Charting A New Course For Nigeria’s Power Sector

(By Nwajiugo Anthony Chukwuebuka)

To this end, NERC is the regulator of the Nigerian electricity market and in furtherance of this regulatory function, issues licences, formulates regulations, and settles disputes among other functions as contained in section 33 of EPSRA. The market operator on the other hand administers the market through guaranteeing an efficient, transparent and non-discriminatory market among all participants. It admits participants (licensees) into the market by entering into a market participation agreement with all the participants and also oversees the activities of the participants in the market.

FOLLOWING the ongoing privatisation in the Nigerian electricity market, the Nigerian Electricity Regulatory Commission (NERC) and the Market Operator stand as the key watchdogs of the Transitional Electricity Market (TEM). While NERC is the regulator of the market, the Market Operator is the administrator and they both share the common goal of stabilising the market. It is needful to evaluate these institutions for a clearer understanding of their roles and scope of operation.

  NERC as a statutory corporation was created pursuant to the provision of section 32 of the Electric Power Sector Reform Act (EPSRA) and assumed the cloak of a legal person with all the consequent rights which include the right to sue and be sued, the right to borrow, the right to own properties, the right of perpetual succession etc. The Market Operator on the other hand was not reflected as a distinct legal person under the EPSRA but however assumed life as part of the administrative structure of the system operator under the Transmission company of Nigeria (TCN), which is one of the successor companies unbundled from the defunct PHCN pursuant to Section 8 of EPSRA.

  The system operator also functions as the market operator and is officially known as the Operator of Nigerian Electricity Market (ONEM). The uniqueness of the reform process is that TCN, which primarily holds the function of transmission service provider, also operates with a system operator’s licence as both the system operator and market operator. This lumping together of functions makes TCN a hydra headed company designed to assist the reform process scale through its transitional stage of market development in accordance with the provision of Section 25(b) of EPSRA.

  NERC under the privatised electricity market is charged with various functions spanning from those contained in the EPSRA and in other subsidiary legislations. The principal function of NERC is to create, promote and preserve efficient industry and market structures and to ensure the optimal utilisation of resources for the provision of electricity service. To this end, NERC is the regulator of the Nigerian electricity market and in furtherance of this regulatory function, issues licences, formulates regulations, and settles disputes among other functions as contained in section 33 of EPSRA. The market operator on the other hand administers the market through guaranteeing an efficient, transparent and non-discriminatory market among all participants. It admits participants (licensees) into the market by entering into a market participation agreement with all the participants and also oversees the activities of the participants in the market.

  Consequent to the above, it is clear that every person natural or artificial that intends to participate in the Nigerian electricity market has to first obtain a licence from the regulator just like obtaining a ticket from the doorkeeper standing at the gate of a dinner banquet issuing tickets. The regulator examines such a person through the process of public hearings to know if he is properly dressed for the dinner banquet and thereafter certifies such a person qualified by issuing a licence in deserving cases. This certification now qualifies such a person to be welcomed and recognized by the market operator who is like the master of ceremony of the dinner but is nonetheless a guest of the dinner banquet.

  The master of ceremony carries out this recognition process through signing of the market participation agreement with all the participants, which process is referred to in the market rule as ‘admission’. The market operator likened to the master of ceremony of the dinner banquet thereafter informs the guests of the need to behave properly by abiding by the code of conduct issued by the doorkeeper who in actual sense is the regulator. This code of conduct mentioned earlier is primarily embodied in the market rules and the grid code issued by NERC in consonance with its function of formulating regulations for the Nigerian Electricity Market as enshrined under section 96 of EPSRA. These are rules, which every participants of the Nigerian electricity market must abide by for the smooth operation of the market.

  This is followed by the master of ceremony introducing the items on the programme, which is the market procedures, issued by the operator of the Nigerian electricity market. Through the course of the dinner, the market operator oversees the guests and practically takes charge of the dinner to prevent any form of chaos during the banquet hence the requirement for the market operator to administer the market. Among the activities of the dinner include the operations of the various participants in the segments of the electricity industry, which are power generation, distribution, transmission, system operation and trading. The market operator administering the market sees to the enforcement of the market rules and other market related standards. It need be stated that in the event of anarchy or issues, which is beyond the master of ceremony who in this case is the market operator, such dispute shall without delay be relayed to the doorkeeper to take necessary steps in resolving the issue. Hence the need for the continued presence of the Regulator.

  The doorkeeper of the dinner, which is the Regulator after issuing the tickets, need not leave the venue of the dinner as his function goes beyond just issuing tickets but also includes ensuring the safety of the venue and the general success of the dinner. This he strives to achieve through the help of the Master of ceremony, which is the Market Operator.

  It is well appreciated that notwithstanding the diverse functions of the Regulator as reflected in both the Act and other subsidiary legislations, the realization of an efficient stable electricity market can never be achieved without the proactive role of the Market Operator. These two institutions drive the industry towards a competitive and stable market similar to the relative success achieved in other sectors like the telecommunication industry. The role of NERC as the Regulator and an independent parastatal under the Ministry of Power is evident following the clear regulatory framework under the Act.   The market operator, viewed from a mirror is not just a participant but also a moderator within the market who sets out the contract and meter data exchange procedures and manages the payment and settlement system within the wholesale electricity market and ultimately reports to the Regulator.

  NERC, which is at present under the chairmanship of Dr. Sam Amadi and the Operator of the Nigerian Electricity Market (ONEM), have made giant strides by issuing several regulations and other oversight measures designed to give the Nigerian power sector a smooth sail through the various stages of market development particularly pre-transitional and transitional stages of the market. We can only be hopeful of significant improvement in the sector at the commencement of the transitional stage of the market slated for this month, February 28, 2014, specifically.

• Nwajiugo Anthony Chukwuebuka.

“Opinion pieces of this sort published on RISE Networks are those of the original authors and do not in anyway represent the thoughts, beliefs and ideas of RISE Networks.”

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