By Emmanuel Ukera, Esq
The enactment of the Constitution of the Federal Republic of Nigeria (CFRN),1999 (Fifth Alteration) (No.17) Act,2023 and the Electricity Act, 2023 which paved way for full devolution of intra-state electricity regulatory powers to state governments have stirred up a lot of contestations amongst stakeholders than ever imagined.
The bone of contention appears rooted in the misconception amongst stakeholders regarding the extent of the regulatory powers available to state governments under the current multitier regulatory regime recognized by the CFRN (Fifth Alteration) (No.17) Act,2023 and the EA,2023. One of such misconceptions which has gained traction in the media is that the recent constitutional alteration and the consequent enactment of the EA, 2023 have for the first time devolved electricity regulatory powers to sub-nationals to the extent that the newly established State Electricity Regulatory Commissions (SERCs) can now regulate ( in all its ramifications), electricity generation, transmission and distribution activities within state boundaries to the exclusion of the Nigerian Electricity Regulatory Commission ( NERC), which hitherto regulated electricity activities nationwide.
Relatedly, there are those who are of the strong opinion that under the current legal regime, power plants located within state boundaries should fall under the overriding regulatory powers of SERCs including full takeover and control of the eight (8) power plants now operated by the eight successor generating companies (GENCOs) that emerged after the conclusion of privatization in 2013.
It has also been argued that the EA,2023, is an iniquitous and needless piece of legislation which has abolished cross-subsidization and provided the framework for promotion of energy inequalities especially considering the disproportionate distribution of electricity infrastructure between the northern and southern states of Nigeria.
The instant intervention seeks to disambiguate the jurisdictional boundaries of the SERCs and NERC under the current legal regime and shed light on recent debates.
To fully understand the jurisdictional confines of the two levels of governments regarding electricity regulation in Nigeria, it must be stated that the Constitution of the Federal Republic of Nigeria, 1999 (as altered) and the Electricity Act, 2023 constitute the primary sources of electricity law in Nigeria currently. Furthermore, there are other federal enactments that must be taken into consideration when discussing the regulatory powers of the two levels of government.
These include the Standard Organization of Nigeria (Establishment)Act which is the general legislation on national technical standards; Federal Competition and Consumer Protection Commission Act which is the general legislation on competition, consumer protection, and anti-trust; Climate Change Act ,2021 which deals with climate change mitigation and adaptation bearing in mind Nigeria’s international commitment to climate change; Water Resources Act, CAP W2, Laws of the Federation of Nigeria (LFN) ,2004 which regulates the planning, development and use of water resources that affects more than one state; National Environmental Standards and Regulations Enforcement Agency (Establishment) Act; and the Environmental Impact Assessment Act, CAP.E12, LFN,2004 which are relevant in the area of environmental impact of electricity projects or related activities in the power sector. Additionally, licensed electricity entities operating under the regulatory purview of state regulators are expected to comply with extant federal enactments on company income tax, personal income tax and value added tax etc .
The above, amongst others constitute the gamut of laws that are critical in disambiguating the legislative and regulatory competences of the two levels of government in Nigeria on the issue of electricity and should be well understood by key players in the power sector.
With respect to the powers of the two levels of government under the Constitution, one must recall that prior to 1999, the business of electricity generation, transmission and distribution was for decades under the sole control of the defunct National Electric Power Authority (NEPA) as a vertically integrated monopoly.
The defunct NEPA operated a redial national grid system comprising of on-grid power plants, high voltage transmission lines and distribution lines through which electricity albeit epileptically was supplied to Nigerian nationwide without regard to geographic boundaries of state governments.
This integrated high voltage system of interconnected generation plants, transmission lines, substations and related facilities crisscrossing states of the Federation and beyond that was operated by NEPA as a unified network is what is essentially referred to as the national grid system.
However, following the promulgation of the CFRN,1999, electric power was included as an item on the concurrent list. In this regard, item F, paragraphs 13,14, and 15, Part II, Second Schedule to the CFRN,1999 (“the Constitution”) defined the legislative competence of the respective levels of government regarding electricity.
