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Dual Regulatory Agencies in the Nigerian Electricity Supply Industry: An Overkill or Finding the Balance O.A. Aladeitan; E.C. Uwadi; E. Chukwu; "Dual Regulatory Agencies in the Nigerian Electricity Supply Industry: An Overkill or Finding the Balance" OGEL 4 (2016), www.ogel.org URL: www.ogel.org/article.asp?key=3649

Article

Dual Regulatory Agencies in the Nigerian Electricity Supply Industry: An Overkill or Finding the Balance O.A. Aladeitan; E.C. Uwadi; E. Chukwu; "Dual Regulatory Agencies in the Nigerian Electricity Supply Industry: An Overkill or Finding the Balance" OGEL 4 (2016), www.ogel.org URL: www.ogel.org/article.asp?key=3649

Abstract

The implication of the establishment of a seemingly parallel regulatory agency with overlapping responsibilities for the Nigerian Electricity Supply Industry (NESI) which has been generally described as struggling due to incessant power outages and inefficient electricity power supply is the focus of this paper. The paper adopts a comparative analysis of the functions of the two regulatory agencies that is the Nigerian Electricity Regulatory Commission (NERC) and the National Electricity Management Services Authority (NEMSA) against the background of the principles and philosophy behind regulation and seeks to determine the effects of duplication of responsibilities on operators,(generating, transmitting or distributing) and consumers of electricity supply in the country and its impact on the overall growth and development of the sector. The paper is divided into six parts. Part 1, provides an introductory background, part 2 deals with the principles and philosophy of regulation. Part 3 gives an overview of both the NERC and NEMSA while part 4 compares and contrasts both agencies. Part 5 examines the implications of the overlapping responsibilities on operators, consumers and development of the electricity industry while part 6 concludes with recommendations.
Dual Regulatory Agencies in the Nigerian
Electricity Supply Industry: An Overkill or
Finding the Balance
by O.A. Aladeitan, E.C. Uwadi and E. Chukwu
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© Copyright OGEL 2016
OGEL Cover v2.8
Oil, Gas & Energy Law Intelligence
ISSN
:
1875-418X
Issue
:
Vol. 14 - issue 4
Published
:
November 2016
1
Dual Regulatory Agencies in the Nigerian Electricity Supply
Industry: An Overkill or Finding the Balance
by Lanre Aladeitan*, Enyinnaya Uwadi**, Emmanuel Chukwu***
Abstract
The implication of the establishment of a seemingly parallel regulatory agency with
overlapping responsibilities for the Nigerian Electricity Supply Industry (NESI) which has
been generally described as struggling due to incessant power outages and inefficient
electricity power supply is the focus of this paper. The paper adopts a comparative analysis
of the functions of the two regulatory agencies that is the Nigerian Electricity Regulatory
Commission (NERC) and the National Electricity Management Services Authority (NEMSA)
against the background of the principles and philosophy behind regulation and seeks to
determine the effects of duplication of responsibilities on operators,(generating, transmitting
or distributing) and consumers of electricity supply in the country and its impact on the
overall growth and development of the sector. The paper is divided into six parts. Part 1,
provides an introductory background, part 2 deals with the principles and philosophy of
regulation. Part 3 gives an overview of both the NERC and NEMSA while part 4 compares
and contrasts both agencies. Part 5 examines the implications of the overlapping
responsibilities on operators, consumers and development of the electricity industry while
part 6 concludes with recommendations.
Introduction
Although electric power generation and supply in Nigeria started as far back as 18961 with
the installation of the first power generating plant in the then Lagos colony,2 the Nigerian
Electricity Supply Industry is still largely characterised as energy deficient due to incessant
power outages and electricity supply disruptions. To reposition the Nigerian electricity sector,
with itsmyriads of challenges…such as [include] limited access to infrastructure, low
connection rates, inadequate generation and usage of power capacity, ineffective regulation,
high technical losses and vandalism, insufficient transmission and distribution facilities”,3 the
current democratic dispensation starting with the President Olusegun Obasanjo
administration in 1999 opted for a policy direction to encourage private sector participation in
order to achieve effective and efficient electricity supply in the country.4 To this effect, the
* Ph.D. (Law), MBA is a law lecturer and current Head, Department of Public and International Law, Faculty of
Law, University of Abuja, Nigeria. He can be reached on lanrealadeitan@yahoo.com or
olanrewaju.aladeitan@uniabuja.edu.ng.
