The Electrical energy Act 2023 was signed into legislation by President Bola Tinubu on June eighth, 2023.
The Act follows the fifth Alteration of the Structure of the Federal Republic of Nigeria, which expressly offered full constitutional rights to State Homes of Meeting to make legal guidelines for electrical energy era, transmission and distribution inside their state territories.
By advantage of the fifth alteration of the Structure, the regulation of all points of the distribution and sale of electrical energy inside a State is an unique (not residual) proper of State Electrical energy Regulatory Commissions (SERCs).
Lower than two years after its passage, a invoice to amend the Electrical energy Act has handed second studying on the ground of the Senate.
The Electrical energy Act Modification Invoice 2025 is sponsored by Sen. Enyinnaya Abaribe, who can be the chairman of the Senate Committee on Energy. It’s instructive to notice that Sen. Abaribe was a senator within the ninth Nationwide Meeting that handed each the Constitutional Amendments and the Electrical energy Act 2023. Sen. Abaribe served because the Deputy Governor of Abia State from 1999 to 2003.
The acknowledged core aims of the Electrical energy Act (Modification) Invoice, 2025, are to amend the Electrical energy Act, 2023, to:
- Make provision for rising points within the Nigerian Electrical Energy Sector.
- Improve coverage and regulatory coordination.
- Strengthen sectoral financing.
- Shield essential electrical energy infrastructure.
- Foster industrial relations within the sector.
- Make clear transitional preparations.
Primarily based on the Electrical energy Act (Modification) Invoice, 2025, a number of areas of potential battle and jurisdictional overlap exist between the Nigerian Electrical energy Regulatory Fee (NERC) and the newly empowered State Electrical energy Regulatory Commissions (SERCs). The stress primarily arises from the division of regulatory energy over a nationwide grid that companies state-level markets.
Listed here are the important thing areas of battle highlighted within the invoice:
Overriding Regulatory Oversight of NERC
Essentially the most vital potential for battle lies within the idea of NERC’s “overriding regulatory oversight.” Part 230C(1)(b) of the invoice states that intra-state electrical energy operations that depend on the nationwide grid system stay topic to the “overriding regulatory oversight of NERC”. This provides NERC direct regulatory jurisdiction over electrical energy distribution licensees, and every other state electrical energy licensee working in SEMs the place such licensee has a reliance on the nationwide grid.
Use of Obscure and Ambiguous Terminologies
The invoice makes use of imprecise and ambiguous terminology and language; for example, “reliance on the nationwide grid system”, “operational codes”, “intra-state electrical energy operations” and “intra-state electrical energy exercise” are just a few of the imprecise and ambiguous phrases utilized by the invoice.
The time period “overriding regulatory oversight” is just not explicitly outlined by the invoice, leaving it open to broad interpretation by NERC. This might result in jurisdictional disputes the place a SERC believes NERC is overstepping its authority within the regulation of the state’s inner market. The ambiguous and imprecise terminologies are definitely not useful to the Invoice’s core goal of addressing battle between Federal and State Regulatory Our bodies.
Conflicting Powers over Tariff Design and Implementation
One other space of battle created by the invoice is in tariff design and implementation for electrical energy distribution. Whereas states are empowered to ascertain their very own electrical energy markets, the invoice unusually permits NERC to retain vital management over tariffs for any state linked to the nationwide grid system.
The amended Part 2 grants State Homes of Meeting the facility to legislate on their very own electrical energy markets and regulators. Nevertheless, Part 230C(2) extends NERC’s overriding oversight to “tariffs, designs and implementation” for any state market that’s reliant on the nationwide grid. This creates a direct battle. A SERC may set a tariff for its native market, just for NERC to problem or try to override it, citing its authority over the interconnected grid.
The problem between Enugu State Electrical energy Regulatory Fee and MainPower DisCo is an effective instance of such potential regulatory overreach by NERC underneath the modification invoice.
The purpose should be made that SERCs don’t have any authority to design and implement tariffs for era and transmission on the nationwide grid (nationwide wholesale electrical energy market). For readability and opposite to (uninformed) public opinion, EERC didn’t alter wholesale era and transmission tariffs set by NERC for Enugu Electrical energy Distribution Firm (the HoldCo for MainPower).
Moreover, the invoice defines how electrical energy subsidies underneath the Energy Client Help Fund (PCAF) can be applied. Nevertheless, PCAF, as proposed by the invoice, will distort state tariff methodologies and usurp the powers of SERCs to implement any electrical energy subsidies inside SEMs.
Twin Authority on Client Safety Requirements
The modification invoice will create conflicts between federal and state regulators in implementing client safety inside SEMs.
The amended Part 2 lists “client safety and anti-trust” as an space the place state legal guidelines should not battle with the federal Act, implying NERC’s requirements are supreme. Concurrently, Part 230C(2) explicitly consists of client safety as a part of NERC’s oversight for grid-connected state markets.
It is a clear constitutional overreach by the invoice and can result in implementation disputes. As an illustration, a battle may simply come up if a SERC makes an attempt to implement a client safety regulation that NERC deems both inadequate or in battle with nationwide requirements.
In any case, it’s pertinent to ask which client is being protected right here? Are these clients served by electrical energy distribution licensees inside a SEM?
