Encouraged by the newly signed Electricity Act 2023, which allows states to generate, transmit and distribute their own electricity, the Southwest states of Lagos, Ogun, Oyo, Osun, Ondo and Ekiti have risen to the challenge of generating and distributing electricity to residents. Southwest Bureau Chief BISI OLADELE examines how the states are seizing the opportunity opened by the Act, which was sequel to the constitutional amendment signed during the last days of the Buhari-led administration, to provide stable electricity for consumers.
It took the re-classification of electricity and railway laws from the hitherto Exclusive List to the Concurrent List to kick-start what promises to be a game-changer, particularly in the country’s crisis-ridden power sector.
The stage for this heart-warming development was set following the June 9 signing of the Electricity Act 2023, and this was sequel to the constitutional amendment signed during the last days of the Buhari-led administration that allows states to generate, transmit and distribute their own electricity.
On the strength of the amendment, precisely the new Electricity Act 2023, the Southwest states of Lagos, Ogun, Oyo, Osun, Ondo and Ekiti held a conference in Akure, the Ondo State capital, where they identified pathways to maximise the opportunities presented by the development as well as the hurdles to overcome.
The two-day conference, which was facilitated by the Development Agenda for Western Nigeria (DAWN) Commission, allowed experts to analyse the electricity sub-sector in Nigeria and the Southwest. It also strategised on how to leverage the constitution amendment to provide sufficient electricity for consumers with the ultimate aim of boosting the economy of each state.
After rigorous conversations, which were deepened by rich presentations by experts in both areas, including policy and finance experts, the investment agencies of the six states agreed that each state should establish or strengthen its ministry of power or energy, establish rail department in the transport ministry, develop a blueprint for rail transportation, electricity supply and collaborate with other states to set up regional agencies in the two service areas
A Professor of Energy and Electricity Law at the University of Lagos, Yemi Oke, set the tone for the conference when he gave a deep insight into how power policies evolved in the last few decades with an analysis of the current state of things in the sector. He also gave an insight into the new Electricity Bill recently signed into law by President Muhammadu Buhari, and its implications to states.
Prof. Oke, who demonstrated a deep understanding and his involvement of policy development in the sector, identified the immense opportunities which the new Act opened up to states and the additional benefits of regional projects in power generation, transmission and distribution. Emphasising the decentralisation of services in the sector, he pointed out that states are to start afresh in many areas of service provision simply because the Lagos/ENRON partnership of 2001 was not allowed to work.
According to him, if the project, which was conceived and implemented by the then Asiwaju Bola Tinubu administration in Lagos State had been allowed to succeed, Southwest states would only be talking about expansion now. He explained that with the constitutional amendment, states can now set up electricity regulatory commissions to take charge of electricity supply.
Oke said states can now renegotiate with the electricity distribution companies (DISCOs) as part of regu lation, adding that they are free to licence new distribution companies to shore up the service of existing ones.
He also exposed the faults in the power privatisation particularly electricity distribution, saying some of the DISCOs were remotely owned by politicians. He said the companies did not have the required funds to invest in electricity infrastructures as required by the privatisation agreements.
Oke, a lawyer added that the companies obtained loans denominated in United States Dollar whose repayment had been worsened by the astronomical rise in foreign exchange rate. He said it was the reason many of the DISCOs are almost insolvent at the moment.
The same factor, he noted, was responsible for DISCOs’ inability to invest in electricity infrastructures which would have developed the sector further. The policy expert also said poor payment of bills by electricity consumers compounded the woes in the sector as metering was a huge challenge.
Prof. Oke, however, stated that providing sufficient electricity requires humongous investments which states are unable to provide on their own. He emphasised that only investors can bring the money while states can also come together as a region to access foreign loans to build the infrastructures needed to achieve the lofty goals.
To succeed in the new regime, Oke recommended that states must provide enabling environment for investors, offer incentives, allow small investors who can build small power stations to take care of specific communities or factories, enact laws that will regulate electricity service chain, introduce proper metering system and obey the laws to boost investors’ confidence.
He also said states should cooperate with the Federal Government and leverage regional advantage. Others are reacquisition and refinancing of the sector, restructuring of DISCOs and GENCOs, national grid concessioning, progressive licensing regime and captive power generation.
Summing his presentation, Oke said: “The amendment to the constitution of the Federal Republic of Nigeria which was signed into Law by former President Buhari, has altered the equation of the power sector in Nigeria, and this has serious implications for Southwest states. With the constitutional alteration, States can now generate, transmit and distribute electricity in respect of the areas covered by the national grid.