** LLB (Hons) Abuja, BL (Hons) is an LLM (Energy Law) Candidate, Centre for Petroleum, Energy Economics
and Law (CPEEL), a John D and Catherine MacArthur Foundation-funded Centre of Excellence, University of
Ibadan, Nigeria. He can be reached on euwadi8301@stu.ui.edu.ng or enyinnayauwadi@gmail.com
*** A law graduate of the University of Abuja, and is currently a student of the Nigerian Law School.
1KPMG Nigeria, A Guide to the Nigerian Power Sector, December 2013
www.kpmg.com/Africa/en/IssuesAndInsights/ArticlesPublications/Documents/Guide%20to%20the%20Nigeria
n%20Power%20Sector.pdf Last visited 07/09/2015
2 Osideinde, A.A. Strategic Electricity Marketing Activities in Distribution Companies of Nigeria, Imade
Publishing Company (2011) p. 1
3 IseOlorunkanmi O. J. Issues and challenges in the Privatized Power Sector in Nigeria, Journal of Sustainable
Development Studies ISSN 2201-4268 Volume 6, Number 1, 2014, 161- 174
4 The National Electric Power Policy (NEPP) 2001
2
Electric Power Sector Reform Act (EPSRA) 2005 was enacted to provide the required legal
framework for the development of a competitive electricity market.5 Against the backdrop of
encouraging and promoting private participation as well as developing competitive electricity
market, the EPSRA made provisions for the unbundling6 of the now defunct National
Electricity Power Authority7 and created the Nigerian Electricity Regulatory
Commission(NERC)8 as the sole regulator of the Nigerian Electricity Industry, a position that
was maintained until the recent establishment of National Electricity Management Services
Authority (NEMSA) by the immediate past Federal Government administration led by
President Jonathan, at the twilight of his administration in May, 2015. The establishment of
NEMSA, which was created among other things to carry out the functions of enforcement of
technical standards and regulations, technical inspection, testing and certification of all
categories of electrical installations, electricity meters and instruments9 has generated
controversy with divided opinions that it amounts to over-regulation of the electricity sector
on the one hand and on the other hand, that it is a necessity to balance noticeable regulatory
gaps for standardization and safety of operators activities. It is for this reason that this paper
adopts the comparative assessment especially of the functions of NERC and NEMSA against
principles and best practices in regulatory effectiveness to determine whether the existence of
the two regulatory agencies is an over-kill or a necessity to find the balance needed for the
promotion and development of the sector.
The Philosophy/Principle of Regulation
Regulation according to the Black’s Law Dictionary is “the act of regulating, that is a rule or
order prescribed for management or government,… it is a rule or order prescribed by superior
or competent authority relating to action of those under its control. Regulation is [therefore]
rule or order having force of law issued by executive authority of government.”10 In the
United Kingdom, for example, the Better Regulation Task Force (BRTF) on the principles of
good regulation defined regulation widely as “any government measure or intervention that
seeks to change the behaviour of individuals or groups.”11 By this definition, regulation can
confer right(s) and restrict certain behaviour or action(s). In conferring rights and restricting
5 The preamble to the Electric Power Sector Reform Act (EPSRA) 2005 states that the EPSRA is enacted for the
formation of companies to take over the functions, assets, liabilities and staff of NEPA; to develop competitive
electricity markets; to establish the Nigerian Electricity Regulatory Commission; to provide for the licensing
and regulation of the generation, transmission, distribution and supply of electricity; to enforce such matters as
performance standards, consumer rights and obligations; and to provide for the determination of tariffs and
related matters.
6 Section 8 of EPSRA provides that “the National Council on Privatisation shall, not later than eight months
after the formation of the initial holding company under section1 of this Act, shall take such steps as are
necessary under the Companies and Allied Matters Act to incorporate such number of additional companies,
limited by shares, as the National Council on Privatisation shall deem appropriate, which shall be the successor
companies for assuming the assets and liabilities of the initial holding company including, but not limited to,
companies with functions relating to the generation, transmission, trading, distribution and bulk supply and
resale of electricity.
7National Electric Power Authority Act (2004), Cap. N33, Vol. 10, Laws of the Federation Nigeria, repealed by
section 99, EPSRA, 2005
8 S. 31(1) EPSRA, 2005
9 See preamble to NEMSA Act
10 Nolan J.R. et al, Black’s Law Dictionary with Pronunciation, Sixth Edition, St. Paul Minn West Publishing
Co. (1990) p. 1286
11 The Better Regulation Task Force. Principles of Good Regulation. London. 2003. Available at www.brtf.uk
accessed on 20/07/2015
3
certain actions, regulation must be balanced and proportionate if the proper protection and
impact on those being regulated must be felt, otherwise, it becomes overly complicated,
excessively costly and inhibit productivity.12 It is to this effect, that BRTF in 199713 devised
five principles that will receive a broad degree of public confidence as the parameter for
determining the necessity of any particular regulation. The five principles are: (i)
Proportionality, which implies, for the purpose of this paper, that regulation should only be
made when necessary. In which case, the remedy should be appropriate to the risk posed,
while taking into consideration the cost implication. (ii) Accountability, this suggests that the
justification for the decision of the regulation(s)/regulator(s) should be subject to public
scrutiny. (iii) Consistency, as a hallmark of fairness requires that regulations should be
predictable in order to give stability and certainty to those being regulated (iv) Transparency,
basically implies openness and the need for regulation to be clearly defined and effectively
communicated to all interested parties and finally (v) Targeting, which suggest that
regulation should be focused on the problem, while minimizing side effects.14
The foregoing principles set the context for the evaluation of NERC and NEMSA’s functions
in order to determine whether there are duplications in their functions and if there are,
whether they are sufficient to create an unnecessary bureaucratic burden on the Nigerian
Electricity Supply Industry.
