NERC: Electricity Value Chain and Power Sector Overview
NERC: Electricity Value Chain and Power Sector Overview
By Bola Bakare
A regulatory agency in the electricity sector is responsible for overseeing and enforcing laws and regulations specifically within the power industry with duties including but not limited to Licensing and permits to businesses and individuals operating within the regulated industry, Enforcement by conducting inspections, investigations to ensure compliance with laws and regulations, Developing and implementing rules and regulations to govern the industry, Monitoring and Reporting analysis data to industry trends, compliance, and performance, Protecting consumers by ensuring that businesses operate fairly and transparently, Overseeing the industry to ensure that businesses operate safely, efficiently, and effectively, Developing and implementing policies to guide the industry and ensure compliance with laws and regulations, Educating businesses, consumers, and other stakeholders about laws, regulations, and industry best practices, Conducting investigations and taking enforcement actions against businesses that violate laws and regulations, Collaborating with other government agencies, industry stakeholders, and international organizations to promote regulatory effectiveness and efficiency.
Also, Tariff Regulation to ensure they are fair, reasonable, and transparent, Grid Management to ensure it is safe, reliable, and efficient, Dispute Resolution between electricity providers, consumers, and other stakeholders, Market Monitoring to ensure it is competitive and functioning effectively, Renewable Energy development and integration into the grid, Market Design and implementation mechanisms to promote competition and efficiency, Providing incentives for investment in the electricity industry, Educating the public about electricity industry issues and developments, Advocating for the interests of consumers and ensuring their voices are heard, Assessing the social impact of electricity industry developments and policies.
The NERC (Nigerian Electricity Regulatory Commission) as a regulatory commission based on above definitions has a Yeoman’s job of maintaining equilibrium in the electricity delivery value chain. This position mandates NERC thus:
• Design and implement market mechanisms to promote competition, efficiency, and innovation in the electricity industry.
• Protect consumers by ensuring that electricity providers operate fairly and transparently, providing clear information about prices, services, and terms and conditions.
• Promote the integration of renewable energy sources into the grid, ensuring a smooth transition to a low-carbon economy.
• Energy efficiency and demand-side management, encouraging consumers to reduce their energy consumption and promoting the use of energy-efficient technologies.
• Ensure the security of the electricity grid, protecting it from cyber threats, physical attacks, and other risks.
• Resolve disputes between electricity providers, consumers, and other stakeholders, ensuring that issues are resolved fairly and efficiently.
• Monitor the electricity industry and enforce compliance with laws, regulations, and industry standards, taking enforcement action when necessary.
• Maintain a grid code with rules and standards that govern the operation of the electricity grid, ensuring its safety, reliability, and efficiency.
It is important to reiterate Nigeria’s power sector numerous challenges that hinder its ability to provide reliable and efficient electricity to its growing population.
• Insufficient and limited power generation capacity with the national grid experiencing frequent outages and shortages. The country’s energy demand far exceeds its available supply.
• Over-Reliance on fossil fuels particularly natural gas, which can be unreliable and unsustainable in the long term.
• Transmission and Distribution infrastructure is outdated, inadequate, and inefficient, leading to significant technical and non-technical losses.
• Corruption and inefficient management have hindered the development of the power sector, with many Nigerians relying on private generators to supplement the intermittent power supply.
• Limited access to electricity for about 45% of Nigeria’s population with many rural areas completely disconnected from the national grid.
• Inadequate regulatory framework governing the power sector which is often unclear or ineffective, leading to uncertainty and discouraging investment.
• Frequent vandalism and theft of electrical infrastructure further exacerbating the power supply challenges.
• Ageing Infrastructure of existing transmission is outdated and lacks regular maintenance, leading to frequent power outages and grid instability.
• Insufficient Investment which hampers the upgrade and expansion of transmission lines, substations, and other critical infrastructure.
• Terrain and geography in Nigeria’s diverse terrain, including rivers, forests, and mountains, poses significant challenges to the construction and maintenance of transmission lines.
• Rural electrification transmission lines to rural areas is a complex task due to the dispersed population and limited economic returns on investment.
• Technical and non-technical losses due to outdated equipment and non-technical losses resulting from theft and vandalism.
• Crippled Industrial and Agricultural Sectors: Power supply difficulties hinder the growth and productivity of industries and agricultural enterprises.
• Economic Losses: The lack of reliable power supply results in significant economic losses for businesses and households.
• Limited Economic Development: The power sector’s inefficiencies impede Nigeria’s overall economic development and growth.
Read Also: Taraba govt reallocates land for Federal Secretariat Complex,…
The Nigerian Electricity Regulatory Commission (NERC) in fairness, transparency and pragmatic stance has implemented a significant price hike and tariff adjustments, affecting electricity consumers in the country. NERC approved a 300% increase in electricity tariff for Band A customers, raising the rate from ₦68 to ₦225 per kilowatt-hour. This change affects 15% of Nigeria’s 12 million electricity customers, specifically those receiving up to 20 hours of electricity supply daily. The tariff adjustment is partly due to the recent increase in natural gas prices, a vital fuel source for electricity generation in Nigeria which influenced the decision to adjust electricity tariffs accordingly.
Though this price hike may lead to increased production costs for manufacturers and higher prices for goods and services. The element of appropriate billing for service rendered is pertinent here. To address concerns about potential over-billing, NERC has reassured customers of their commitment to rapidly deploying meters across Band A households. The metering rate within this category is expected to reach up to 80% to ensure accurate billing and transparency. The pursuit for total metering of all consumers is in the offing.
Much as we identify with these anomalies, our systemic failures in multiple administrations leaves a lot to be desired.
Over the years we have had power sector projections but unfortunately implementation of the lofty ideas generated falls short. With the backdrop of billions of dollars been made available to pursue this electricity shortfall, we are unfortunately still grossly inadequate in delivery.
Nigeria undoubtedly is exploring alternative energy sources, such as solar power, and improving energy efficiency with:
• Solar Energy Adoption in solar energy to reduce dependence on fossil fuels and mitigate the impact of power outages.
• Decentralized energy solutions like mini-grids, are being implemented to provide electricity to rural areas and reduce reliance on the national grid.
• Energy sector reform giving states more access in electricity generation, transmission, distribution and promoting private sector investment.
For a nation as big as Nigeria we should be beyond our present epileptic electricity delivery status.
Our power sector reforms warrant all hands on deck absolutely.
