• Thursday, June 20, 2024
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What state electricity markets mean for Nigeria’s power sector

Power firms quietly slap customers with tariff hike

The new development that empowers states to generate, transmit and distribute electricity in areas covered by the national grid can improve electricity access across the country and promote rapid industrialisation, analysts say.

State governments eager to develop their electricity markets as well as private investors who wish to play in the electricity market have an opportunity to ramp up after the Nigerian Electricity Regulatory Commission (NERC) transferred its regulatory oversight of the electricity market in Enugu and Ekiti states to the governments of both states.

“The development is a good one for Electricity Development in Nigeria,” Ikechukwu Obialor, Energy lawyer and research fellow at the African Energy Council said.

He said, “The order now allows states to determine the development of electricity within their state, which then translates to competition within the space as states will have the leverage to offer good fiscal and regulatory incentives to investors who are most times looking for a regulatory climate that suits their investment objectives

Obialor added that the order also allows for an open market with states now having their destinies in their hands.

For Chinenye Ajayi, team lead of Power and Infrastructure Practice at Olaniwun Ajayi LP, NERC’s move to decentralise the electricity sector would greatly benefit customers.

“It also opens up an opportunity for every state to grow at their own pace. So, everyone doesn’t have to rely on the national grid, because states can build their transmission and distribution lines, subject to technical standards and other requirements,” Ajayi said.

She emphasised that the state-regulated electricity market creates enabling environments for investors to come in, for projects to thrive, and for increased access to electricity for consumers within their respective states.

“There will be much more competition in the market and more funds flowing into the sector, both at the federal and state levels,” Ajayi added.

For Adeola Adenikinju, professor of Energy Economics, at the University of Ibadan and president of the Nigerian Economic Society, state-regulated electricity market would allow for more efficiency and responsiveness.

“It would put DisCos on their toes because it would allow them to carry out their activities quickly and help to easily detect when they are underperforming. But, it also means that these DisCos will be able to get quick responses in areas they need support,” Adenikinju added.

He noted that if Enugu and Ekiti governments can properly regulate their electricity, NERC may deploy the same strategy to other states.

In June 2023, President Bola Tinubu signed a new Electricity Act into law, heeding the calls of Nigerians that the power sector be reformed and removed from the exclusive list, to give states the power to generate, transmit and distribute electricity within their jurisdiction.

This newfound autonomy has sparked a flurry of activity. Lagos, Kano, and ten other states have reportedly finalized plans for power projects, eager to address their own energy needs.

Some states have even established their electricity market laws, seeking approval to set up independent regulatory bodies separate from the NERC.

As of February, checks with the Ministry of Power revealed that Lagos, Edo, Kaduna, Enugu, and Oyo have signed their electricity laws.

A review of the power plans by the Lagos and Edo state governments, for example, ranks metering high on the priority lists as these state governments wishing to set up their electricity market have reached an understanding with various meter assemblies as part of their plans.

The Lagos State government had even organised a competition to select the best metering ideas.