Overview of the Functions of the Nigerian Electricity Regulatory
Commission
Mrs Bolanle Onagoruwa, a former Director-General of the Bureau for Public Enterprises
(BPE) while presenting a paper on the Nigerian Power Sector Reforms and Privatisation in
June, 2011 was emphatic on the fact that:
The Electric Power Reform Implementation Committee (EPIC)
[which] was inaugurated by BPE {and} resulted in [the] Federal
Executive Council approving the National Electric Power Policy
(NEPP) in September 2001, which recommended the establishment of
a sector regulator; privatization of the electric power sector; [and] a
market trading design and new rules, codes and processes.15
It is on the basis of the said EPIC recommendation for a sector regulator as provided for in
the Nigerian Electric Power Policy16 that the Nigerian Electricity Regulatory Commission
12 Ibid
13 Ibid
14 Ibid
15Onagoruwa, B. The Nigerian Power Sector Reforms and Privatisation, June 2011
www.sec.gov.ng/files/Bolanle%20Onagoruwa%20Presentation%20to%20DG%20SEC.pdf last visited
07/09/2015
16 The National Electric Power Policy 2001, in chapter three provides for policy and regulatory institutions that
will support the reform of the Nigerian Electricity Supply Industry by updating the role of Government and the
Ministry of Power and Steel and to establish an effective regulatory framework, based on an independent
regulatory agency”. Under the policy framework, Nigeria’s Power Sector shall consist of the following
components (a) Federal Government; (b) Ministry of Power and Steel; (c) State Governments; (d) Nigerian
Electricity Regulatory Commission; (e) Competing Generation Companies; (f) a single Transmission Company;
(g) A Special Purpose Entity; (h) On-grid Distribution Companies; (i) Off-grid generation and distribution
companies and (j) Grid connected auto generators”. Specifically, with regard to the Nigerian Electricity
4
was established in the Electric Power Sector Reform Act, 2005 as the regulator of the
Nigerian Electricity Supply Industry. Specifically, section 31 of the EPSRA provides that
There is established a commission to be known as the Nigerian
Electricity Regulatory Commission, which shall be a body corporate
with perpetual succession which can sue and be sued in its corporate
name and subject to the EPSRA perform all acts that bodies corporate
can perform.17
Consequent upon the establishment of NERC, the EPSRA in section 32(1) provides for its
principal objects, which are:
(a) To create, promote and preserve efficient industry and market structures, and
to ensure the optimal utilization of resources for the provision of electricity
services;
(b) To maximize access to electricity services, by promoting and facilitating
consumer connections to distribution systems in both rural and urban areas;
(c) To ensure that an adequate supply of electricity is available to consumers;
(d) To ensure that prices changed by licenses are fair to consumers and are
sufficient to allow the licensees to finance their activities and to allow for
reasonable earnings for efficient operation;
Regulatory Commission, the policy provides that a privatised electricity industry with competition over
monopoly transmission and distribution grids, requires an effective regulatory agency that is independent both
of Government and of all the companies operating in the industry. The Ministry of Power and Steel will
therefore provide in a new Electricity Law for an independent regulatory body that: (i) has a clear appointment
and dismissal rules; (ii) has a source of independent funding; and (iii) faces appropriate checks and balances to
ensure that regulation not only operates in a fair and transparent way but is also seen to operate in a fair and
transparent way.” The policy provides further that “ there will therefore be an independent agency for
electricity in the form of a Regulatory Commission, which shall be called the Nigerian Electricity Regulatory
Commission (NERC), based on the following regulatory arrangements: (i) NERC will be an independent
Federal agency and electricity for grid connected services; (ii) NERC will have decision making powers on
the key aspects, technical and economic regulation (viz; tariff regulation, approval of capacity expansion
plans and regulated company business plans, oversight of capacity, tendering, competition, standards, quality
of service, service obligation etc; (iii) NERC will be properly established with its powers, duties, constitution
etc, laid down in a new Electricity Act; (iv) NERC will have the main responsibility for issuing licenses to the
companies operating in the Nigerian ESI. These regulatory licenses will specify the rights and obligations of
each business and company and will provide the basis under which NERC will monitor and enforce the
economic and technical regulation of the sector. There will be separate licenses for: (a) Transmission
(including dispatch); (b) Generation; (c) Distribution; and (d) Retail sales; (v) NERC will have all the necessary
regulatory functions for electricity. In particular, it will, through the licences, have the responsibility for
decisions on regulatory approval for: (a) electricity tariffs and prices, wholesale and retail; (b) business and
capacity expansion plans for transmission, generation and distribution; (c) the enforcement of competition over
the transmission network, including the regulation of (i)transmission connections, (ii) transmission access rights
and (iii) fair cost reflective useof-system prices; (d) enforcement of competition over electricity generation,
distribution and sales; (e) setting and enforcing quality standards and (f) enforcing the legal rights of
consumers. (vi) NERC will also be responsible for (a) ensuring that all major investments in generation capacity
expansion are carried out by competitive tender; and (b) agreeing on the rules for supervising such competitive
tenders, including acting as an appeals body in the case of accusations or complaints over the conducts of
tenders. (vii) NERC will act as an appeals agency over regulatory decisions taken at state level. The policy
framework on NERC concludes with the provision that “appeals procedure against any faults in the regulatory
process committed by NERC shall be defined in the new electricity law”.