With none equivocation, implementing client safety rules inside a state electrical energy market ought to fall underneath the jurisdiction of the SERC. NERC and the FCCPC might set baseline client safety requirements, however no federal legislation ought to invalidate or forestall State Homes of Meeting from making legal guidelines for client safety inside their territories.
Dispute Decision and the Discussion board of Regulators
The invoice establishes a Discussion board of Electrical energy Regulators (FERs) to harmonize rules between the NWEM and SEMs. Nevertheless, the invoice as drafted seeks to solidify NERC’s supremacy over SERCs underneath the FER construction.
Based on Part 228B(d), the discussion board serves as a platform for settling disputes. But, it grants NERC “remaining administrative appellate jurisdiction” relating to technical disputes involving two or extra SERCs or points which have a bearing on the Nationwide Wholesale Electrical energy Market (NWEM).
On this state of affairs, a SERC might contest a remaining choice made by NERC, viewing it as an imposition reasonably than a decision.
There may be additionally an ambiguity within the Discussion board’s advisory outcomes. Part 228D(4) states that selections of the FERs are “advisory however shall carry vital weight”.
This ambiguity may result in useless controversy when a SERC ignores an “advisory” choice, creating battle and undermining the discussion board’s function.
The FER is welcome, however its function must be extra of a platform to encourage collaboration between NERC and SERCs, and never a discussion board empowering NERC with an ambiguous advisory however judicial mandate over SERCs.
Unique Federal Jurisdiction over Technical and Security Requirements Enforcement
The invoice establishes the supremacy of federal businesses in setting and implementing technical requirements, which may conflict with comparable technical requirements enforcement features of State businesses underneath State electrical energy legal guidelines. Part 230C(2) provides NERC unique regulatory jurisdiction over the enforcement of technical requirements and operational codes nationwide.
Moreover, Part 230C(3) clarifies that the powers of the Nigerian Electrical energy Administration Companies Company (NEMSA) to implement technical requirements and conduct inspectorate companies “shall prevail and apply nationwide”, regardless of any comparable features being carried out by a state authorities company. This might render state-level technical and security our bodies redundant or result in direct battle between state and federal inspectorate officers.
One should ask why the drafters of the invoice search to retain NERC and NEMSA’s unique function over technical and security requirements in SEMs, in view of the poor implementation and enforcement of such requirements within the NESI to this point by these two regulatory our bodies.
In 2024 alone, over 112 Nigerians misplaced their lives within the Nigerian electrical energy sector, based on information launched by the NERC.
Widespread sense would recommend that one of the best strategy to implement and implement technical requirements inside the NESI is for NEMSA to work in collaboration with SERC and different businesses of State authorities inside SEMs.
Again-door Constitutional Modification
The fifth Alteration of the 1999 Structure, signed by President Muhammadu Buhari in 2023, eliminated the restriction on States to make legal guidelines for electrical energy ONLY in areas not coated by the nationwide grid system inside their territories.
A cautious and unbiased studying of sections 230A-C of the modification invoice would spotlight a troubling indisputable fact that the modification invoice seeks to roll again the fifth alteration of the 1999 Structure (as amended) by relating intrastate electrical energy actions and the regulatory jurisdiction of SERCs inside the context of a connection or reliance on the nationwide grid system.
The invoice interprets “intra-state electrical energy exercise” as “intra-state era, transmission, distribution and provide of electrical energy NOT CONNECTED TO, OR RELIANT ON THE NATIONAL GRID SYSTEM, which shall fall underneath the unique regulatory jurisdiction of related SERC upon completion of switch of regulatory oversight (S.230C(1)(a))”. In part 230C(1)(b), the invoice explicitly states that “intra-state operations that contain reliance on any a part of the nationwide grid system or different interstate sources of era, shall stay topic to the overidding regulatory oversight of NERC”.
Consequently, Part 230C(1)(a-b) will roll again the fifth alteration of the 1999 Structure, therefore a back-door modification of the 1999 Structure.
Moreover, with a commercially oriented NISO in place, there is no such thing as a want for NERC to retain any type of regulatory oversight over SubCos and different state electrical energy licensees that will procure energy from the nationwide grid.
Moreover, the modification invoice defines “State electrical energy markets” as “the varied state electrical energy markets established pursuant to part 230 of the Principal Act for distribution and retail sale of electrical energy procured from both state licensed mills or by NWEM”.
It should be famous that State Electrical energy Markets are creations of the State Meeting and never the Nationwide Meeting; their institution isn’t pursuant to the provisions of the Electrical energy Act 2023. It’s most regarding that the drafters of the modification invoice search to limit actions in state electrical energy markets to solely the distribution and retailing of electrical energy.
Abstract
The Nationwide Meeting is properly inside its powers to both amend or repeal any of its Acts, and at such a time it deems obligatory.
- Nevertheless, the Electrical energy Act modification invoice 2005, as presently drafted, is riddled with constitutional, authorized, regulatory and monetary landmines that will be catastrophic to the Nigerian electrical energy sector if the invoice is handed.
- I’ve solely highlighted just a few of the landmines that relate to the implementation of the SEMs. I urge the Senate and proponents of the invoice to have a cautious rethink earlier than passing the invoice into legislation.
Odion Omonfoman is an vitality professional and the Lead Advisor on electrical energy to the Nigeria Governors Discussion board. He will be reached at [email protected]
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