Power sector operators and experts have raised concerns, expressed fears and projected opportunities as some states assumed responsibilities for regulating electricity markets within their various domains.

This follows the recent revelation by the Nigerian Electricity Regulatory Commission, NERC, that seven states now control their electricity markets in accordance with the Electricity Act 2023.

The states are Enugu, Ondo, Ekiti, Imo, Oyo, Edo, and Kogi. Other states, including Lagos, Ogun, Niger, and Plateau, are expected to complete their transitions between June and September.

Anambra, having recently passed its electricity law, is also gearing up to join the list.

Before President Bola Tinubu signed the new Electricity Act in 2023 with the Federal Government, through the Nigerian Electricity Regulatory Commission, the only agency regulating electricity in Nigeria.

However, the decentralisation of the sector by the Act has now given states the authority to control and regulate electricity within their domains, granting them the freedom to generate, transmit, and distribute power.

This marks a historic shift in Nigeria?s electricity governance, from a centrally regulated structure to one where states are empowered to generate, transmit, distribute, and regulate electricity within their borders and only submit to national oversight by the NERC.

This shift, while hailed by stakeholders as a leap towards energy decentralisation and market competitiveness, is already raising questions over capacity gaps, regulatory clarity, subsidy management, and potential friction between state and federal oversight. This is because NERC appears to be losing relevance in the very sector it was created to govern.

While officials at NERC expressed reservations about some states? ability to manage their power markets, some industry experts said the development had created opportunities with challenges.

The seven states who now have the power to generate, transmit, and distribute electricity, will as well regulate the same and grant approval to licensees without the influence of NERC.

The regulator also disclosed during a presentation at the power stakeholders? meeting in Lagos recently that 11 out of the 36 states had commenced the process of transitioning to self-regulation of electricity.

Discussions at the meeting focused on the transition to state electricity markets, with participants highlighting current sector challenges and proposing practical and collaborative solutions.

?So far, 11 states have commenced the transition process, with seven states ? including Enugu, Ondo, Ekiti, Imo, Oyo, Edo, and Kogi ? already transitioned,? NERC stated in its presentation.

The stakeholders emphasised the importance of capacity building, regulatory coordination, and investment readiness to ensure sustainable, state-led electricity markets under the framework of the Electricity Act 2023.

Once regulatory functions are transferred from the NERC, the states will regulate their electricity markets.

Similarly, the electricity distribution companies operating in the seven states and other licensees would be controlled by the states, instead of the Federal Government?s regulatory commission.

In states where NERC has ceased to operate, the Discos hitherto operating in those states would be mandated to incorporate a subsidiary company to assume responsibilities for intrastate supply and distribution of electricity in those states.

For instance, as the Enugu Electricity Regulatory Commission commenced operations, the Enugu Electricity Distribution Company set up a subsidiary named Mainpower Electricity Distribution Limited, which was licensed by the state regulator.

This means that the main Enugu Electricity Distribution Company, EEDC, is now operating under different regulations. While some experts expressed worries over the development, others said it could be a positive turnaround for the power sector.

In line with the Electricity Act, the NERC has since April 2024 issued 11 transfer orders to states that have applied and met the necessary conditions. Each order comes with a six-month timeline for full operational handover.

For instance, Lagos and Ogun are set to complete the transition this month, Niger in July, and Plateau in September. Meanwhile, Anambra has formally set the ball rolling with the establishment of the Anambra State Electricity Regulatory Commission, following the passage of the state?s electricity law signed by Governor Charles Soludo.

Despite the optimism, industry sources warn that many of the states may not be adequately prepared for the complex regulatory and operational responsibilities ahead.

Operators worry

A senior official at NERC, who spoke to The PUNCH on condition of anonymity due to lack of authorisation to speak on the matter, said, ?The new electricity market is more likely to impact distribution, which is also a stronghold in the value chain. Managing the new change in the electricity market is going to overwhelm the state governments.

?They actually don?t understand the implication of it yet, but NERC is doing everything in its power to make it easy for these states. A major issue is manpower; you need experienced hands to handle some issues, and if you can?t find someone to do that in your team, there will be issues.

?An issue as simple as setting a tariff, which is the most important thing for revenue generation, will be very difficult for the states because not many people in the whole of this country can set tariffs. Globally, only about 2,000 people have the expertise to set electricity tariffs correctly. Most states don?t have that expertise yet.?

The source added that manpower shortage, lack of technical experience, and poor institutional memory could derail the transition if not urgently addressed.

?Every month, we meet with the states and provide guidance. But challenges like asset delineation, where a single transmission line passes through multiple states, are already emerging. It?s a work in progress, but there will be hiccups,? the official warned.

Proponents of the Act argue that decentralisation is long overdue and necessary to attract private investment into Nigeria?s struggling power sector. But critics fear that the balkanisation of regulatory oversight could lead to confusion, conflicting standards, and even exploitation of consumers.

Another issue flagged is the subsidy. Under the new structure, each state governor would determine whether their administration will subsidise electricity for residents or allow market-based pricing. This could widen inequalities in electricity access across states.

Electricity theft and enforcement of penalties are also areas of concern. Under the new regime, NERC must hand over theft cases to state commissions, which don?t have trained enforcement teams on such issues.

?Delineation of assets is another challenge because one transmission line can pass through multiple states. It is a work in progress, but there will be hiccups on the way. Eleven states have applied. Subsidy is also another issue because it is the governor of each state who will determine if they will be paying the subsidy on behalf of citizens and how much they can pay. These are the loopholes.

?If the governor declines, it means everyone will pay for their power usage. Then electricity theft, will they have the capacity to handle it? The law says we have to hand over the case to them, and we can only hope they will handle it well. We are also sharing our experiences,? the NERC official noted.