17 EPSRA, S.31
5
(e) To ensure safety, security, reliability and quality of service in the production,
and delivery of electricity to consumers;
(f) To ensure that regulation is fair, and balanced for licenses, consumers,
investors and other stakeholders; and
(g) To present quarterly reports to the President and National Assembly on its
activities.18
It is important for the purposes of this paper to flag off section 32(1) (e) and (f) which is
explicit on the objectives of NERC as a regulator to ensure safety, security, reliability and
quality of service in the production and delivery of electricity to consumers and in the same
vein ensure that regulation is fair, and balanced for licenses, consumers, investors and other
stakeholders.
In furtherance of the objectives of NERC as enunciated above, the Electric Power Sector
Reform Act stipulated in section 32(2) the Commission’s functions are to:
(a) promote competition and private sector participation, when and
where feasible; (b) establish or, as the case may be, approve
appropriate operating codes and safety, security, reliability, and quality
standards; (c) establish appropriate consumer rights and obligations
regarding the provision and use of electricity services; (d) license and
regulate persons engaged in the generation, transmission, system
operation, distribution, and trading of electricity; approve amendments
to the market rules; (f) monitor the operation of the electricity market;
and (g) undertake such other activities which are necessary or
convenient for the better carrying out of or giving effect to the objects
of the Commission.19
Again it is imperative to also note here for the purposes of this discussion, the significance of
the combined effect of the provisions of section 32(2) (b) to (g). Details of the significance
will be emphasized subsequently while drawing a comparison between the functions of
NERC and NEMSA.
From the foregoing, it is not in doubt that NERC is established by law as the Nigerian
Electricity Supply Industry regulator and as a sector regulator, NERC seems to be
empowered to undertake technical and economic regulation of the sector. Thus, it would
appear that NERC can undertake these regulations through major instruments of regulatory
control20 such as primary legislation (EPSRA); subsidiary legislations (regulations made
pursuant to EPSRA); licences, (Interim licence to PHCN, licenses to Successor Companies;
[Generation licence, Transmission licence, System Operations licence, Distribution licence,
Trading licence, Temporary bulk purchase and resale licence]); Price regulation; and Industry
Codes, Rules and Orders (the Grid Code, Distribution Code and Metering Code etc.), most of
which have been made and are in place for the regulation of the Nigerian Electricity Supply
18 Ibid, S.32(1) (a) to (g)
19 Ibid, S. 32(2) (a) to (g)
20 See generally, EPSRA, S. 96 which empowers the Commission to make regulations prescribing all matters
which by [the] Act are required or permitted to be prescribed or which in the opinion of the Commission, are
necessary or convenient to be prescribed for carrying out or giving effect to [the] Act
6
Industry. To this end, it is submitted that NERC’s regulatory powers which is substantially
extensive can significantly drive the objectives for which it was established.
Overview of the Functions of the Nigerian Electricity Management Services
Authority
NEMSA was established pursuant to the signing into law of the NEMSA Bill by President
Jonathan on the 26th of May, 2015 exactly seventy-two hours to the completion of his tenure
as President.
