Nigeria: Right Of States To Generate, Transmit And Distribute Electricity

RIGHT OF STATES TO GENERATE, TRANSMIT AND DISTRIBUTE ELECTRICTY: ASSESSING THE SIGNIFICANCE OF THE 1999 CONSTITUTION (FIFTH ALTERATION) BILL NO. 33, 2022

1. Introduction

The Nigerian Constitution has always allowed component States in the country the authority to generate, transmit and distribute electricity within their territory. However, that authority could only be exercised over the areas not connected to the national grid¹. The World Bank reports that 43% of the Nigerian population are not connected to the national grid.² This lack of connectivity results in an estimated annual loss of $26.2 billion.³ The latest constitutional amendment - The 1999 Constitution of the Federal Republic of Nigeria (Fifth Alteration) Bill No. 33, 2022 (National Grid System - Part I & II, Second Schedule), passed by both Chambers of the National Assembly on the 1^st of March 2022 is to the effect that the various States can generate, transmit and distribute electricity to cover areas already connected to the national grid⁴. The amendment is part of a wider effort to beef up the electricity supply in Nigeria which currently generates so little for its population of over 200 million people. Nigeria's power generation is mostly thermal and hydro with an installed capacity of about 12,522 MW.⁵ For context, South Africa generates 58,095MW and has a population of 67 million people.⁶ Nigeria requires at least 180,000MW to ensure a stable electricity supply.⁷ About 60% of Nigeria's population does not have access to grid electricity.⁸ In fact, out of its installed generation capacity, Nigeria only generates plus or minus 6000MW⁹ in available generation capacity. The gap between the demand and supply is significantly wide and there is the need to plug this gap. However, plugging this gap has proved a herculean task for various reasons primarily -infrastructural constraints, liquidity crisis resulting from collection shortfalls, insufficient end-user pricing, and accumulating debts by the NBET. There is therefore the need to appraise the significance of Bill No 33, 2022 in the Nigeria Electricity Supply Industry (NESI).

2. True Federalism and the NESI

Electricity in Nigeria is generated primarily through thermal and hydro power sources¹⁰. The main source of electricity generation comes from fossil fuels especially gas which accounts for 86% of the capacity in Nigeria with the remainder generated from hydropower sources.¹¹ In 2019, electricity generated in the United States of America (US) primarily came from natural gas (38%), coal (12%), nuclear (20%), and other renewables (11%).¹² The United Kingdom generates electricity through fossil fuels, nuclear sources, and other renewable sources.¹³ The over reliance on just two sources of energy to generate electricity for over 200 million persons shows that Nigeria is in dire need of diversification if it is to generate adequate energy to serve its growing population.

More so, power in the US (which, like Nigeria, practices the federal system of governance) is regulated independently by both federal and State agencies through the Federal Energy Regulatory Commission (FERC) and the State Public Utility Commissions.¹⁴ The FERC oversees wholesale sale of electricity and interstate transmission of electricity and other energy sources, while the various State Public Utility Commissions regulates retail electricity, generation, transmission, and distribution of electricity (except hydro and nuclear generated). In all, there is an interplay between Federal and State authorities in terms of ownership, regulation, and management of the electricity supply value chain in the US.¹⁵ This interplay ensures not only the diversification of power sources in the US as States are encouraged incentivize the propagation of renewable energy sources within their territory, it also bolsters the energy generation pool.¹⁶ A clear depiction of true federalism.

In comparison, paragraphs 13 and 14, Part II, of the Second Schedule, CFRN clearly delineates the powers of the Federal and State legislative entities to make laws regarding control and operation of electricity infrastructure vis-à-vis the generation, transmission, and distribution of power, wherein the States are restricted to areas not covered by the National grid. However, there is still the issue of the inability of State governments and their Houses of Assemblies to properly regulate the management and operation of electricity infrastructures in areas outside the national grid. This is largely due to the Federal Government's (FG) historic arrogation of electricity regulation to self. The practicality of State control is almost entirely derogated by the establishment of the Rural Electrification Agency, an FG agency established by an Act of the National Assembly to control and promote the provision of power to rural areas within the component States of Nigeria not covered by the national grid.¹⁷ A clear depiction of the overarching power of the center in the NESI as the States are also (if not exclusively) fully empowered to establish similar entities to control the operation of electricity infrastructure within their territories outside the national grid.¹⁸ However, although this posture has been less than encouraging for most, States like Lagos continue to set the pace for State control of the electricity infrastructure by the establishment of the Lagos State Electric Power Sector Reform Law of 2018 made mainly for the purpose of establishing an embedded power scheme in collaboration with the Nigerian Electricity Regulatory Commission (NERC) and creation of offences for energy theft within Lagos.¹⁹

The huge benefits derivable from a more decentralized and diversified control of the electricity infrastructure operations in Nigeria cannot be overemphasized. For instance, with the large coal reserves in Nigeria, it is quite surprising that there has been no step towards exploiting the use of coal for electricity generation in the country.²⁰ This could easily be a low hanging fruit for States with abundant coal deposits, for power generation. There is also a paucity of renewable energy development and incentivization unlike as obtainable in the US. Recently in Nigeria, there has been a lot of talk on the need for renewable sources of energy due to the debilitating effects of climate change, but we have seen less than tangible materialization of efforts to diversify electricity generation to include large-scale renewable sources on the part of government, although we have seen private entities and individuals more frequently resort to the use of solar panels to harness solar energy, in order to mitigate power shortages.

