International Electricity Market before Reform

0

The Electricity market and industry has undergone significant structural changes, in the last three decades. Before this period the electricity market was monopolistic, with the exception of the United States and Japan that allowed privately owned vertically integrated monopolies. The electricity market was monopolistic for a reason – the nature of electricity and the available technology at that time. Electricity cannot be stored, and it is consumed within a tenth of a second of its production. Also, electricity produced by one generator cannot be distinguished from another generator, once switched onto the power pool grid. Electricity dynamics are therefore said to respond, not to contractual terms as such, but to physics. At that time there were large power plants that were built up over long construction periods, because of coal and hydropower that were the main sources of energy at that time. This resulted in substantial economies of scale and ultimately, a vertically integrated monopoly, mostly organised around publicly owned utilities.

International Electricity Market Post Reform

With technological advances, other sources of energy, smaller power plants, shorter construction time and lower economies of scale, a market shift began to emerge by the 90s, first in England and Wales, later sweeping through Scandinavian countries, and finally engulfing the rest of continental Europe and other parts of the world. Following the rapid liberalisation of the electricity market around the world, an appetite, which hitherto did not exist, was created for knowledge and learning and skills for Lawyers in the electricity market. Legal skills were in extremely short supply in the electricity market, because of the monopolistic nature of the market at that time. International scholars have documented that the first set of Lawyers in a post reform and liberalised electricity market, were “borrowed” from the international oil and gas industry.

Nigeria’s Electricity Market

Nigeria’s own electricity market reform was not different. Up till 2005, the Nigerian electricity market was a monopoly. Nigeria Electricity Power Authority, NEPA, as Nigerians came to romantically refer to it, was in charge. At that time, NEPA manifested all the evil that proponents of a competitive free market advocated. Despite receiving subventions from government, it failed miserably to provide adequate and constant electricity from the 80s. Thus, in 2005, Nigeria shoved aside this monopoly, replacing it with a liberalised electricity market through the Electricity Power Sector Reform Act of 2005.

Today, the market is undergoing birth pains, and understandably literature is required to provide adequate guidance. When NEPA reigned, while a lot of newspaper articles existing, largely exposing its inefficiency, there was not a lot by way of a well-researched works in scholarly journals, let alone monograph or textbook. This is now changing and there is a growing healthy number of such works inspired by Nigeria’s electricity reform market. For instance, my contribution in 2009 “Foreign Private Participation in the Electricity Sector of Developing Countries: What Works? An Examination of Nigeria’s Reformed Electricity Sector” in Journal of World Investment & Trade. In 2013, the first book on Nigerian Electricity Law emerged, authored by Ayodele Oni, a Legal Practitioner titled The Nigerian Electric Power Sector: Policy, Law, Negotiation, Strategy and Business and published by CI-Plus. This was followed in very quick order by Dr Yemi Oke, an associate professor at the University of Lagos, and a regular commentator on Nigeria’s Electricity Sector titled Nigerian Electricity Law and Regulation published by Law Lords Publications, also in 2013.

The Nigerian Electricity Supply Industry: Post Privatisation Realities, Trends and Challenges

A new book was added to this corpus of knowledge, authored by Kofoworola Olokun-Olawoyin a graduate of the University of Lagos Faculty of Law who was in private legal practice, and currently Assistant General Manager and Head of Legal Advisory and Contract Unit in the Legal Department of Eko Electricity Distribution Plc. The book is titled The Nigerian Electricity Supply Industry: Post Privatisation Realities, Trends and Challenges published by Doculand Business Solutions Limited with a Forward by eminent Professor Akin Oyebode. This book scores a first in a number of ways. It is the very first time a book on Nigeria’s electricity sector is being authored directly by an industry person. In that sense, it is written from a practical industry, not just a theoretical standpoint. For instance, Oni’s book is helpful for focusing on the history, legal and regulatory framework, financing, environmental and Intellectual property aspects of the market, as well as drafting and negotiation, privatisation, general dispute settlement. Oke similarly adds value by discussing themes such as the unbundling of assets, the regulator and its business and market rules and grid code; licences and tariff, consumer protection and competition, rural electrification, captive power, and Renewable Electricity.

Contents of the Book

Kofo Olawoyin’s book however, has a different focus. This book of ten chapters and 640 pages (40 Preliminary and 600 Main pages), is very ambitious in its sheer breath. Complete with very helpful colourful industry maps, diagram and statistics that clearly explain concepts, it touches on very topical issues, some already covered by the two other referenced authors, but many not previously treated, such as pre-privatisation considerations, cross-border electricity trade and power pool in West Africa; State participation in the Power Sector; detailed explanation on very complex industry matters (e.g. the MYTO/Tariff, Aggregate Technical, Commercial and Collection Losses (ATC&C) Loss; post- privatisation trends and challenges including Embedded Generation, Mini-Grids, Eligible Customers, Rural electrification initiatives, Electricity Offences; the Nigerian electricity industry financing and bankability of project documents; taxation; dispute resolution and key and policy considerations.