Similar to the establishing provision of NERC under EPSRA, section 1(1) of the Nigerian
Electricity Management Services Authority Act, 2015 (the “Act”) established NEMSA as a
body corporate with perpetual succession and common seal, which may sue and be sued in its
corporate name and can subject to the Act, perform all acts that bodies corporate may by law
perform.21 Under the Act, “the Electricity Management Services Plc22 (EMS) incorporated in
2007 is to be taken over by NEMSA for the purposes of the Act, and the personnel thereof
shall be deemed to have been appointed under the Act and they shall continue to hold office
on the same terms and same conditions on which they were appointed in EMS.”23 Some of
the powers, functions and responsibilities of NEMSA as provided for in section 6 of the
NEMSA Act include electrical inspectorate services for the NESI;24 enforcement of all
statutory technical electrical standards and regulations25 as well as specification of safety
requirements for construction, operation and maintenance of electrical power plants,
transmission systems, distribution networks and electric lines.26 NEMSA is also empowered
to carry out the duties of inspecting engineers for inspection testing, and certification of all
categories of electrical installation in the NESI27 as well as provide comprehensive
TECHNICAL SUPPORT SERVICES that will guarantee the efficient production and
delivery of safe and reliable power supply and enhance efficient service delivery industry.28
Still on NEMSA’s responsibilities, it is important to mention that the Authority is also
mandated to regularly monitor the compliance level with the regulations, standards and
specification used in the NESI.29
21 Nigerian Electricity Services Management Authority Act, S. 1(1)
22 The Electricity Management Services Plc (EMS) is one of the companies incorporated pursuant to the
Supplementary Regulations to Part 1 of the Electric Power Sector Reform Act on the Transfer of Assets,
Employees, Liabilities, Rights and Obligations of Power Holding Company of Nigeria Plc, 2010. By virtue of
section 2 of the Supplementary Regulations, any company formed pursuant to these regulations is [shall]
deemed as formed under section 8 of EPSRA. Specifically, the Electricity Management Services Plc, is one of
the companies set out together with the National Power Training Institute of Nigeria Ltd/Gte; Nigeria Electricity
Liability Management Ltd/Gte and the Nigerian Bulk Electricity Trading Plc, in respect of which the National
Council on Privatisation issued an Order on the 23rd of September, 2010 for the Transfer of Assets, Employees,
Liabilities, Rights and Obligation of Power Holding Company of Nigeria Plc.
23NEMSA Act, S. 1(3)
24 Ibid, S.6 (a)
25 Ibid, S.6 (b)
26 Ibid, S.6 (f)
27 Ibid, S.6 (h)
28 Ibid, S.6 (i)
29 Ibid, S.6(p)
7
Functions of NERC and NEMSA Compared
Following a comparison of the functions of NEMSA as highlighted above with those of
NERC, it is observed that the combined effect of sections 32(1) (e) to (f) and 32(2) (b) to (g)
of EPSRA empowers NERC amongst others to: establish or, as the case may be, approve
appropriate operating codes and safety, security, reliability and quality standards; license and
regulate persons engaged in the generation, transmission, system operation, distribution, and
trading of electricity30 as well as monitor the operation of the electricity market.31 These
mandate of NERC, though broad and generic, are in the light of the grid code, metering code,
health and safety code, electricity health and safety manual, standards and regulations32
already put in place by NERC are for all intent and purposes adequate to govern the carrying
out of technical inspection; monitoring of the compliance level of the regulations, standards
and specifications used in the NESI as well as other functions and responsibilities vested in
NEMSA. In view of the fact that the primary function of NEMSA has been argued to be the
carrying out of electrical Inspectorate Service and Technical Regulation for the NESI, it is
important to point out that with regards to inspectorate services, section 95 of the EPSRA,
empowers NERC to appoint Inspectors, who shall have power to examine, inspect, and
inquire for the purpose of ascertaining whether compliance has been made into various
activities across the value chain of the Nigerian Electricity Supply Industry.33 In the light of
this observation, it can be reasonably submitted that but for issues of research and manpower
development and the advancement of the skill of persons engaged in the NESI,34 which now
forms part of NEMSA’s responsibilities, practically all the other functions of NEMSA are
similar and overlapping with those of NERC, thus, leading to the conclusion that the
establishment of NEMSA is a duplication of regulatory roles for NESI. Although, issues of
manpower capacity development has been identified as specifically vested in NEMSA, it
must nevertheless be mentioned that this can also be subsumed under the omnibus provision
contained in section 32(2) (g) which empowers NERC to “undertake such other activities
which are necessary or convenient for the better carrying out of or giving effects to the
objects of the Commission.”35 Besides the fact that NERC can carry out responsibilities of
manpower development for NESI, it is important to note that with the existence of National
Power Training Institute of Nigeria (NAPTIN),36 the inclusion of manpower development
and advancement of personnel skills for NESI as a function of NEMSA is not only a
duplication but a flashpoint of confusion in an industry characterised as inefficient due to
limited access to infrastructure, low connection rates, inadequate generation and high
technical losses. For purposes of emphasis, NAPTIN was conceived and established in 2009
by the National Council on Privatisation (NCP), and registered by the Bureau of Public
Enterprises, specifically for capacity building and training of both technical and non-technical
workers in NESI.
30 EPSRA, S.32(2)(d)
31 Ibid, S.32(2)(f)
32 For details of the codes, standards and regulation see generally Nigerian Electricity Regulatory commission
http://www.nercng.org/
33Ibid, S. 95
34 NEMSA, S.6 (s)
35 EPSRA, S. 32(2)(g)
36 The National Power Training Institute of Nigeria Ltd/Gte (NAPTIN) was incorporated pursuant to the
Supplementary Regulations to Part 1 of the Electric Power Sector Reform Act on the Transfer of Assets,
Employees, Liabilities, Rights and Obligations of Power Holding Company of Nigeria Plc, 2010.