3. The NESI and Bill No. 33, 2022

Historically, the NESI suffer challenges such as poor machineries, energy theft, liquidity crisis resulting from collection deficit/shortfalls, insufficient end-user pricing, infrastructural defects, and poor maintenance, etc.²¹. Thus, necessitating steps towards the liberalization of the sector as contemplated in the Electric Power Sector Reform Act (EPSRA) 2005, which generally sought to unbundle the NESI for a more efficient and commercially viable market, better service delivery, even distribution of power supply within the country, and seamless regulation of the sector. Power reforms under EPSRA remains in its transitional stage till date as the FG through the Nigerian Bulk Electricity Trading PLC and the Transmission Company of Nigeria still own and control, in totality, these critical intermediaries in the NESI value chain. Granted that the benefits of the liberalization may not have been fully felt as yet, it is unarguable that the FG would be better off shedding some of its the responsibilities in the NESI, particularly with respect to policy and regulation. The sharing of responsibilities between the Federal and State Governments would lead to improvements such as the erection of more grids and swift development of alternative energy sources like renewables. Nigeria, today has one national grid servicing all the States in the country. Failure of the national grid at any point results in a total blackout across the country. An event that has occurred all too often within the past year. This situation could be easily avoided by plug-ins to substitute mini-grid systems in the various States, as this would not only reduce the pressure on the national grid but avail the NESI value chain with much needed alternatives.

The ability of States to make policies, laws, and regulations within their territories as in Bill No. 33 2022 will make for more access to power supply for Nigerians; engender the establishment of State electricity regulatory agencies to manage, license and regulate the electricity supply chain in their respective jurisdictions, and set market tariffs; drive needed competition and widen the choice of electricity supply channels available to end-users; decongest the national grid for more efficiency; and attract more investors into the NESI. However, for all these to materialize, there may be need to repeal the current highly FG-centric EPSRA, and adopt a more accommodating, full spectrum electricity law regime, accommodating in clear terms of the vested interests of the component States as enshrined in Bill No. 33 2022, in synergy with that of the FG.

4. Conclusion

The benefits of Bill No. 33 2022 to the NESI cannot be over emphasized. The potentials are almost limitless especially considering the now widened pool of investment prospects chasing the most populous black nation. There have been incessant yearnings in the past from States like Lagos, Edo, and Rivers for the control of electricity regulation, ownership, and management in line with the actual intendments of Schedule 14b, Part II, of the Second Schedule, CFRN. In other words, some of the States seem ready. It is undoubtedly expected that this means more business for energy experts and industry players as we expect a gradual dematerialization of FG's monopoly upon assent of the Bill. Where properly exploited and managed, this seemingly infinitesimal alteration to the Schedule of the Nigerian constitution portends very weighty significance in the NESI, such that can cause a paradigm shift, causing Nigeria's history of epileptic power supply to truly be a thing of the past. As we approach a new regime change in the country, this may well be a major consideration for the new dispensation of leaders.

Footnotes

1. Paragraph 14(b), Part II second Schedule of the 1999 Constitution of the Federal Republic of Nigeria (CFRN) (as amended)

2. Nigeria to Improve Electricity Access and Services to Citizens (worldbank.org) (Accessed on 16^th of March 2022)

3. Ibid.

4. National Assembly Votes Sixty-Eight Alteration Bills- Policy and Legal Advocacy Centre. (Accessed 16^th April 2022)

5. Nigeria - Electricity and Power Systems (trade.gov) (Accessed on 16^th of March 2022)

6. Power Africa in South Africa | Power Africa | U.S. Agency for International Development (usaid.gov) (Accessed on 16^th of March 2022)

7. 'Nigeria needs 180,000MW to enjoy stable power supply' - Punch Newspapers (punchng.com) (Accessed on 16^th of March 2022)

8. Comparison of costs of electricity generation in Nigeria (wupperinst.org) (Accessed on 16^th of March 2022)

9. NERC-Power Generation In Nigeria (www.nerc.gov.ng) (Accessed 10^th April 2022)

10. Ibid.

11. Oyewo, Ayobami; Aghahosseini, Arman; Bogdanov, Dmitirii; Breyer, Christian (2018-12-15). "Pathways to a fully sustainable electricity supply for Nigeria in the mid-term future".Energy Conversion and Management.178: 44-64.doi:10.1016/j.enconman.2018.10.036.ISSN0196-8904

12. What Is Us Electricity Generation By Energy Source? - Global Network on Energy for Sustainable Development (gnesd.org) (Accessed on the 16^th of March 2022)

13. Electricity generation | Energy UK (energy-uk.org.uk)

14. What Federal Energy Regulatory Commission Does- US (www.ferc.gov) (accessed 11^th April 2022)

15. J. Logan, C Marcy, et al, 'Electricity Generation Baseline Report' National Renewable Energy Laboratory (Technical Report) January 2017, -Available at:< https://www.nrel.gov/docs/fy17osti/67645.pdf >Access 13 April 2022

16. Ibid.

17. Section 88 of the Electricity Power Sector Reform Act 2005 (EPSRA)

18. It is often the case that FG would unconstitutionally actively frustrate efforts of States to generate and supply their own power within their territories.

19. The Law establishes a Board to manage electricity policy issues within the State and an Agency to manage offences of theft. Its embedded power scheme tries to scale up electricity transmission and distribution infrastructure, provide feedstock for power generation, liaise with NERC for cost reflective tariffs, and create modalities for entities wanting to operate power plants of over 1MW within the State subject to Board approval and registration.

20. Analysis of clean coal technology in Nigeria for energy generation - ScienceDirect (Accessed on 16^th of March 2022)

21. Transmission Losses in The Grid | Nigeria Electricity Hub (Accessed on the 16^th of March 2020)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.