The implication of the aforementioned constitutional provisions is that, since 1999, state governments were at liberty to invest in electricity within their domains including the power to set up of state grids and regulate intra-state electricity where they possess the wherewithal. No state government took advantage of this constitutional provision either due to lack of the political will or some other inexplicable reasons.
It is, however, important to note that prior to constitutional alteration in 2023, the powers of State Houses of Assembly to legislate on intra-state electricity generation, transmission and distribution activities was greatly impeded by the restriction under paragraph 14 (b), Part II, Second Schedule to the Constitution “to areas not covered by the national grid system within that State”.
It was this restrictive phrase “to areas not covered by the national grid system within that State” that was essentially deleted through the enactment of the CFRN,1999 (Fifth Alteration) (No.17) Act,2023. According to the long title to the CFRN,1999 (Fifth Alteration) (No,17) Act,2023, the constitutional alteration was intended to “allow states to generate, transmit and distribute electricity in areas covered by the national grid”…. What is apparent from the foregoing is that it is not correct to say that the CFRN,1999, (Fifth Alteration) Act (No.17) Act,2023 for the first time transferred “electric power” from the exclusive list to the concurrent list as it is often reported in some sections of the media. Electric power was an item in the concurrent list to the CFRN 1999 and remains so even after the said constitutional alteration of 2023.
What the CFRN,1999 (Fifth Alteration) (No.17) Act,2023 did is to simply delete the inhibitive words “to areas not covered by the national grid system within that State” to allow state governments legislate on and regulate intra-state electricity activities and most fundamentally “generate, transmit and distribute electricity in areas covered by the national grid” as expressly stated in the long title.
In other words, the constitutional alteration was not aimed at empowering state governments to embark on far reaching regulatory measures that would conflict or undermine the regulatory powers of the Nigerian Electricity Regulatory Commission (NERC) such as taking over NERC licensed on-grid power plants, setting tariffs or slashing tariffs for electricity procured through the National Wholesale Electricity Market(NWEN) or regulation of other activities on the national grid .
The constitutional alteration was primarily intended to promote investments within state boundaries without being inhibited by the presence of the national grid or component of it within such state boundaries.
In simple terms, by virtue of this constitutional alteration, state governments can now embark on embedded generation, mini-grids, licensing and regulation of independent electricity distribution networks (IEDNs) and independent electricity distribution network operators (IEDNOs), and even set up state grid even if such activities have bearing on the national grid.
Unfortunately, most state governments have since focused on issuing controversial regulatory measures that will throw the Nigerian Electricity Supply Industry (NESI) in disarray and put the state regulators at cross-purposes with NERC instead of taking initiatives that will boost investments and ultimately improve electricity access to their citizens, the latter being the primary intendment of the constitutional alteration.
Furthermore, the powers of state governments to legislate on and regulate intra-state electricity activities without being inhibited by the presence of the national grid as recognized by the CFRN (Fifth Alteration) (No.17) Act,2023 must be understood against the preeminence powers of the federal government to ” make laws for the Federation or any part thereof with respect to — electricity and establishment of electric power stations, generation and transmission, damming of water for electricity generation, cross-border electricity trading and distribution, promotion and establishment of the national grid system, regulation of right of any person to use, work, operate any plant, apparatus, equipment or work designed for the supply or use of electrical energy as provided under paragraph 13 (a)(b)(c)(d)(e)and(f) part II, Second Schedule to the Constitution all of which remains unaffected by the recent constitutional alteration.
The implication is that it will amount to constitutional infraction for any state government to set or approve parallel technical standards and operational codes or set up an agency for enforcement of technical standards under the guise exercising intra-state electricity regulatory powers.