8
Argument for and against Dual Regulation for NESI
Due to the nature and importance of NESI to the overall economy of Nigeria, quite a
reasonable number of stakeholders and concerned citizens have expressed their respective
views on the establishment of an additional regulatory body for the sector. Some proponents
for the establishment of NEMSA, have argued that its establishment was necessary as it
“would help remedy and ensure technical standardization which in turn would curb domestic
fires.”37 Truly, any regulation that will help curb domestic fire incident is a necessity that
must be encouraged, however, while there is no empirical basis to conclude that domestic fire
incidences are largely attributed to electrical installation and the fact also that the possibilities
cannot be discountenance, it must be emphasised that the Standard Organisation of Nigeria
(SON) is the country’s regulatory body for standardization and regulation of quality for all
product38 as established by the Standard Organization of Nigeria, Act No. 51 of 1971 which
has undergone three amendments in 1976, 1984 and 1990.
SON as a corporate body has the sole responsibility for National Policy on Standards,
Standards Specification, Quality Control of manufactured, industrial, and imported products
and services.39 For the performance of these responsibilities, SON is an active member of
African Regional Organization for Standardization (ARSO), member of the International
Organization for Standardization (ISO). It is also a member of the International
Telecommunications Union (ITU) and an associate member of the International Electro-
Technical Commission.40 SON in furtherance of its functions in sections 4 and 5, as well as
the provision of section 12 requiring it to establish industrial standards issued a mandatory
industrial standards order in 1989.
Against the background of SON’s statutory responsibilities and the setting of mandatory
industrial standards which in scope covers the activities of NEMSA, it thus appear that the
argument of some of the proponents of NEMSA, that it will curb domestic fire incidence is
untenable. Advocates for the creation of NEMSA argued that the existence of monopoly of
regulation and enforcement functions/responsibilities normally deters progress and growth in
any sector, and that if this is allowed especially in the power sector, that it will have attendant
consequences on sector transformation.41
Putting forward their argument, NEMSA’s proponents stated that “as it can be seen in the
present set up in the Nigerian power sector, NERC serves as the regulator, the inspector,
police, the prosecutor, investigator, enforcer and judicial officer”42 and reasoned that “this
monopoly will deter the required growth and that the arrangement is clearly against the rule
of separation of power and equity.”43 The argument of monopoly of a regulator that is not
expected to be in competition but to ensure the smooth and effective running of the sector,
37Overview: Nigerian Electricity Management Authority (NEMSA) Act, available online at
www.businessdayonline.com/2015/08/overview-nigerian-electricity-management-services-authority-nemsa-act
last visited 03/09/2015
38About SON-Standards Organization of Nigeria, available at www.exports2Nigeria.Com/about. Last visited
01/09/2015
39 Ibid
40 Ibid
41Aneke, U. Power Sector, a Case for NEMSA Bill, The Sun Newspaper, available at
www.sunnewsonline.com/new/power-sector-case-nemsa-bill last visited on 15/07/2015
42 Ibid
43 Ibid
9
sounds rather unfounded and untenable and perhaps would have been more persuasive, if it
was canvassed in respect of operators and not a regulator. Furthermore, the point must be
made that the economies of scale of having a sole regulator may permit cost savings on
infrastructure, administration and support systems as well as mitigate the costs which
operators in the sector may bear if they have to deal with multiple regulators. In the same
vein, the complexity of a multiple regulatory system with its competitive inequalities could
lead to lack of clarity of roles and consequently lack of accountability especially in a
developing economy like Nigeria with its peculiar bureaucratic challenges notwithstanding
the current move towards lliberalisation of the electricity sector in the country. It is therefore
disturbing that advocates for NEMSA believed that “in a well-established/ organized power
sector…, it is always better to have an enforcement agency of government separated from
those who make the regulations and standards for the industry… This will obviously allow
for checks and balances as the regulator will make and approve the standards and regulations
while another agency of the government … will enforce these codes, regulations, standards,
etc. with no conflict of any sort.”44
The proponent for dual regulatory body gives the impression that this is “internationally
known best practice of countries with stable electricity and [that] long term planning for the
sector follow the best practices of separating… technical regulation from the
economic/commercial regulation and /or enforcement from regulation to avoid monopoly of
regulations.”45 Examples of India which has the Central Electricity Regulatory Commission
(commercial), Central Electricity Authority and Chief Electrical Inspectorate (under Ministry
of Power) and Ghana, which has Energy Commission of Ghana (technical) and public
utilities Regulatory Commission (Commercial/Economic) were cited.”46 The logic of this,
argument seems to overlook or deliberately ignore the confusion, distraction and disharmony
caused by dual or multiple regulatory bodies for a particular sector of an economy. In fact,
