confirm the number of employees that are required to provide service
to Niger State as a standalone public utility; and
v.
Transfer the identified assets for operations in Niger State, contractual
obligations, liabilities and employees to AEDC SubCo.
E.
The Commission shall prepare register of licensees, permit holders, certificate
holders and holders of any other authorisations from the Commission in Niger
State. The register shall be delineated along the lines of authorised activities
and use of the national grid for their activities.
A transfer of regulatory
oversight notification shall be issued by the Commission to the companies in
the register whose activities are limited within Niger State informing the
entities of the transfer/assumption of regulatory oversight for their activities
by NSERC. All cross-border transactions involving the national grid shall be subject to the approval of the Commission ii accordance with the CERN and
EA.
F.
AEDC shall confirm to the Commission the contractual details for the supply
of energy and capacity that shall supply AEDC SubCo in Niger State, and
where reliance shall be made on the national grid or other interstate sources
of generation; AEDC SubCo shall seek appropriate authorisation/approval
from the Commission in accordance with the CFRN and EA.
G.
NSERC shall have the exclusive responsibility of determining and adopting
an end-user tariff methodology applicable within its area of regulatory
oversight. Where AEDC SubCo receives electricity from grid connected
plants, the contracts and tariffs applicable for generation and transmission
services shall be approved by the Commission. The final end-user tariffs
approved by NSERC shall be the exclusive tariffs that apply in Niger State
and all tariff policy support for end-use customers in Niger State shall be the
responsibility of the Niger State Government.
H.
All transfers envisaged by this order shall be completed by 9 July 2025.
Dated this 10th day of January 2025
Musiliu 0. Oseni
Vice Chairman
Yusuf Ali
Commissioner
Planning, Research and
Strategy
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