Introduction:

On June 27^th, 2024, the Nigerian Electricity Regulatory Commission (“NERC”) issued an Order to transfer the regulatory oversight of the Electricity Market in Imo State to ISERC. This move follows the enactment of the Constitution of the Federal Republic of Nigeria, 1999 (Fifth Alteration), Act, (No. 17), 2023, and the Electricity Act 2023 (“EA 2023”), which facilitated the decentralization of electricity regulation in Nigeria.

The Nigerian Electricity Supply Industry (“NESI”) has always operated under a centralized jurisdiction overseen by NERC. However, a significant shift occurred with the presidential assent amending key sections of the Nigerian Constitution on March 17, 2023. Specifically, Paragraph 14(b) Part II of the Second Schedule to the 1999 Constitution was amended to grant states legislative authority over the generation, transmission, and distribution of electricity within their respective territories. This Constitutional amendment, coupled with Section 2(2) of the EA 2023, recognizes the autonomy of states in managing their electricity markets. This provision ensures that state laws pertaining to generation, transmission, system operation, distribution, supply, and retail of electricity are not invalidated by federal legislation. This includes the provision for the establishment and management of state-owned electricity power stations, markets, and regulatory bodies.

Despite the decentralization, NERC maintains a pivotal role as the central regulator responsible for overseeing inter-state and international electricity generation, transmission, supply, trading, and system operations. However, states are empowered to regulate mini-grids, Independent Electricity Distribution Networks (“IEDNs”), and Independent Electricity Transmission Networks (“IETNs”) within their territories, provided they establish the necessary legal and institutional frameworks. States seeking to regulate intrastate electricity markets must adhere to the provisions of Section 230 of the EA 2023. This section outlines the procedure for states to enact relevant laws, establish state electricity regulatory authorities, and formally request NERC to hand over regulatory oversight of electricity operations within the state to new regulators now established by the state.

Objectives of the IMO Order and Key Directives for Transition:

The overarching objectives of the Order are outlined as follows:

1. Initiate the Transfer Process: Begin the process of transferring regulatory oversight of the intrastate electricity market in Imo State from NERC to ISERC, in accordance with the legal framework set by the CFRN and the EA, 2023.
2. Establish a Transition Plan: Provide a comprehensive plan to manage the transition, ensuring all procedural and logistical steps are clearly outlined and adhered to.
3. Address Transitional Matters: Identify and resolve any issues that may arise during the transition phase, ensuring a seamless transfer of responsibilities.

In compliance with Section 230(3) of the EA, 2023, NERC has developed a transition plan to facilitate this transfer to ensure a smooth transition of responsibilities. Key directives for transition include:

1. Incorporation of a Subsidiary: The Enugu Electricity Distribution Company (“EEDC”) is instructed to register a subsidiary (“EEDC SubCo”) with the Corporate Affairs Commission tasked specifically with handling intrastate electricity supply and distribution within Imo State. This subsidiary is be incorporated within 60 days from the start date of the Order and acquire a license for intrastate electricity supply and distribution from ISERC.
2. Geographic and Network Delineation: EEDC is directed to delineate the geographic boundaries of Imo State, establishing boundary meters at all crossing points to ensure a standalone network for Imo State.
3. Asset and Liability Management: EEDC is responsible for identifying and transferring all relevant assets, liabilities, and employees to EEDC SubCo. This includes establishing an asset register and apportioning contractual obligations related to operations in Imo State.
4. Register and Notification: NERC will compile a register of licensees and other authorization holders in Imo State, notifying them of the regulatory oversight transfer to ISERC.
5. Contractual and Tariff Details: ISERC will validate supply contracts for EEDC SubCo. Authorization from NERC will be required for the electricity sourced from the national grid.
6. Regulatory Responsibilities: ISERC is mandated to adopt and implement an end-user tariff methodology exclusive to Imo State. While contracts and tariffs related to national grid electricity must be approved by NERC, final end-user tariffs will be set by ISERC in collaboration with the Government of Imo State.
7. Completion Timeline: All transfers and necessary adjustments are to be finalized by December 31, 2024.

These directives and objectives underscore the structured approach toward transitioning regulatory oversight of the electricity market in Imo State to the newly established ISERC, ensuring regulatory compliance and operational continuity throughout the process.

CONCLUSION

The Order marks a significant power shift in the evolution of the country’s electricity regulatory landscape. This Order signals the beginning of a carefully calculated transition, transferring regulatory responsibilities from the central oversight of the NERC to the newly empowered ISERC.