Transparent grid management to reduce concerns of collapse with TCN unbundling – experts

Unbundling of the Transmission Company of Nigeria (TCN) could ensure greater transparency in grid management and reduce the concerns of grid collapse in Nigeria, which has been a major recurring decimal post privatisation, with its huge negative effects on socio-economic activities.

The Nigerian Electricity Regulatory Commission (NERC) has since last month commenced stakeholders consultations on the unbundling of the TCN, a move industry analysts say will enshrine transparency in the management of loads, address concerns of load rejects and issue out punishable enforceable sanctions on the system operator and the distributions companies (Discos).

Before now, the TCN has been performing the role of market operator and system operator, which has seen it as a judge in its own case by performing dual roles. But those who know believe that the unbundling will see the market operator become the arbiter and settle disputes between the system operator and the distribution companies in a bid to address concerns of grid collapses often occasioned by load rejection.

“For me, the unbundling will show more transparency in terms of market structure, on the transmission capacity and the market capacity,” Chuks Nwani, an energy lawyer and power sector governance expert, says in an interview with BusinessDay.

According to Nwani,” There has been lots of blame trading between the Discos and the TCN once there is grid collapse. We expect that all that will stop with this unbundling.
“With this development, the functions of regulating the market operators will be able to settle disputes between the system operators and the Discos, most especially regarding trip offs and concerns of grid collapse.”

Speaking further on how the unbundling would help the proposed service reflective tariff, he says, “The unbundling will play a role in the much talked about service reflective tariff because the system operator would be able to communicate to the Discos on level of load sent to a particular feeder or transformer to ensure it is received to avoid load rejection and other forms of disconnect that could worsen concerns of grid collapse.”

It could be noted that the unbundling of TCN is one of the conditions alongside ensuring a cost reflective tariff to ensure a credible market for the sector given to the Federal Government by the World Bank in order to access its $750 million support for the power sector intervention.

Other conditions include settlement of all outstanding disputes by various value chain players, some of whom are still in court for various forms of industrial disputes. Industry analysts have also spoken in favour of demerging the TCN, which is still the only value chain in the electricity market under government’s management after the privatisation of the Discos and the generation companies (Gencos) in 2013.

The regulator, NERC, is empowered by the Electricity Power Sector Reform Act of 2005 to unbundle the TCN and also ensure that it does not play both role of market and system operator.

The TCN hitherto consists of the Independent System Operator (ISO) and the Transmission Service Provider (TSP), also called the market operator.

Sam Amadi, a former chairman of the NERC, tells BusinessDay that the main challenge for the government currently in making TCN efficient is how it can allow the corporation to be a fully regulated entity.

According to Amadi, “The government continues to treat TCN as a parastatal or agency under the Federal Ministry of Power, which should not be. Under the former administration, we were able to push for corporatisation but it was not good enough.

“At a point after fighting several wars, I had to put an independent director in line with NERC’s fit and proper regulations. But at the end instead of an independently professional, government put a former governor as an independent director, thereby destroying the essence of directorship. The unbundling if well done will solve some of these challenges.”

Some industry analysts have also made case for proper alignment of the various power sector value chain, which has been a major weak point for the below performance of the Nigerian power sector.

Already, NERC alongside other industry sector analysts are deepening engagement on ensuring credible electricity market that would see to removal of unsustainable subsidy that has least impacted the sector post privatisation.

Emeka Okpukpara, a lead partner at NEXIER Power, informs BusinessDay that government reforms must look at realigning of various power sector value chains to solve the recurring challenges confronting the sector, with a clear cut enforcement of penalty where such directive applies.

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