State governors have urged the federal government to implement a “no-meter, no-service” policy for all new electricity connections across the nation. This plea was articulated in the Development of the National Integrated Electricity Policy & Strategic Implementation Plan: Policy Recommendations by State Governments to the Federal Ministry of Power document issued by the Nigeria Governors’ Forum.
In the document, state governments emphasized the crucial role of electricity meters in addressing the substantial metering gap, which is vital for the sustainability of sub-national markets.
Furthermore, the states advocated for State Electricity Regulatory Commissions (SERCs) to have the authority to determine the most suitable meter technology, type, and deployment method within their respective electricity markets.
The document read: “States believe that the provision of electricity meters to close the huge metering gap is a necessary requirement to make sub-national markets viable. However, SERCs in conjunction with the Distribution Licensees should be allowed to determine the meter technology, type and form of meters to be deployed within their states’ electricity markets, taking into consideration the cost of meters, extent of the telecommunications coverage in the State, tariff methodologies adopted by the SERC (fixed tariff, time of use, etc) and metering requirement in urban and rural communities and across customer categories arising from their energy consumption.
“States are of the view that the national electricity policy should mandate an immediate “no-meter, no-service” policy for all new connections, to prevent the metering gap from further increasing.
This comes as states prepare to phase out electricity subsidies within their jurisdictions, with more states preparing to adopt individual electricity tariffs under their own regulations.
The document highlighted that states intend to enforce varying electricity tariffs in their regions, based on the Electricity Act 2023. This federal law replaces the Electric Power Sector Reform Act and serves as the prevailing legal framework for the Nigeria Electricity Supply Industry.
The Electricity Act of 2023 (EA 2023) establishes a multi-tiered electricity market framework consisting of (i) a centralized wholesale federal electricity market and (ii) decentralized retail sub-national electricity markets. These markets are interconnected and interlinked through policies and regulations.
Under the EA 2023, regulatory powers are to be transitioned from the Nigerian Electricity Regulatory Commission, a federal agency, to State Electricity Regulatory Commissions once states fulfill the specified requirements outlined in the legislation.
Furthermore, the governors have urged the Federal Government to continue addressing the N4tn legacy debts in the power sector, emphasizing that these market liabilities were incurred under the previous single electricity market structure in the Nigerian Electricity Supply Industry (NESI).
The Federal Government, represented by the Federal Ministry of Power, acknowledged receipt of the document on Sunday, while state governments highlighted that they now have the authority to enact electricity laws.
Commenting on winding down electricity subsidies, the NGF said, “Electricity is a commodity and a product that must be paid for by consumers. The states believe that electricity subsidies and other forms of financial interventions in the power sector by the Federal Government over the last 15 years have been inefficient and ineffective so far.
“Rather than improve the quality and reliability of service, electricity subsidies in the sector have been applied to cover inefficient costs and lack of service by Discos, TCN, Gencos and gas producers across the NESI.
“Moreover, the so-called electricity subsidies benefit only customers who are connected to the national grid and enjoy some form of supply reliability. Millions of households, particularly in underserved and unserved communities, pay more than twice the average true cost of on-grid supply.”
They stated that the 2001 National Electric Policy recommended the restricted use of subsidies for the promotion of universal access to electricity.
“States agree with the retention of this policy,” the governors stated.
They added, “To this end, states recommend that wholesale and retail electricity subsidies to customers and across the NESI value chain are reduced and eventually eliminated over time, except for pre-defined customer categories or in line with national economic growth initiatives.
“Where electricity subsidies are deemed necessary, the states propose a cost of service analysis which will be conducted by the state to determine the cost of supply and arising electricity subsidies for each state.
“Where electricity subsidies continue to be implemented as a specific policy of the Federal Government, it must provide funding for the subsidies before implementation.”
In addition, they noted that the method, and criteria for the application of electricity subsidies by the Federal Government should be transparent and precise with a clear regulatory framework to determine the extent of subsidies required and category(ies) of consumers that would be eligible to receive electricity subsidies.
“The FMoP and NERC should also ensure that there should be no discrimination in implementing electricity subsidies, against states and regions, especially states and regions with more efficient electricity markets.
“It should also be noted that continuing electricity subsidies may undermine the viability and sustainability of state electricity markets.
“Thus, the Federal Government and states should collaborate in determining how any subsidy by the Federal Government is applied within a state electricity market. In this regard, the states propose a joint framework with the Federal Government for administering future electricity subsidies in a state electricity market,” the NGF stated.
Electricity Tariffs
They stated that “it should be recognised that states will implement different end-user tariff methodologies within their markets according to the state electricity policies and strategic implementation plans, viability and market sustainability requirement and peculiar socio-economic characteristics in states.”
They, however, recommended that electricity tariffs should be both efficient and cost-reflective across the federation.
“States urge the Federal Government to revert to the 2001 Electric Policy recommendation (chapter 6, pg. 37) on electricity tariffs regulation. The National Assembly and the Federal Government should allow NERC to independently carry out its regulatory functions of determining, approving, and implementing economic wholesale tariffs at the appropriate time, and not (politically) intervene in the tariff-setting process.
“In determining wholesale tariffs, NERC must also adhere to its regulations/rules for tariff approvals and reviews, including the need to transparently hold consultative public hearings and mandatorily consult with SERCs on wholesale tariff methodologies and tariff proposals by Licensees of the commission,” the NGF stated.
The states said the Federal Government should continue settling the N4tn legacy debts in the power market.
“States recommend that existing market debt (arising from a combination of unfunded electricity subsidies, legacy debts, payment shortfalls, and interest penalties and Central Bank of Nigeria debt) and tariff shortfalls, which are more than N4 trillion, should continue to be borne by the Federal Government as the market liabilities were created by the Federal Government under a single electricity market in NESI.
“The debts should not be passed onto State Electricity Markets as it would make State Electricity Markets unviable. In this regard, states recommend that the Federal Government should restructure retail electricity tariffs to remove such market debts and tariff shortfalls on end-user electricity tariffs.
“States will also not bear any market liability of successor Discos that was incurred inefficiently,” the governors stated in their document.
State Electricity Laws
The NGF document also said state electricity laws have now come into existence, giving state authorities powers to develop legal, policy and regulatory frameworks over electricity matters within their states.
“However, the provisions of state electricity laws do not cover the operation and regulation of the national grid within their territories or interstate electricity operations. Several states have already enacted their electricity laws,” the NGF stated.
It recommended that “the Federal Government should, pursuant to the EA, do all in its powers to support any state that wishes to enact its own electricity law, adding that “once a state meets all the requirements, the NERC should issue the necessary Transition Order and provide relevant support to states in this regard.”
The states reiterated that the multi-tier legal and regulatory environment is normal under a federation such as Nigeria.
They said, “Different states are at liberty to make electricity laws that would boost electricity access within their territories. States electricity laws are not in conflict with the EA 2023, provided the provisions of the state law apply solely within the state territory and do not cover national grid operations.”
They also stated that “the National Assembly is urged and encouraged to reject all requests for amendment of the EA 2023 that would create conflicts of law between the EA 2023 and a State Electricity Law or invalidate the provisions of a State Electricity Law.”