The author explains in detail, regulatory policies, various challenges, and various contracts executed under each scheme with negotiation strategy to be adopted by various Parties. In many cases, she offers practical solutions informed by industry experience.

The author dedicates a full chapter on an emerging area – Renewable Energy, carefully explaining the Renewable Energy Technologies existing in Africa and in Nigeria particularly, Renewable policies, incentives, investment opportunities and lessons to draw from other jurisdictions. Kofoworola Olokun-Olawoyin provides expansive information to intending investors of this industry, by detailing information on various investment opportunities existing in the market , investment challenges and risks, and the various statutory issues to consider before, during and after investment including licences and approvals, environmental, health and safety matters, capital information, incentives, national content, immigration et cetera.

Usefulness

This book is very well structured, well organised, well researched and excellently analysed with the copious use of footnotes. It is also written in accessible and lively English, and labours to simplify a lot of arcane electricity industry jargons. In my opinion, Nigeria’s electricity sector is richer with this latest addition. University teachers – not just law teachers – have additional material to use, as they impart knowledge to students that will constitute the future workforce of this industry. Researchers will certainly find it useful. Practitioners and industry consultants, will also find in this book a valuable companion. Our Judges and the Arbitration community, will also find this book useful. Policy moulders and industry regulators keen to understand the challenges in the market, have a solid reference book. It is also a useful tool in the hands of international agencies, who are tracking Nigeria’s electricity reform progress. As Professor Oyebode stated in his Foreword of the book: “we have the author of this work to thank for her incise appraisal of the country’s electricity sector, especially after the much-touted privatisation reforms of electricity distribution to consumers. …This offering is yet another worthy contribution to the growing literature on Nigeria’s electricity architecture and, therefore, merits commendation.”

Criticism

But, it will be a disservice if I don’t mention the one criticism I have against this otherwise masterfully written book. The author followed a very disturbing Nigerian tradition and culture of self-publishing such an important material. I think this is a serious mistake. I have never understood why Nigerian legal practitioners, and I suppose even university lecturers who should know better, would self-publish their manuscript. I drew attention to this years ago as Guest Columnist of This Day Lawyer. The same manuscript might just have passed through the rigorous peer review of an international publisher. As a Nigerian university undergraduate student in the 80s, the law books that we used were mostly by Nigerian authors alright, but published by Sweet and Maxwell, a major international publisher. I get told now that international publishers are no longer interested in our manuscripts, because of foreign exchange. This is not correct. The international community is still very keen to learn about developments out of Nigeria, provided the manuscript is top quality as we have found out through Dr Joseph Tolorunse (DPR Legal Adviser) or Dr Tade Oyewunmi (US based Energy Law Lecturer) whose works were published by Kluwer Law International, Property Rights in Discovered Petroleum Reservoirs (2014) and Regulating Gas Supply to Power Markets: Transnational Approaches to Competitiveness and Security of Supply (2018) respectively. These efforts were preceded by Dr Dayo Ayoade’s Disused Offshore Installations and Pipelines: Towards “Sustainable Decommissioning” (2002) also published by Kluwer. There are just so many examples.

Postscript

After writing this review, Dr Yemi Oke was very kind enough to send me a copy of his new book, Nigerian Electricity Law and Practice, while Dr Oni also sent me information of his new book in Electricity Law. I congratulate both of them heartily. While I am yet to read these materials, I am sure, like their earlier works, their latest efforts will benefit the market.

Dedication

This Book Review is dedicated to the memory of my younger brother, Adeniji Akinboyejo Adaralegbe Junior who handed in his lamp on 6th January, 2021.

Dr Bayo Adaralegbe, Partner and Head of Energy and Extractives in Babalakin & Co.; Pioneer Book Review Editor of Journal of World Energy Law and Business (JWELB), publication of Oxford University Press. He has also other editorial responsibilities, including being part of the editorial team of Oil, Gas & Energy Law(OGEL Journal). He has written several scholarly articles in international peer reviewed journals, and his works have been cited with approval in major foreign books published by leading international publishers. His areas of expertise are oil, gas, power, arbitration and international investment law, and serves as a peer reviewer for international journals of repute in these areas. Dr Adaralegbe has a specialised LLM in Petroleum Law and Policy, a PhD in International Investment Arbitration