“A major constraint is that the new regime of decentralised power sector has now tasked Southwest States with institutional responsibilities: to generate, transmit and distribute electricity in respect of areas covered by national grid as well as in areas not covered by a national grid.
“Nigerians eagerly await effective implementation of the amended constitution on decentralized electricity governance model that will eventually lead to the establishment of State electricity regulatory institutions.
“This is because, as speculated, if the ultimate objective is to ensure regular supply of power for economic development of Nigeria, it naturally follows that the federal and state governments must act as collaborators, not as competitors, in terms of electricity governance in the country.
“Given its antecedent and levels of sophistication, all eyes are on the Southwest states to get it right, as usual, for other states in the country to follow, and get properly guided.”
A consultant in the industry, Mr Eyo Ekpo, underscored the need for the policy developers in the region to get the buy-in of the governors and other major political players in the Southwest, stressing that the success of the project requires political will.
“Politicians matter in achieving this project. The DAWN must engage political leaders in the region for this reform in the power sector to work. They need political will. Nigerians already know the cost of power. Politicians only need to be courageous to make it happen.”
Ekpo explained that foreign investors did not participate in the 2011/2012 privatisation because Nigeria didn’t demonstrate enough seriousness previously.
Reeling off figures to back his claims, he revealed that electric generators in Southwest generate about 20,000MW of power, adding that the region paid N34 billion daily to power generators in 2022.
He said the figures do not include the cost of purchase of the generating sets. “Whereas if we pay at the highest tariff and power is served for 18 hours daily, we will be paying maximum of N20 billion daily,.” Ekpo said.
The expert opposed electricity subsidy, saying that Nigerians already understand the cost of power. “But when we generate enough and distribute to more consumers, cost will be distributed and go down.
The new development affords Southwest states the opportunity to come together and make laws that will make the power sector work for consumers,” he said.
Ekpo urged Nigerians to take their destinies in their hands and focus on meeting universal electricity provi sion goal.
Agencies highlighted the uniqueness of electricity supply in their states and the areas of cooperation that can make the regional electricity project a success.
The agencies agreed that the success of a regional electricity project will provide large number of jobs, create wealth for investors and other service providers in the industry with a great positive impact on the economy of the region.
States also agreed to incorporate solar energy and other renewable energy sources in the overall plan.
A senior government functionary, who is very familiar with the progress of power project in Oyo State, told The Nation that the State Assembly has promised to give the bill expedited passage in coming weeks. The bill was submitted last year, meaning that the state was a ready working on it before the law was moved to the Concurrent List in March.
The state has also embarked on a gas station that will produce 50 million standard cubit feet of gas daily. The project is being undertaken by Shell Nigeria Gas Company for Oyo State. It will supply gas for independent power plants, a development that will eliminate transmission hurdles.
“We also have energy mix, meaning each geographical location will use the source of electricity that is best for it,” the source said.
The Ekiti State Government has also built a five megawatt independent power project which is due for commissioning in July. The electricity bill is in the works. The House of Assembly is expected to pass it soon.
Ogun State already has its law on electricity in place. It was enacted in 2019. The State is only sourcing investors to generate and distribute electricity.
Lagos State has its law in place, but it is not clear if it needs to amend the law in view of the movement of the Act to the Concurrent List.
Giving an update on the progress made so far, the Director General of the DAWN Commission, Mr Seye Oyeleye, explained that the states have taken practical steps to make laws that will empower them to facilitate generation and distribution of electricity as well as provide the framework for operating in the sub-sector.
He said: “They need laws. Some of the states already have while others are at an advanced stage, making the law. Some private investors in power are already talking to the states. Preliminary meetings are being held with private investors some of who are proposing an entirely new technology for generation and distribution.
“These are mostly facilitated by DAWN.
“The states, which did not have the law before, are following the Lagos State template with slight modifications. They are all moving very fast. DAWN has sent a roadmap to member states based on the outcome of the Akure conference. It will be implemented with specific attention to their peculiarities.
“They will have a new agreement with the DISCOs, with the Nigerian Electricity Regulatory Commission (NERC) as the regulator. They may be going for modular power plants. DAWN is impressed with the response of the states because they are all taking practical steps. Exciting times are ahead on electricity in Southwest Nigeria.”
(Culled from The Nation)