Chineme Okafor in Abuja
The Nigerian Electricity Regulatory Commission (NERC) has indicated its willingness to cede part of the Transmission Company of Nigeria (TCN) to customer groups and market participants in a fresh move aimed at revitalising electricity service delivery in Nigeria.
In a consultation document posted on the commission’s website, the regulator said it was seeking input from key stakeholders on what governance model that could be adopted for the management of the Market Operator (MO) and System Operator (SO) departments which it desires to unbundle from the TCN.
NERC explained that the move became necessary to guarantee greater independence for the SO and MO. It stated that previous effort to grant greater independence to both departments considered the operational and financial ring-fencing of their functions within the TCN for implementation as one of the early initiatives of the Transition Steering Group (TSG) but that a description of their functions has remained blurred over-time.
It therefore stated that Electric Power Sector Reform Act (EPSRA) 2005 defined that the holder of the SO license would be expected to ensure neutrality and transparency in the management of the electricity grid by strictly complying with the provisions of the grid code and the market rules as it affects all market participants.
“The SO and TSP licenses are currently bundled under the auspices of the TCN and there are concerns from market participants in respect of possible conflicts of interest on matters that affect the TSP,” said the NERC which also said that the broad functions of the system operator will include enforcement of compliance with grid code and market rules; efficient cost allocation and effective market settlement; non-discriminatory access to transmission assets; and market efficiency and system reliability.
The regulator added that anyone holding the licence would have to draft and implement operating procedures as may be required for the proper functioning of the power system; undertake system planning of generation capacity and transmission; implement and supervise open access to the transmission system in collaboration with TSP; manage system constraints, emergencies and system partial or total recovery amongst other responsibilities.
In this regard, it explained that: “Stakeholder opinion is being solicited in respect of the following models of granting the SO/MO function greater independence in the NESI: financial and operational ring-fencing of the SO within TCN; the SO may continue to be a part of the corporate entity of the TCN but operating within the rules of the market and in such a manner as to ensure its operational and financial autonomy.
“Independent legal entity, government (ISO owned by FGN); the unbundled SO/MO function may be incorporated into a distinct legal entity wholly owned by the FGN with own staff, management and board of directors.
“Stakeholder owned ISO; the unbundled SO/MO where considered desirable may be wholly owned by market stakeholders including participants, customer groups and registered as non-profit entity.”
NERC further explained that SO as one of the service providers for the sector, is currently funded by the electricity market as part of the components of the tariff order, adding that where the unbundling is considered appropriate, the annual budgets shall be approved in accordance with the provisions in the market rules.