according to Ediri Ejoh, the Chairman of NERC, Sam Amadi said NEMSA “is capable of
distracting the Commission from its core mandates, causing disharmony and derailing the
progress made in the power sector.”47
However, the then Permanent Secretary of the Federal Ministry of Power, Ambassador
Godknows Igali was quoted as saying that “section 8 of EPSRA provided for the creation of
other bodies to take care of new areas of need in the sector [and that this provision] led to the
creation of the EMSL among others.”48 Granted that EMSL was created pursuant to section 8
of EPSRA, the original conception of the EMSL was not that of a parallel regulatory body to
NERC but as a government owned, independent and technically based company with the
mandate to ensure safety and quality of services in the value chain of the NESI.49 This role of
EMSL was aptly emphasized by Uche Aneke, the General Manager, Public Affairs of EMSL
44 Ibid
45 Ibid
46 Ibid
47Ejoh E. NEMSA is unhealthy rivalry NERC, Vanguard Newspaper, available at
www.vanguardngr.com/NEMSA%20is%20unhealthy%20rivalry last visited 10/08/2015
48 Alohan, J. NEMSA Bill: Avoiding Regulatory Conflict in Power Sector LEADERSHIP Newspaper, available
at www.leadership.ng/business/382260/nemsa-bill-avoiding-regulatory-conflict-power-sector lasted visited
03/09/2015
49 Aneke U. How to reposition electricity management services in the power sector, Vanguard Newspaper,
available at http://www.vanguardngr.com/2014/04/reposition-electricity-management-services-power-sector/
last visited 14/03/2016
10
in his article “How to reposition electricity management services in the power sector” where
he wrote that:
A lot of activities are ongoing in the power sector to reposition the
Electricity Management Services Limited (EMSL) in order for the
company to play its unique and crucial role in facilitating safe and
qualitative power supply to Nigerians. EMSL which is a government
owned, independent and technically-based company has been
mandated to ensure safety and quality of services in the value chain of
the Nigerian Electricity Supply Industry (NESI). Contrary to
speculations that EMSL is being established as a parallel regulatory
body to National Electricity Regulatory Commission (NERC), EMSL
is established by government to carry out technical inspection, testing
and certification of all electrical equipment/materials used in the
industry and all electrical installations along the power supply value
chain. These functions were hitherto being performed by the Electrical
Inspectorate Services (EIS) of the Federal Ministry of Power for over
50 years before transferring its functions, the 15 Zonal Offices,
Engineers/Technical staff, materials and equipment to EMSL. NERC
remains the only regulator in the Nigerian power sector, while EMSL,
with core technical competence and expertise is established to enforce
and ensure compliance with technical standards, inspection, testing
and certification of plants, materials, equipment, networks etc in the
NESI.50
Aneke noted further in the same article that during the inauguration of the EMSL, the then
Minister of Power, Professor Chinedu Nebo, tasked the management team of EMSL led by
Engr. Peter Ewesor, to reposition EMSL into a technically and financially efficient,
sustainable and commercially viable company stating that “It must be able, after today to
provide the needed technical services to drive, support and sustain the emerging private
sector-led electricity industry in Nigeria”.51
As can be observed from both Aneke and the Minister’s submission, the idea of creating
EMSL does not in any way suggest the establishment of a parallel regulatory body but rather
an entity to assist in the optimization of NESI operational activities. EMSL was therefore
created to be an efficient world class technical services provider in ensuring quality,
standardisation, safety and competence required for the competitive electricity market and not
for a regulatory role that NEMSA which took over its functions is now established to
perform, which is clearly a situation not contemplated by the sector’s reform policy and legal
framework.52 Specifically, Azinge Terhemen, a Deputy Director in the Bureau of Public
Enterprises was quoted as saying that:
This sector [NESI] has a policy and laws that follow the policy. In the
policy, the roles of institutions were delineated with their legalities.
50 Ibid
51 Ibid
52 Abdulhamid, Y. Electricity: One Industry, Two Regulators, DAILY TRUST Newspaper available at
www.dailytrust.com.ng/news/feature/electricity-one-industry-two-regulators/104676.html last visited
03/09/2015
11
Our concern at the BPE is that the law didn’t create an agency but a
company in EMSL registered under our country’s company law and in
crafting the sector, the policy and law requested for one regulator for
the sector as practiced globally because regulation include both
technical and commercial. There was no envisage of a tripod in the
sector; setting up this agency [NEMSA] will distort the architecture of
the power sector.53
So far, NERC seems to be performing these economic and technical regulatory functions
satisfactorily through the seven divisions created within the Commission namely – the
NERC’s Chairman’s Office; Market Competition and Rates; Legal, Licensing and
Enforcement; Finance and Management Services; Government and Consumer Affairs;
Research and Development; Engineering, Standards and Safety. In particular, the
Engineering Safety and Standards Division has the task of developing and monitoring
compliance of technical codes and standards for all operators in the industry as well as the
technical evaluation of licence applications submitted to the Commission.
