Single Power Market: Nigerian Governors reject proposed bill, write Senate, Rep

The thirty-six state governors, under the aegis of the Nigeria Governors’ Forum, NGF, on Monday, rejected the proposed Single Electricity Market Bill, which gives the Federal Government the sole control of electricity matters in the country.

The Governors insisted that the development is injurious to the constitutional rights of states with regard to electricity generation, transmission, and distribution. 

In a letter addressed by Dr. Kayode Fayemi, Chairman of NGF and Ekiti State Governor, to Senator Gabriel Suswam, Chairman, Senate Committee on Power, representing Benue North East and copied the President of the Senate, Senator Ahmad Lawan and the Speaker, House of Representatives, Femi Gbajabiamila, said that the bill must be jettisoned because it is injurious to the states with regard to generation, transmission, and distribution of electricity in their domain. 

The bill is expected to be presented today March 1, at the Senate by the former Governor of Benue State governor and now the Chairman of the Committee on Power  at the Senate.

EnergyDay gathered that the letter was dated 22nd February, 2022 and received on 23rd February by the Senate Committee on Power. 

The Governors argued that “The Electricity Bill 2022 is based on recommendations put together by a team of Consultants engaged by the Senate Committee on Power.

“Invariably, the Electricity Bill by the Senate Committee on Power is not a ‘true and fair’ reflection of stakeholders in the Nigerian electricity sector, most particularly the State governments. It is also not a “true and fair” reflection of the Federal executive arm.”
 The Governors further stated that, contrary to the views of the Suswam, Clause 2(2) of the Bill is rather injurious to the constitutional rights of States with regard to electricity generation, transmission, and distribution, adding that limiting the powers of State governments to build generation plants, transmission and distribution lines only  in areas not covered by the national grid, shrinks the powers of States to make laws for electricity within their state jurisdiction.

The NGF’s submission details other aspects of the Electricity Bill that not only violate the constitutional rights of States, but unconstitutionally donate powers to the National Assembly and the Federal Government with respect to the supervision and regulation of electricity generation, transmission, and distribution within States.

Fayemi in the letter advised that it is important to engage the Federal House of Representatives on the respective bills for the electricity sector, particularly the EPSRA amendment bill 2020 and other bills, which also infringe on the constitutional rights of states to make laws for electricity, with a view to harmonizing it into a single draft electricity bill.

The letter titled, ” Re: The Senate Electoral Bill, read, “We write concerning a matter that has now become one requiring urgent national attention. It has come to the attention of the Nigeria Governors’ Forum (NGF) that the Senate of the Federal Republic of Nigeria has before it a Bill for a law to repeal the Electric Power Sector Reform Act, 2005, consolidate various laws relating to the electricity sector and for many other matters both connected and unconnected therewith.

“The following relevant information have also come to our attention: The Bill has gone through a second reading and a public hearing thereon has been scheduled for the 28th of February and 1st March 2022. A schedule of parties to be heard at these public hearings has been published by the Senate Committee on Power. “Regrettably, states have no opportunity to be heard, whether individually or through the Nigeria Govemors’ Forum.

 “We wish to point out that “electricity” is not an exclusive federal matter. It is guided by the provisions of the Concurrent Legislative List. Articles 13 and 14 clearly provide that the power to make laws for the generation and transmission of electricity are concurrent. Also, Article 14 reserves exclusively to the State the power to make laws for the distribution of electricity within a State as it also does the power to make laws for the generation and transmission of electricity exclusively within the borders of a State.

“We also wish to note that the National Electric Power Policy, 2001, the only extant Federal Government general policy statement on the electricity sector, in Chapter Three, is very clear that the states and state governments are key stakeholders in the electricity value chain.

“We recall that past efforts of states to establish and sustain electricity markets of their own have been stifled by the Federal Government. The efforts of Lagos and Rivers States are notable examples. Historically, the extension of electricity services beyond State capitals in the first 12 states of Nigeria was driven by the state governments through their State electrification or rural electrification boards.

“This has continued with the 36 States and it is now established by the Nigerian Electricity Regulatory Commission and accepted by the National Council on Privatisation that an average of 30 per cent of the historical investment into the electricity distribution networks were made directly by the States. Most of this value is situated in the rural areas of the 36 States.

“We believe that the reality of the States as key partners in the achievement of universal electricity access by all Nigerians must not only be accepted by the Federal Government but must be legislated by the National Assembly. States like Lagos, Edo Ekiti, Ondo and Kaduna have already taken the initiative to enact policy statements and laws for the electricity sectors in their states.

”Similarly, the 19 States of Northern Nigeria have come together to establish a common platform for realising the benefits of the extensive renewable energy resources that their region is blessed with.

“It would be unconstitutional and an unjustifiable act of overreach for the Senate to consider and pass a Bill that continues to treat the Federation as one single electricity jurisdiction or sector. While a single Electric Power Sector Reform Act may have been useful as a catalyst for the sector in the early years of the Fourth Republic, the States have all come of age, literally and metaphorically, and the arrangements must change in a way that accepts and respects the maturity of the States in electricity matters; a reality that this Senate Electricity Bill does not recognise and take account of but at best only pays the most cursory lip service.

