Gabriel Suswam: Overreaching Objectives of the Electricity Bill 2022

Perspective

On Tuesday September 28, 2021, the “Electricity Bill, 2021 (now Electricity Bill, 2022), sponsored by Senator Gabriel Suswam, Chair, Senate Committee on Power passed Second Reading in the Nigerian Senate and was referred to the Senate Committee on Power for further legislative action. The formulation of the Bill and its consequent introduction in the Senate was preceded by a rigorous process involving industry-wide appraisal of extant operational and statutory lapses confronting the Nigerian Electricity Supply Industry (NESI) since the conclusion of the privatization exercise in 2013.

On the whole, a team of consultants engaged by the Committee had undertaken a thorough appraisal of several industry issues consequent upon which a diagnostic report which included recommendations on the way forward was submitted to the Committee for consideration. The recommendations were reviewed by the Committee and largely formed the basis of the Electricity Bill, 2022 which scaled through Second Reading in the Senate and now the subject of further legislative scrutiny by the Committee through a proposed two –day public hearing slated to take place on Monday 28th February and 1st March, 2022 at the Senate Wing of the National Assembly. In terms of the structure, the Bill is made up of 213 clauses subdivided into XXI Parts and Five schedules

Since the Second Reading of the Bill and its consequent release to critical stakeholders and members of the general public ahead of the scheduled public hearing, it has become necessary to undertake an analysis of the overarching objectives of the Bill, its structure, key novel provisions and related issues with a view to enhancing understanding of the Bill by invited stakeholders and its likely impact on the fortunes of the Nigerian power sector.

With respect to its objectives, Clause 1 of the Bill provides that Bill seeks to among other things – repeal the Electric Power Sector Reform Act, 2005, consolidate all legislations in Nigerian Electricity Supply Industry (NESI) and enact an omnibus Electricity Act for the industry to provide the ideal legal and institutional framework that will regulate the post –privatization phase of the industry in Nigeria. The Bill also seeks to provide the framework that would attract more investors to leverage on the modest gains of the privatized electricity industry in Nigeria to accelerate growth in power generation capacity and improve utilization of generated power through increased investment in new technologies that that would enhance transmission and distribution of generated power and minimize aggregate value chain loses.

Consistent with the stated objectives of the Bill and bearing in mind the need to address post –privatization challenges, one of the novel provisions under Clause 2(2) of the Bill is that for the first time there is proposal for a statutory backing to the powers of state governments to build generation plants, transmission and distribution lines in areas not covered by the national grid. This provision is not merely a reenactment of the provisions of Section 4, paragraphs 13 and 14, Part II, Second Schedule to the Constitution of the Federal Republic of Nigeria, 1999 (as amended) but goes further to provide for areas of collaboration between State Governments and the Federal Government in order to power areas where there is in fact grid presence but no supply.

Furthermore, the Bill for the first time under Clauses 3(1) and 4 seeks to give statutory backing to the preparation and implementation of an integrated resource plan for the NESI through the National Integrated Electricity Policy and Strategic Implementation Plan (NIEPSIP) covering areas stated in the Bill and such other areas that the Federal Government may determine as requiring policy direction. It is proposed that the Federal Government through the Federal Ministry of Power shall within one year from the Commencement of the Electricity Act, prepare and publish in a Federal Gazette, a NIEPSIP in consultation with relevant Government Authorities as defined under the Bill. The NIEPSIP is to be reviewed or revised every five years or within such a reasonable timeframe as the Minister of Power may determine. This provision is intended to address the problem of policy lull or gaps in the NESI.

To entrench the independence and autonomy of the NERC as the apex regulator in the NESI, Clause 5 of the Bill expressly provides the supervisory powers of the Minister of Power over the NERC including general policy directions on overall system planning and coordination with a proviso that such powers to be exercised by the Minister shall not be in conflict with the provisions of the Constitution, the Bill or any other Act of the National Assembly in relation to electricity. On the part of the Ministry of Power, the Bill further provides under Clause 5 (4) that the Ministry of Power in discharging its functions shall be guided by the provisions of the Constitution, extant policies and implementation plans as well as the provisions of the Bill or any other Act of the National Assembly relating to the Ministry’s function. In the same vein the oversight responsibility of the National Assembly in the NESI is expressly stated to be subject to the provisions of the Constitution among other provisions.

