As several states took up the responsibility of regulating energy markets inside their own jurisdictions, operators and experts in the power sector have voiced concerns, anxieties, and anticipated opportunities.
This comes after the Nigerian Electricity Regulatory Commission recently disclosed that, in compliance with the Electricity Act 2023, seven states currently control their electricity markets.Enugu, Ondo, Ekiti, Imo, Oyo, Edo, and Kogi are the states. It is anticipated that other states, including as Lagos, Ogun, Niger, and Plateau, will finish their transitions between June and September.
Anambra is preparing to join the list as well, having just enacted its electrical bill.The Nigerian Electricity Regulatory Commission was the sole organization in charge of regulating electricity in Nigeria prior to President Bola Tinubu signing the new Electricity Act in 2023 with the Federal Government.
However, the Act’s decentralization of the industry has now allowed states to freely produce, transmit, and distribute power while also having the ability to govern and control electricity within their borders.
States now have the authority to produce, transmit, distribute, and control energy inside their boundaries, subject only to national monitoring by the NERC, marking a significant change in Nigeria’s electricity governance from a centrally managed system. Stakeholders have praised this change as a step toward energy decentralization and market competition, but concerns about capacity shortages, regulatory ambiguity, subsidy management, and possible conflict between state and federal authority are already being raised. This is due to NERC’s apparent decline in significance within the industry it was established to oversee.
Although NERC officials voiced concerns about certain states’ capacity to control their electricity markets, several industry insiders claimed the trend had brought both opportunities and difficulties.
According to the PUNCH, the seven states that currently have the authority to produce, transmit, and distribute energy would also control it and authorize licensees without NERC’s intervention. During a recent presentation at the power stakeholders’ meeting in Lagos, the regulator also revealed that 11 of the 36 states have started the process of switching to self-regulation of energy. The meeting’s discussions centered on the shift to state power markets, with attendees pointing out current issues facing the industry and suggesting workable, cooperative solutions.
According to NERC’s presentation, “seven states, including Enugu, Ondo, Ekiti, Imo, Oyo, Edo, and Kogi, have already transitioned, and 11 states have started the transition process thus far.”
In order to guarantee sustainable, state-led energy markets within the parameters of the energy Act 2023, the stakeholders emphasized the significance of capacity building, regulatory cooperation, and investment readiness. The states will control their electrical markets after the NERC transfers its regulatory responsibilities.
In a similar vein, the states would have authority over the power distribution firms and other licensees that operate in the seven states rather than the federal government’s regulatory body.
Discos that have previously operated in states where NERC has discontinued operations would be required to establish a subsidiary firm to take over responsibility for intrastate energy supply and distribution in such states.
For example, the Enugu Electricity Distribution Company established a subsidiary called Mainpower Electricity Distribution Limited, which was granted a license by the state regulator, when the Enugu Electricity Regulatory Commission started operations. As a result, the primary Enugu Electricity Distribution Company is now subject to new rules. Some analysts voiced concerns about the development, but others suggested it might be a turning point for the electricity industry.
Since April 2024, the NERC has granted 11 transfer orders to states that have applied and fulfilled the requirements in accordance with the Electricity Act. The whole operational handover period for each order is six months.
For example, Plateau is scheduled to finish the switch in September, Lagos and Ogun this month, and Niger in July. After the state’s energy law was passed and approved by Governor Charles Soludo, Anambra legally started the process by establishing the Anambra State energy Regulatory Commission. Industry sources caution that many of the states could not be sufficiently equipped for the intricate operational and regulatory obligations that lie ahead, notwithstanding the optimism.
The new power market is more likely to affect distribution, which is also a bastion in the value chain, according to a senior NERC official who talked to The PUNCH on condition of anonymity because they were not authorized to discuss the issue. The state governments will find it difficult to handle the recent changes in the electrical market.
Although they are still unsure of the implications, NERC is making every effort to facilitate these states’ transition. Manpower is a big problem; some problems require skilled workers, and if you can’t locate someone on your team who can do that, problems may arise.
“Simply imposing a tariff, which is the most crucial step in generating income, will be extremely challenging for the states because so few people in this nation are capable of doing it. Only around 2,000 persons worldwide possess the knowledge necessary to properly calculate power rates. The majority of states lack the knowledge at this time.
If not handled immediately, the source continued, a lack of technical expertise, a lack of personnel, and a loss of institutional memory might cause the shift to fail. We meet with the states once a month and offer advice. However, problems are already starting to appear, such as asset demarcation, in which a single transmission cable crosses several states. There will be bumps in the road, but it’s a work in progress,” the source said.
Decentralization, according to the Act’s supporters, is long overdue and essential to luring private capital into Nigeria’s faltering electricity industry. However, detractors worry that the fragmentation of regulatory supervision may result in misunderstandings, inconsistent guidelines, and even consumer abuse.
The subsidies has also been identified as a problem. Under the new arrangement, the governor of each state would decide whether their administration would permit market-based pricing or provide inhabitants with electrical subsidies. This might make disparities in access to electricity across states even more pronounced. Concerns also exist over the enforcement of sanctions and electricity theft. The new system requires NERC to turn over theft cases to state commissions, which lack enforcement teams with the necessary training.
Because a single transmission line can cross several states, asset delineation presents additional difficulties. There will be bumps in the road, but it is still a work in progress. Eleven states have submitted applications. The governor of each state will decide whether to pay the subsidy on behalf of the people and how much they can afford, so that’s another problem. The flaws are these.
“Everyone will be responsible for paying for their electricity use if the governor declines. Will they be able to deal with electricity theft then? Giving them the case is required by law, and we can only hope that they will handle it effectively. Our experiences are also being shared,” the NERC official said.
It seems that certain states are in a better position than others. For instance, Enugu State is thought to be the most prepared as it hired a seasoned regulator who was involved in the establishment of NERC. Operational regulations have already been released, and enforcement has started.
The approval of MainPower Electricity Distribution Limited in Enugu serves as a recent illustration. Citing Section 35 of the state’s Electricity Law 2023, the Enugu State Electricity Regulatory Commission ordered the corporation to reimburse overbilled units for April 2025 in response to consumer complaints of overbilling.