Similarly, while state governments are at liberty to invest around the national grid presence within their state boundaries, in deference to the powers of the federal Government to regulate the national grid system as indicated above, any investment around the national grid including activities, transactions and services that have bearing on the national grid system will still require the authorization (not license) of NERC before such can legally take place. Such activities, transactions and services that will require NERC authorization may include : interconnection to, injection into, wheeling of electricity over, withdrawal of electricity from the national grid; sale and purchase of electricity, the delivery of which requires the use of the national grid; provision and receipt of ancillary services to or from the national grid; use of metering, control, dispatch and other systems required by the Grid Code for interconnection and wheeling services etc.
The law is trite, the apex court has held in the case of **AG. Ogun State v.Aberuagba &Ors (1985)LPELR-3164** that the powers of state governments to legislate on matters in the concurrent list to the Constitution is limited by the constitutional doctrines inconsistency and covering the field.
One other issue that requires clarification here is the claim in some quarters that the EA,2023, is an iniquitous and needless piece of legislation which has abolished cross-subsidization and provided the framework for promotion of energy inequalities. This is an erroneous impression borne out of lack proper understanding of the objectives, principles and rigorous processes that culminated into the enactment of the EA,2023.
To begin with, the issue of cross-subsidization was introduced through the Power Consumer Assistance Fund (PCAF) and first given statutory recognition under the Electric Power Sector Reform Act,2005 (now repealed) but retained under part XV of the EA,2023.
However, with the full decentralization of electricity including policy matters, the framework for subsidy administration in the NESI is currently undergoing review in the National Assembly bearing in mind the need to allow for the two levels of government to take independent policy decisions on matters of electricity subsidy and also determine fairly, which categories of electricity consumers should bear the brunt of cross subsidization under the current multitier electricity industry.
It must also be added that the Electricity Act,2023 is not a framework for promotion of energy inequalities but was introduced following a rigorous stakeholder engagement including the Nigerian Governors Forum (NGF) to replace the EPSRA,2005, the latter being a reform legislation that became unsuitable for the next phase of the electricity market after conclusion of the privatization exercise in 2013.One of the key features of the EA,2023 as a compelling framework for addressing energy inequalities is the provision of Section 110 which imposes an obligation on NERC to ensure fair spread of transmission and other electricity infrastructure across the country. Similarly, the EA,2023 for the first time made provision for integrated resource planning and leveraging on this provision the Federal Executive Council recently approved the National Integrated Electricity Policy and Implementation Plan,2024 which takes into consideration the peculiar strengths and weaknesses of the various state governments. It is expected that state governments will take advantage of this paradigm shift that recognizes a robust role for wind,biomas, solar and other renewable sources of energy in addressing perceived or existing energy inequalities.
From the foregoing, it can be safely concluded that the current legal regime for regulation electricity in Nigeria as articulated above leaves no room for confusion or controversy. With about 14 states already enjoying regulatory autonomy within their respective state boundaries, NERC should focus on regulation of the NWEN and activities on the national grid system while states should focus on retail activities within their respective boundaries without encroaching on the jurisdiction of NERC.
The primary focus of state governments at this stage of the market should be to adopt state integrated electricity policies and plans that will among other things leverage on potentials for generation and consumption of electricity from renewable sources such as wind, solar and biomass and as a priority integrate a large number of big self-generation consumers into the emerging state markets. A robust plan for integration of self-generation consumers into the nascent state electricity markets can in the short and medium terms be achieved through embedded generation, issuance of licenses for IEDNs/IEDNOs and mini-grids etc.
The Federal Government through the Ministry of power should equally fast track and streamline ongoing transmission and distribution upgrades under the auspices of FGN Power to allow for efficient evacuation of generated power across state boundaries where such states are in position to execute bilaterals that recognize NERC tariffs. State governments should avoid toying with the idea of unstructured tariffs which has left the National Wholesale Electricity Market in crippling debts.
The weakest links in the Nigerian power value chain today remains the transmission and distribution segments and with concerted efforts being made by President Bola Ahmed Tinubu,GCFR to settle legacy debts owed GENCOs, radical actions need to be taken to conclude ongoing upgrade of the transmission and distribution assets for operational and financial synergy along the national grid.
Barrister Ukera, Esq can be reached on emmauks@yahoo.com