It may therefore be premature at this stage when the EPSRA and NERC created pursuant to it
has been barely tested to now create another budget gulping agency when a unit or
department of the existing agency can perform the function for which NEMSA has been
created especially now that the country is facing one of its toughest economic challenges with
the plunge in the prices of crude oil, which is the country’s economic mainstay.54
Implications of Overlapping Regulatory Responsibilities for NESI,
Investors, Operators and Consumers
Against the Nigerian government’s objective of achieving efficient power/electricity delivery
and addressing the fundamental weaknesses in the structure of NESI, the implications of dual
regulatory bodies for NESI as is the case with the establishment of NEMSA, which as earlier
noted have overlapping responsibilities with NERC is the erosion of investors’ confidence
because of the likelihood of confusion as to who does what, with the existence of two parallel
regulators. In fact according to Mr. Faloseyi Michael, the Head of the Media Unit of NERC:
The existence of two regulatory agencies besides creating confusion in
the system, especially when EPSRA, 2005 that created NERC has not
been reviewed is at a cost on the consumers of electricity. Ghana as an
example of countries with two regulators has no good story to tell on
the ground tuff protection and fight for space. I don’t think that is
what Nigerians are asking for. Nigerians want electricity like
yesterday, not creation of agencies that end up fighting for space while
the job is left undone.55
The implication of the existence of a parallel regulatory body for NESI in a country like
Nigeria with the problem of huge recurrent expenditure in her national budget which is
53 Ibid
54 Ibid
55 Faloseyi, M. NEMSA Act, Regulatory Certainty and President Buhari, THISDAY Newspaper available at
www.thisdaylive.com/articles/nemsa-act-regulatory-certainty-and-president-buhari/211514 last visited
03/09/2015
12
against international best practices according to Yunus Abdulhamid “will only add to the
burden the government has to bear and by extension the traumatized Nigerian consumers who
have suffered decades of failed promises by successive governments.”56 To this end
therefore, it must be mentioned that the concomitant effect of eroding investors’ confidence
and the cost implication of setting up and sustaining the structure and staffing of NEMSA
will on the one hand, deny NESI, the much needed capital injection from both local and
foreign investors and on the other hand, duplicate operational cost of meeting the respective
requirements and criteria of both regulatory bodies by operators in the sector. In both
situations, particularly, the latter, it is the consumers as the end user that will bear the brunt of
the increasing cost of providing electricity supply services.
Conclusion
The Nigeria Electricity Regulatory Commission was established pursuant to the Electric
Power Sector Reform Act, 2005 as an independent body to undertake technical and economic
regulation of the Nigeria Electricity Supply Industry in line with the sector’s reform policy.
Primarily, the function of NERC is to ensure adequate, safe, reliable and affordable electricity
to Nigerians by acting as an independent regulator and watchdog of the power industry. To
this effect, NERC amongst other things, determines operating codes and standards, establish
customer rights and obligations, set cost reflective industry tariffs, and the development of
market rules for the electric power sector. With these responsibilities which encompasses the
enforcement of technical standards and regulations, technical inspection, testing and
certification of all categories of electrical meters and instruments expected to be performed
by the recently established NEMSA, raises the critical question on whether or not the
existence of two regulatory bodies is an overkill or a necessity to find the balance which may
have been created by a vacuum or gap by the hitherto existing regulator. In answering this
question, the prevalence of needless duplication of statutory bodies with their attendant high
cost which inhibit against infrastructure development is borne in mind in submitting that the
establishment of NEMSA is not in any manner imperative but rather superfluous. It is not
even complementary. It is inherently full of conflicts that will clog progress and inhibit
investments in the sector. It is also respectfully submitted that the “ingenuity” in the NEMSA
Act, particularly section 6, finds eloquence only in verbosity and grandiose repetition
perhaps, to cloak it with importance instead of finding the balance which a necessary
regulation will achieve if its enactment is based on clear assessments of the likely impact of
regulations to reconcile contradictory objectives and be of benefits to the public and operators
in the sectors.
From all ramification therefore, the existence of two regulatory bodies can amount to
excessive regulation and be described as an overkill if in seeking to remove all the risks in the
sector, critical trade-offs between costs and benefits are not taken into consideration but
rather creating additional problems such as confusion and disharmony in the sector. In this
respect therefore, it is submitted that rather than establishing NEMSA to perform overlapping
responsibilities with NERC, the EPSRA should be revisited and amended with a view to
strengthening the inspectorate and technical department of NERC if it is considered deficient.
It would appear that NERC at the moment is poorly staffed in terms of number and
sufficiency of requisite personnel perhaps owing to funding constraints, the response to this is
56 Abdulhamid, Y. Op Cit
13
not in duplication. Consequently, it is submitted that NEMSA Act should be repealed, while
NERC is strengthened to effectively regulate the Nigerian Electricity Supply Industry.
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