On Friday 17th March, 2023, history was made when His Excellency, President Muhammadu Buhari, signed into law, the constitutional amendment allowing States in the country to licence, generate, transmit, and distribute electricity in areas covered by the national grid.
It is important to State that before this amendment, electricity generation, transmission, distribution in the areas not already covered by the existing national grid was in the concurrent legislative list which States have jurisdiction over.
The implication of articles 13 and 14 of the constitution in this regard has been a subject of debates for many years now, as some have argued that it has prevented the States which want to accelerate their development to do so at their own pace.
Although States currently have the right to generate, transmit, and distribute electricity in areas not already covered by the national grid, they haven’t taken much advantage of the law before this amendment. Thus, it is in order to examine the strengths, weaknesses, opportunities and threats presented by this historic action aimed at deepening competition in the Nigerian Electricity Supply Industry (NESI).
Effectively speaking, the amendment means a restructuring of the electric power system via the constitution and has the potential to turn the Nigerian power sector to a decentralized system. This initiative has come at no better time in view of the dismal performance of the privatization as against what it was intended to do. Potentially, this will lead to improvements in the power supply systems to consumers in the NESI as a result of competition between State owned utilities and existing distribution network licensee(s) in the State.
New licensees who will invest in power systems, meter all consumers, reduce Aggregate Technical Commercial & Collection Losses (ATC&C), improve reliability, quality and quantity of power supply, respond to customer complaints and remunerate staff appropriately will also emerge .
Yes, when properly implemented, we can say that certain sections of the country will start to celebrate improvements in quality and quantity (period of availability) of power supply. Distribution companies (DisCos) will treat consumers more fairly as they will have the option to switch to alternatives in the face of deepening competition.
The end game is to progressively hear of “20 to 24 hours of uninterrupted supply” till we forget “UP NEPA”!
We already have examples of States that have trialed the generation, transmission and distribution of electricity to their citizens including Lagos, Ogun, Rivers, Katsina, Borno, Akwa-Ibom, Edo and Delta States. Kaduna State has a number of similar projects that have reached advanced stages. Clearly, most States will start with investments in generation and seek to provide supply to State-owned offices, buildings, and consumers nearby.
For sure, industrial clusters, Universities and other higher institutions will seek to connect to more reliable electricity supply systems and the DisCo in the network franchise area can then focus on serving the remaining customers better. There is also the opportunity for captive power to be captured in the scope of the power supply program in the State.
Generally speaking, it may be far easier for States to generate electricity and sign an agreement with the existing DisCo in the area for distribution and supply.
Following this path, Nigeria will be able to increase her compliance with UN sustainable development goals (SDG 7 – affordable and clean energy) as the paradigm shift will further strengthen the network in the northern corridor with hydropower generation springing up here and there, such as the ones in Zungeru, Kashimbilla, Gurara etc in addition to Kainji, Shiroro and Jebba.
The existing power system is weak and fragile and fragmenting it may have further weakening consequences. As some States will not be proactive in the early days, it will leave a huge gap between States or regions of the country that enjoy improved power supply while others lag behind. In a way, one will expect migration and over-population in certain cities whilst other States buckle up.
As with anything else, the amendment will not lead to improvements as intended if the implementation is not done right. In this regard, all relevant stakeholders including but not limited to experts in the field of power systems, professional bodies, investors, entrepreneurs, policy makers, consumer groups and advocates, relevant ministries, departments and agencies of the governments (States and Federal) must work hard to make a success of this development.
As highlighted in the opening paragraphs, and for many years now, States have had the provision to invest in generation, transmission, and distribution of electricity within their boundaries, albeit restricted to areas not already covered by the national grid. While this may appear limiting, one would have expected States to have improved power supply in the unserved and underserved areas of their domain before now. It is now left to see how States that have been unable to fund rural electrification, pay salaries and pensions, provide basic public service for years, are indebted, depend on Federal Government bailouts from time to time, will be proactive enough to invest in power systems considering the fact that investments in power systems require a huge amount of capital.
This has the potential for many States to go into debt financing which has to be well considered. Of course, one must say, not all States are included in this bucket of description. The situation where several States take foreign loans that grossly overwhelm the forex available from CBN can be dreadful.
As laudable as the amendment is, it has the potential to lead to chaos and unintended consequences if not well managed.
Except for market driven approach by way of involvement in the retail/supply business, asking States to build independent power networks in parallel with the existing grids have major technical and safety implications. For overhead systems, we will soon see dangerous high voltage lines criss-crossing themselves without safety clearances that can cause electrocution and limit operational flexibilities. Having two or more wires owned by different utilities supplying the same customer group is a no brainer, and will be more expensive compared to having only a single network. Also, except if underground networks are built where possible, rights of way issues will exist if this approach is followed.
There will of course be the disenfranchisement of existing DisCos whose customers will be “poached” by new licensees and this may lead to court cases that may hamper development of the power system. The arguments will be whether or not the DisCos have been given exclusive rights to their network franchise areas in the terms and conditions of their licences and whether they have the typical “change in law provision” in their contracts with the Federal Government. Also to be checked is whether or not this is a force majeure situation.
by Idowu Oyebanjo PhD FNSE FNIPE FNIEEE CEng MIET UK
@Oyebanjo Idowu fNSE