On the need for the harmonization of the roles of regulators in the NESI and their respective legislations, it is must be noted that under part V while the NERC retains its preeminent regulatory powers in the NESI, other enactments such as the Nigerian Electricity Management Services Agency (NEMSA) and the Hydroelectric Power Producing Areas Development Commission (HYPPADEC) establishment Acts have been consolidated and codified under the Bill. To further streamline the roles of NERC and NEMSA in the NESI, the powers of electrical inspection and appointment of electrical inspector have been domiciled in NEMSA bearing in mind the latter’s statutory core mandate in enforcement of technical standards and regulations; inspection, testing and certification of all categories of electrical installations. The overall intendment of these provisions is to align regulatory responsibilities and ensure clarity of statutory roles for ease of compliance by operators.

Again to lay to rest controversies surrounding the privatization of power assets which took place pursuant to the provisions of the Electric Power Sector Reform Act, 2005 (EPSRA),Clause 7 recognizes the legal validity of the reform of the NESI from its previous monopolistic arrangement under the defunct National Electric Power Authority (NEPA) to the privatized phase involving the physical unbundling of the NEPA into eighteen companies and transfer of assets and liabilities to the Power Holding Company of Nigeria (PHCN) and subsequent licensing of 18 successor companies etc . This provision is without prejudice to the savings and transitional provisions contained in clauses 210 and 211 of the Bill which essentially preserves the status quo ante that is not in conflict with the provisions of the Bill.

To better appreciate the importance of this provision, it is may be appropriate to recall that prior to the introduction of this Bill, there were agitations in some quarters for the reversal of the privatization exercise even though the licensed private companies that emerged from the privatization exercise are guided by the terms of their licenses and Performance Agreements. Nigerian courts are also yet to understand the status of these companies and the nature of transactions for the sale and purchase of electricity and ancillary services made possible under the current privatized electricity industry. See for instance the recent decision of the Court of Appeal in the case of Jos Electricity Distribution Company v.Barr. Dasat Lengnan John ( 2020) 1 E.L.R at pg. 2 where the Court of Appeal, Jos Division held that the relationship between JEDCO, the Appellant in the instant case, and Barr Lengnan, the Respondent, is that of Utility Service Provider – Consumer, not contractual and the Appellant owes public duty to its consumers. In this context therefore, it became necessary to put in place such a provision as contained under Clause 7 of the Bill.

The Bill also contains other novel provisions that will stimulate investments in the power sector and also ensure clarity regarding the roles of successor companies in the post-privatized regime. With respect to power distribution, the implication of the provisions of clauses 64 and 73(8) and (9) is that the Bill provides for the decoupling of distribution and retail functions with separate licenses for Distribution Network Operators (DNOs) and for supply in order to facilitate future opening of the market towards retail competition. The Bill further gives statutory recognition to electricity distribution franchising (EDF) under Clause 69(5), and independent electricity distribution networks (IEDN)/ independent electricity distribution networks operators (IEDNOs) under Clause 69 (9) in recognition of the work already being carried out by NERC to allow for third parties investments in the distribution segment.

Similarly, the Bill provides under clause 85(1) a statutory framework for investments in the national grid by a non-licensees and the TCN to allow for expansion or integration of technology into existing transmission infrastructure. Another option is for the establishment of Independent Electricity Transmission Networks (IETNs) and Independent Electricity Transmission Network Operator (IETNOs). Part IV of the Bill comprising of clauses 16 to 33 provides a clear guide on the unbundling of the TCN into a Transmission Service Provider (TSP) and Independent System Operator (ISO) in accordance with its license.

On the development of a competitive electricity during the post –privatization stage, clauses 8 and 9(2) of the Bill provides a clearer guide on the market stages by making reference to the Market Rules thereby making the market stages outlined in the Market Rules the applicable NESI market stages. The anomaly sought to be addressed here is that while Sections 24(3) and 26(1) EPSRA provides for the declaration that a” more competitive market” is to be initiated, the Minister in fact declared the commencement of a Transitional Electricity Market (TEM) leading to debates as to whether TEM possess the same features of a “more competitive market “contemplated by the EPSRA. This implication of clauses 8 and 9(2) of the Bill is that the development of the market will evolved in accordance with the market stages and their corresponding preconditions stipulated under the Market Rules from the current TEM to the Medium Term Market (MTM) and subsequently to the Long Term Market already recognized under Clause 9 (2) of the Bill.

