Regulatory mechanisms for stimulating power sector reform in Nigeria

Abstract

Prior to the introduction of private participation in the value chain of the power supply system, some of the major challenges bedeviling the system are; the inadequate generation capacity, failing and limited transmission network, poor distribution system marred with technical, commercial and collection losses. The main reason for these challenges is that government was ill equipped in the management of power utility. Therefore, the introduction of the National Electric Power Policy (NEPP) spelt out the rationale for the reform of the power sector which is to encourage private participation alongside government participation to drive efficiency. Adopting the World Bank recommended power sector reform principles which typically emphasizes transparent regulatory framework, commercialization and corporatization, and independent power producers as a basis for financial support, the Nigerian government enacted the Electricity Power Sector Reform Act in 2005 (the Reform Act), unbundled its vertically integrated power assets, sold the unbundled assets and formally open up the power market for private privatization in 2013. However, while the power market achieved private participation, necessary regulatory mechanisms for stimulating the reform as well as solving market challenges have either being lacking, weak, or not properly implemented in the post privatized power market. Some of these regulatory mechanisms are namely; the Aggregate Technical and Commercial and Collection losses reduction mechanism, tariff adjustment mechanism (MYTO), estimated billing and metering mechanisms (Meter Asset Provider Regulation and National Mass Metering Programme), load allocation mechanism, transmission expansion plan mechanism, and Grid Code operation. The study analyses some of the regulatory mechanisms vis-a-vis the market problems they are intended to solve. The study equally identified market situations that require regulatory intervention with a view to making findings. Analysis of some selected regulatory mechanism initiatives of other power markets was carried out in order to draw out useful options and lessons for the Nigerian power market. At the conclusion of the study, findings and recommendations were made. To address the findings, three recommendations were made. First, the decentralization of power supply system in the country. Secondly, deemphasizing the overreliance on the transmission network and the restructuring of the network. Thirdly, the underutilized available capacity of the Gencos be utilized before any generation capacity expansion is carried out.