“After 71 years of sole and unchallenged central control of the electricity sector, we live with an electricity sector divided into two parts, One part is the FG-controlled and -regulated national electricity market that today is insolvent, bankrupt and delivers no more than approximately 4,000MW/96,000MWh daily to 220m Nigerians, or an average of 18w/432watt-hours daily, barely enough to power two (2) 10-watt light bulbs a day. The other part of Nigeria’s electricity sector is the alternative/back-up market, whose estimated capacity is approximately 40,000MW so much so that Nigerian citizens are their own electricity providers in their homes, factories, schools, hospitals and places of worship.

“Our calculations indicate that if the 40,000MW of electrical back-up capacity owned and operated by Nigerians were to be delivered to them by licensed private IPPs and distribution companies through organised public electricity markets, Nigerian citizens and governments would have saved up to N17trn in 2021.

“Instead, this much money was burnt up via diesel and petrol generator operating/maintenance costs, instead of being saved and invested by private citizens and businesses and some of it captured by the States and Federal Government as tax revenues and levies.

“This has been the norm for decades and has worsened each year even as it seems set to continue in 2022 and beyond. Unfortunately, the reform and privatisation programme that was started in 2001 with the National Electric Power Policy, expanded in 2005 with the Electric Power Sector Reform Act, recharged in 2010 with the Roadmap to Power Sector Reform and consolidated in 2013 via the privatisation of the generation and distribution has come to a most regrettable halt with a privatised FG-controlled market that has remained incapable of meeting national aspiration since 2013.

“Today, the Nigerian electricity sector is insolvent and has been dependent on the Central Bank of Nigeria and Direct Foreign Investments for regular infusions of cash to keep it afloat since 2013, building up liabilities that now stand at over trillion. 

”It is not clear how the Nigerian electricity sector can settle these liabilities and the Electricity Bill does not offer a way forward on the issue. In 2020, the National Economic Council (NEC) conducted a thorough analysis of the entire sector since the 2013 privatisation.

”The ensuing NEC Report established that the sector is in dire crisis and the privatised national electricity market has not turned out as planned for various reasons, including: Incorrect assumptions made by the Federal Government pre-privatisation; Lack of adequate due diligence by bidders for available electricity assets; Failure to set economic tariffs; Non-compliance with commercial contracts and NERC regulations; Absence of effective power purchase agreements thus encouraging load rejection by Discos; misaligned and poorly-timed infrastructure investments by the Federal Ministry of Power, TCN, REA, etc often without consultations with Discos and/or state governments.

“The NEC Report also made three key recollections aimed at tackling these identified challenges and placing the national electricity market on the right footing: Return to a contract- and rules-based that promotes the orderly evolution of the sector under market rules and implement the EPSRA that enable different tariff methodologies to be applied to the peculiar characteristics in states; shareholders (FG core investors other private sector capital providers) must recapitalize the Discos and bring in both new capital and ownership/management; Implement effective governance at both governmental (policy and regulation) and private sector (board and management) levels.

“Unfortunately, two years later none of these recommendations has been implemented and the sector is even more imperiled than ever before.  ”For the first time since 2013, the Federal Government is implementing the obligation of the Discos to pay up on their bills 100 per cent and the Discos cannot cope.

”Instead, in order to avoid paying on bills the phenomenon of load rejection, whereby Discos refuse to receive energy for delivery to customers, has become far worse and more widespread than ever.

“It is in these circumstances that the Senate now has before it an Electricity Bill that does not address any of the challenges that threaten the sector and the nation. Rather, its key characteristics are a failure to recognise and provide for the rights of states to have their own electricity markets. 

”The re-establishment of the same single national electricity market that has brought neither growth in capacity nor socio-economic development to the nation; and, as stated earlier, the continued absence of a clear path for the market to exit permanently from its long-running insolvent status. 

”The bill also re-establishes the existing Federal Government entities and a number of other new ones as key players in the sector.

“Finally, perhaps the most egregious feature that runs throughout the Bill is the establishment of a single Federal Government appointee, the Minister of Power, as the De-facto head and statutory supervisor of all the key FG electricity sector MDAs, including the Nigerian Electricity Regulatory Commission, NERC, in a supposedly privatised electricity sector. Interestingly, the Ministers extensive powers over the sector are shared with the National Assembly through the mechanism of legislative oversight responsibilities.

“The Nigeria Governors’ Forum does not support this Electricity Bill in the version currently before the Senate, except these amendments are reflected. This is because it is unconstitutional and maintains the policy of Federal Government overreach in the electricity sector that has not yielded development to the country.

“We state in very clear terms that this Electricity Bill is not a solution to the pressing challenges summarised above. It is also premature in that it does not follow from a comprehensive national dialogue on a completely revised national electricity policy. We doubt that a private member’s Bill such as this can deal with such a complex national security issue without the benefit of extensive research, analysis and prior consultation before a comprehensive Bill is drafted.

“We strongly recommend the constitution of a Working Group, spearheaded by the State Governors under the auspices of the National Economic Council (NEC), to work with the NASS leadership on the way forward for the electricity sector. From this should emerge a new National Electricity Policy and the foundations of a new Act of the National Assembly that, for the first time, will have the full buy-in of the States. Electricity is a vital matter of national security that, by virtue of the 1999 Constitution, is in the concurrent list and should, therefore, be made into law only with the collaboration and concurrence of the states of the federation,” the statement ended.

The NGF however noted that the Governors are ready to collaborate with the National Assembly and the Federal Executive Branch in charting a new and productive path towards bringing energy security to the country.

Leave a Reply

Your email address will not be published. Required fields are marked *