NEW VISTAS OF INVESTMENT OPPORTUNITIES AS NERC SIGNS REGULATIONS TO ENCOURAGE SMALL POWER GENERATION AND DISTRIBUTION
By Faloseyi Michael
After over two decades in the doldrums and near total abandonment, the first serious step at reforming the Nigerian Electricity Supply Industry (NESI) was taken in 2005, when the Federal government enacted the Electric Power Sector Reform Act. The main objective of the Act is to encourage private investments and ensure efficiency in the sector. This policy shift was justifiable as it was obvious that the Federal Government could no longer meet up with the financial requirement for the capital intensive power sector.
The Act, which established the Nigerian Electricity Regulatory Commission (NERC), is the enabling law for the power sector reform. The implementation of the reform, which has been criticized by many industry watchers as rather slow, has been able to register some modest achievements. Arguably though, most notable of the achievements registered is the modest improvement in the peak generation capacity of electricity available in the national grid from about 1,900 megawatts in 1999 to about 4,000 megawatts as at today. This is in addition to the growing number of private investors licensed by the Commission. However, some of these investors, as well as interested state governments, have helped the Commission identify some of the regulatory bottlenecks to their participation in the sector in relation to generation and distribution of electricity.
The fears of these wary investors and stakeholders were allayed on Wednesday March 7, 2012 when the Nigerian Electricity Regulatory Commission (NERC) signed two regulations- the Independent Electricity Distribution Network (IEDN) and Embedded Generation 2012. The regulations are products of about six month intensive research and stakeholder consultations by staff of the Commission. The combined impact of these regulations are that communities, local and state governments as well as private investors can now generate and distribute electricity without recourse to the national grid. These regulations also make it easier for companies to participate with various options available.
The regulation on embedded generation permits investors, communities, state and local governments to generate and distribute electricity for their exclusive consumption using facilities of existing electricity distribution companies or independent electricity distribution network operators.
The regulation on independent electricity distribution networks on the other hand permits communities, local and state governments to invest in electricity distribution networks in areas without access to the grid or distribution network or areas poorly serviced. State governments with investments in infrastructure for power generation and distribution can now begin to reap benefits of their investments. Also, state and local governments with enough financial muscle, but had been hitherto discouraged can now take fuller advantage of these regulations to provide adequate power for their constituents.
It is most significant that these laws were direct attempts to cater for about 40 per cent of the country’s population without access to electricity. The regulations are also capable of addressing the problem of poor quality of electricity supply, especially in the north eastern part of the country which is most notorious for what is popularly called ‘low current’ in layman’s language.
Signing the two regulations, Dr. Sam Amadi said that they will provide the needed solutions to the shortage in supply of electricity in the country.
According to him, “These are the most important regulations today in this country because we do not have enough electricity to go round. We also have so many constraints preventing us from having enough to generate, transmit and distribute.”
“From now on, the much expected expansion in the electricity supply to the end users would be easily realizable. With these regulations we have further unlocked the opportunities in the sector to community, private and government participations. The laws are expected to revolutionise the sector.”
He enthused further that the appropriate tariff to encourage the use of renewable and alternative sources of power generation will soon be put in place by the Commission.
He commended the efforts of the staff of the Commission that were able to put together such brilliant regulations after due consultation with industry stakeholders. He said that similar efforts in the past would have been contracted out to consultants at a huge cost to the commission.
One cannot but conclude with Amadi’s optimism that the terrain for power generation, transmission and distribution will no longer be the same, especially as investors, communities, local and state governments attempt to make the best use of the opportunities provided by these regulations, in addition to such other orders, rules and regulations of the Commission.
Faloseyi Michael is of the Media and PR Unit, Nigerian Electricity Regulatory Commission (NERC), Adamawa Plaza, First Avenue, CBD.