The Making and Evolution of an Electricity Market: Unpacking the Nigerian Electricity Bill, 2021
Part 2: Revamped Institutional Framework for the Nigerian Electricity Supply Industry
In the first part of the multi-part series that unpacks the Electricity Bill, 2021, the subject of National Electricity Policies and Plans was expounded alongside the scope for States to participate in value chain activities in areas covered by the national grid.
In this second part, the revamped institutional framework as detailed within the Bill will be highlighted alongside the implications for the industry in terms of the ability to attract the much needed investments into NESI or otherwise, in a bid to educate readers on the process, evolution and dynamics of electricity markets.[1]
One of the key objectives of the Bill is to provide an ideal legal and institutional framework leveraging on the modest gains of the privatisation phase of the power sector in Nigeria to accelerate growth in power generation capacity and increased investment in new technologies that would enhance transmission and distribution of generated power.
In this vein, the Bill makes provision for various institutional stakeholders in NESI.
The Minister of Power
The Minister’s key responsibility is the determination, formulation, and monitoring of Government policy for NESI, and in carrying out its objectives, the Bill assign specific functions to the Minister including:
General supervision over the affairs and operations of the Commission and agencies established under the Bill by giving general and specific policy directions on overall system planning and coordination.
Advise the Federal Government on all matters pertaining to NESI, subject to prior consultation with the Commission.
Promote local content development in NESI.
Promote Gender Mainstreaming in the design and implementation of electricity projects and programmes.
Negotiate and execute international electricity agreements with other countries, international organizations, etc., on behalf of the Federal Government and in consultation with the Commission, etc.
Whilst the inclusion of the promotion of gender mainstreaming in the design and implementation of electricity projects is a welcome development and a recognition of the role women play in the energy industry, such inclusion must be implemented strategically and should not serve as a ‘feel good’ inclusion just on paper.
To this end, various measures can be explored and put in place to strategically embed gender mainstreaming in electricity projects and the industry at large including:
Development of a National Gender Policy as was implemented in Burundi through their National Gender Policy (2012-2025). Although there is an existing National Gender Policy (2006) in Nigeria, alongside the National Gender Policy 5-year Strategic Framework (Implementation Plan), 2008-2013, implementation has been a key challenge, as such policies have been devoid of an enabling legal framework to give sufficient backing to adequate implementation. In Burundi for example, the Constitution exists as the primary guarantor of the country’s gender approach. The 2005 constitution establishes a 30% minimum quota of women in the government in the National Assembly and in the Senate. The revised electoral code of 2009 extends the quota to communal councils and administrators. In addition, in 2016, the Government of Burundi promulgated a new law on Gender Based Violence to protect victims, witnesses and other persons at risk. Burundi clearly depicts clear measurable and actionable steps that have been taken by their government to promote gender inclusion. This has not been the case in Nigeria as the National Assembly on the 1st of March 2022, during the proposed constitutional bill amendment, failed to pass the five (5) Gender Bills making specific provisions for women in the Constitution.
Formulation of a Gender Action Plan as was done in Botswana in their 2011 Gender Action Plan (GAP), the National Action Plan to Integrate Gender Issues in Energy Access (PANGE) in Senegal, etc., thus depicting a clear plan of action for gender inclusion in the energy industry.
Incorporation of gender-sensitive indicators within the monitoring and implementation stages for projects in the industry, etc.
For more gender related developments, particularly the intersection between gender and energy access for women, please look out for the ‘Gender & Energy Lens’ series commencing shortly.
Regarding the role of the Minister in supervising the affairs and operations of the Commission, it is advised that such supervision remains arm’s length to guarantee regulatory independence, which is a key antecedent in attracting investments into the sector. Based on a recent study assessing and ranking the level of ministerial influence across Sub-Saharan Africa, hinged on four key areas (regulatory governance, licensing, power procurement, dispute resolution), Angola ranked the highest as the Minister in addition to undertaking a supervisory role, is responsible for the grant of licenses and executes concession agreements for power procurement. On the other end of the spectrum, Zimbabwe ranked the lowest in terms of the level of ministerial influence, with the involvement of the minister restricted to one of a supervisory role within regulatory governance. Bringing it home, Nigeria’s ranking was medium, given the Minister’s supervisory role in regulatory governance and power procurement activities.
The National Assembly
The National Assembly based on the provisions of the Bill is vested with oversight responsibility over NESI through its respective Committees on Power in the Senate and House of Representatives, which is to apply regardless of the supervisory powers of any government Ministry or government owned enterprises such as the Nigerian Bulk Electricity Trader (NBET), the Transmission Company of Nigeria (TCN), etc., or any other entity in which the government has not divested its equity holdings. This clearly vests the National Assembly with ‘overarching’ powers which may be viewed as being excessive, given the intention of the Bill, if passed into law.