Other post privatization issues addressed under the Bill are payment of Competition Transition Charges (CTCs) to distribution franchisees under Clause 13(2) , tenure of licenses under Clause 73(10), entrenchment of a framework for business continuity in cases of revocation of licenses under Clauses 78 to 80 , the role of the Nigerian Bulk Trading Plc (NBET) under the post –privatization competitive market and NBET’s contracts novation obligation under Clause 8(1)(d), regulation of competition and market power under Clause 97, Part XIII, consumer protection and licensees’ performance standards under Clauses 95 and 96, Part XII, tariffs and subsidies under Clauses 92 and 93 Part X , offences relating to electricity under Clauses 186 to 202, and proposal for the establishment of the Electricity Appeal Tribunal under Clauses 163 to 185 of the Bill. In sum, the Bill has abolished tenured licenses and in its place made provision for open licenses or licenses with such tenures as may be prescribed by NERC.

NBET is also expected to fold up and novate its existing contractual rights and obligations preparatory to the declaration of a Medium Term Market (MTM) by the Commission pursuant to the provisions of the Bill. The Bill for the first time made provision for offences and penalties against electricity theft and related crimes with a Federal Power Task Force proposed in the Third Schedule to the Bill to prosecute offenders with the fiat of the Honorable Attorney General of the Federation and Minister of Justice. Similarly, under Clause 93 of the Bill, it is clear that tariff subsidies can only be accommodated under the Power Consumer Assistance Fund (PCAF).
Another fundamental proposal contained in the Bill is the name change proposed from the Rural Electrification Agency (REA) to Rural Electrification and Renewable Energy Agency (REREA) with detailed provisions regarding the objectives and functions of REREA, its structure and the expansion of the Rural Electrification Fund to include Renewable Energy Fund, all under Part XV of the Bill. These proposals are in recognition of the role of the REA in rural electrification and by implication the promotion of renewable energy through its projects. Indeed, copious provisions have been made under Part XVI and Sections 92(2)(f) , 145 , 148 etc all geared towards the promotion of renewable energy which is a central feature of this Bill.

It must, however, be clarified that apart from the Electricity Bill, 2022 (SB.511) which is the subject of the proposed two –day public hearing slated for 28th February and 1st March, 2022, the House of Representatives on its part had course to consider several Bills bordering on the Nigerian electric power sector and public hearings have been held by relevant Committees in the House of Representatives on these Bills. The Bills already considered in the House of Representatives are the Electric Power Sector Reform Act (Amendment) Bill, 2020 – HB 681, Electric Power Sector Act (Amendment) Bill, 2021 – HB 1528, National Power Training Institute of Nigeria (Establishment) Bill, 2019 –HB 657, Energy Commission of Nigeria Act (Amendment) Bill, 2019 –HB 243, National Renewable Energy Development Agency (Establishment) Bill, 2021 –HB 1241, and Energy Commission of Nigeria (Amendment) Bill, 2019 –HB 446.

One striking difference between the Electricity Bill, 2022 and the aforementioned Bills is that while the former seeks consolidate all electricity related laws into one statute, the latter seeks to either amend existing legislations or attempt to deal with issues already covered in detail by the Electricity Bill. Again, the Electricity Bill under review here is not an amendment Bill to the EPSRA as wrongly reported but a fresh Bill that repeals all existing enactments in the power sector and in place of such repealed enactments seeks to put in place an omnibus Electricity Act for the NESI. It will therefore not be difficult for the two chambers to deal with these Bills within their Rules of Procedure in such a manner as to enact a single statute for the NESI.

From the foregoing, it is clear that so much effort has been made to address key statutory and operational lapses in the NESI under this Bill. However, it is not unusual for some stakeholders to have reservations regarding certain provisions in the Bill. What is expected of such aggrieved stakeholders is to submit written memoranda articulating their comments and recommendations to resolve all grey areas so that at the end of the public hearing, the Bill will be enriched and passed in a form and content to achieve stated objectives.

Suswam, former governor of Benue State and currently serving Senator, writes from Abuja.