The powers of the National Assembly are all-encompassing and impose investigative powers that extend to the affairs of any ministry, department, agency, or person in charge of the preceding entities, or government owned enterprise in NESI. The Bill also vests the National Assembly with the power to procure evidence or summon for defense of any allegation. It is questionable as to the capacity of the National Assembly to undertake quasi-judicial functions as the legislative arm of government. The role of the National Assembly should ideally be limited to its Inquiry role and should not extend to undertake a function that may be best handled by the judiciary.
In addition, the National Assembly based on the Bill has the power to review budget estimates proposed by any ministry or government-owned enterprise or any other entity operating in NESI, of which the government is yet to divest its equity holdings. This would by inference include majority of the successor companies that have been privatised with the government holding a percentage interest in the applicable respective entities.
Nigerian Electricity Regulatory Commission (NERC or the Commission)
The powers of the Commission have been expanded by the provisions in the Bill, which is a commendable development in ensuring that the regulator takes the lead in driving industry activities across the electricity value chain. In addition to its existing powers under the Electric Power Sector Reform Act [EPSRA] (2005), the Commission is vested with the power and responsibility to: (i) ensure a phase-wide development of a competitive electricity market across the applicable market stages, (ii) issue directives and measures to ensure the gradual development and smooth operation of the various stages of the market, (iii) promote the development and utilization of renewable energy services and increase the contribution of renewable energy to Nigeria’s energy mix, (iv) promote gender mainstreaming and local content requirements within the Nigerian Electricity Supply Industry (NESI), etc.
Questions of law based on an order or decision of the Commission are now to be reserved for determination by the Electricity Disputes Appeal Tribunal as established under the Bill, as opposed to the High Court as contained in EPSRA.
Hydroelectric Power Producing Areas Development Commission (HYPPADEC)
The Bill established the HYPPADEC charged with the responsibility of managing ecological menace to the operation of dams for hydroelectricity generation. This is a welcome development, given the contribution of hydro to the country’s overall energy mix.
Rural Electrification and Renewable Energy Agency
The Bill provides an added layer of responsibility to the Rural Electrification Agency (REA) that exists within the EPSRA. The Bill in addition to rural electrification, vests the agency with the promotion of renewable energy development in the sector which is indeed a welcome development especially considering global energy transition debates. It is a step in the right direction that the Bill makes provision for the promotion of the productive use of renewable energy to allow for strategic development and utilization of renewable energy sources, thus serving as a panacea for attracting investment into the sector. Given the general lack of awareness regarding the workings of renewable energy, the Bill mandates the REREA to undertake public education for renewable energy production and consumption. The REREA is mandated to also oversee, manage, and execute the funding of the Rural Electrification and Renewable Energy Fund with an expanded scope to accommodate renewable energy projects and programs. Contributions to the Fund are anticipated to be payable by eligible customers and licensees at a rate not exceeding 5% of the cost of electricity procured by eligible customers from non-renewable generators or as determined by the Commission. Interestingly, the REREA is to advocate for carbon tax to disincentivise the sale of fossil fuels and encourage reliance on renewable energy which will trigger the gradual transition to clean energy.
Nigerian Electricity Management Services Agency (NEMSA)
The inclusion of NEMSA in the Bill may be viewed as a ‘win’ for NEMSA, given the previous debates that revolved around the conflicting roles of NEMSA and the Commission in relation to the establishment of technical standard and specifications. The Bill has clearly delineated the role of the Agency as being responsible for carrying out electrical inspectorate services for NESI and enforcing all statutory technical electrical standards and regulations as published by the Commission and other relevant statutory bodies. In addition, the agency is vested with the functions of enforcing compliance with technical standards and safety requirements, enforcing the conditions for installation of meters for the transmission systems and distribution networks and supply of electricity, monitoring compliance levels with the technical regulations, standards, and specifications used in NESI, etc.
Concluding Remarks
Although the powers of the Commission have been increased significantly, thus depicting industry support for greater independence of the regulator, and the rural electrification agency has been ascribed with the additional responsibility of the management of renewable energy within the industry, one may wonder the need for the added institutional layers within the Bill, which may be interpreted as a ploy to factor all stakeholder interests in NESI to the detriment of the industry; if not properly managed and monitored, given the likelihood of multiplicity/duplicity of functions and activities across the value chain.
Key Takeaways
The role of the Minister in supervising the affairs and operations of the Commission should remain arm’s length to guarantee regulatory independence, which is a key antecedent in attracting investments into the sector.
The inclusion of the promotion of gender mainstreaming in the design and implementation of electricity projects is a welcome development and a recognition of the role women play in the energy industry, such inclusion must be implemented strategically and should not serve as a ‘feel good’ inclusion just on paper.
The capacity of the National Assembly should be restricted to law making as the legislative arm of government and hence, should not undertake quasi-judicial functions that may be best handled by the judiciary.
It is a step in the right direction that the Bill makes provision for the promotion of the productive use of renewable energy to allow for strategic development and utilization of renewable energy sources, thus serving as a panacea for attracting investment into the sector.
[1] Electricity markets in the context of this brief speaks to the sector view as a whole, as opposed to the trading of electricity which exists as an activity within the sector.