Some states appear better positioned than others. Enugu State, for example, is regarded as the most prepared, having appointed an experienced regulator who was part of the founding of NERC. It has already issued operational regulations and begun enforcement.

A recent example is the sanctioning of MainPower Electricity Distribution Limited in Enugu. Following customer complaints of overbilling, the Enugu State Electricity Regulatory Commission ordered the company to refund overbilled units for April 2025, citing Section 35 of the state?s Electricity Law 2023.

Lagos is also said to be making steady progress, leveraging its previous experience in embedded generation and independent power projects. The Lagos State Electricity Regulatory Commission, LASERC, has also released its first major order on the provision of electricity services by individuals or entities in Lagos State without a licence or permit

The directive, titled ??LASERC ORDER/001/2025?? and released recently, formally brings electricity market operations under the agency?s exclusive control.

The Convener and Executive Director of PowerUp Nigeria, a power consumer advocacy group, Adetayo Adegbemle, raised concerns over the pace and seriousness of states that have taken up regulatory autonomy in the electricity sector following the decentralisation of electricity governance.

Speaking on the unfolding development, Adegbemle said while the decision to decentralise electricity regulation was a welcome and progressive one, many of the states that sought autonomy seemed unprepared for the practical responsibilities that come with it.

?From the onset, it was clear that any state seeking to assume electricity regulatory oversight within its domain would be taking on a heavy burden,? he said. ?Yes, we?ve seen 11 states obtain approval for autonomy, but the truth is many of them are yet to move beyond the paperwork. It?s one thing to declare interest, it?s another to actually roll up your sleeves and get the work done.?

Adegbemle noted that out of the 11 states that had secured autonomy, only four have gone ahead to establish any form of regulatory framework or policy direction, while the rest have remained inactive.

?There?s no visible sign of regulatory activity in most of these states. They?ve written to the Nigerian Electricity Regulatory Commission, received the green light, but stopped there. No laws. No institutions. No implementation. It appears many of them are only playing to the gallery,? he said.

According to him, the decentralisation process is not an easy path and requires significant groundwork, from setting up institutions to training personnel and developing regulatory models tailored to local realities.

?This is not a walk in the park. It?s a technically intensive space. Some states are only just realising that once they take on this responsibility, electricity from the national grid will be invoiced at full cost, and they?ll need to decide whether to pass that cost to their residents or offer some form of subsidy. That realisation has caused many to pause,? he stated.

Adegbemle said the remaining 25 states were likely watching closely to see how the early adopters fared before making any move of their own.

?It?s a healthy thing. It allows others to learn before they leap. But we must also be realistic ? this is a journey, not a sprint. States will mature into it at different paces. It?s an evolution,? he said.

On what decentralisation meant for electricity generation and distribution companies (Gencos and Discos), Adegbemle dismissed fears of disruption, saying the reform should actually lead to a better investment climate and corporate governance.

?It shouldn?t negatively affect the operations of Gencos or Discos. In fact, it could reduce the size of regulatory bottlenecks and encourage more targeted investments. But what is concerning is the immediate vacuum that occurs once the national regulator, NERC, pulls out of a state. Consumers are left without any protective framework, no enforcement of service standards or customer rights.?

He warned that while autonomy gives states the power to regulate, they must not neglect their duty to protect electricity consumers and ensure fair market practices.

?We can?t have a situation where regulatory autonomy becomes regulatory abandonment. States must urgently develop and implement frameworks that protect consumers, ensure transparency, and promote accountability. Otherwise, this reform will backfire,? he cautioned.

Adegbemle called on sub-national governments to prioritise capacity building and consumer protection as they transitioned into electricity market regulators.

?State-level competition is good; it fosters innovation and responsiveness. But it must come with robust consumer protection policies, clear rules, trained manpower, and an understanding of the market dynamics. Otherwise, we risk fragmenting the sector into 36 regulatory islands with no real governance,? he added.

Also, the President of the Nigeria Consumer Protection Network, Kunle Olubiyo, commended the reform, describing it as a true reflection of federalism.

He said, ?The idea of the presidential system of government, which I believe embeds true federalism, means that there is co-federation, and what it means is that issues of economic landmark in the constitution that were hitherto exclusively reserved to the Federal Government. What the constitution has given birth to is to make sure the sub-national and the federal arm can co-exist and operate in areas of landmark in the Constitution.

?In the United States of America, where we copied the presidential system from, the issue of common currency, national security, borders, and related concerns are things that are reserved for the Federal Government, but states have their own jurisdiction.

?In the electricity sector, what we intend to do is operate concurrently. That means with clear lines of sight and delineation. The sub-nationals, comprising the 36 states of the federation and the Federal Government, can operate side by side without any fear of contradiction or crises.

?We already have in existence; the national grid and what it means is that we are not going to balkanise the grid or split and cut them in pieces but because we don?t have a regional system of government, states couldn?t get licenses for electricity generation, transmission and distribution licenses due to bottlenecks. This used to discourage investors who just wanted to operate in the state.?

He, however, warned that the system must be carefully managed to avoid outright anarchy.

?This shift means the states and the Federal Government can now operate concurrently within clearly defined roles. States can license off-grid, embedded, or mini-grid power projects to serve their unique economic needs, without necessarily connecting to the national grid,? he said.

He noted that while the national grid remains under federal control, states can now create localised energy solutions, grant sector-specific licenses, such as for agro-industrial clusters, and implement customer-centric models tailored to their realities.

?This is not about breaking up the grid; it?s about giving states the power to fill gaps in power supply where the national system has failed. It will create competition, expand energy access, and improve service delivery,? Olubiyo added.

He, however, cautioned that the supremacy of the Constitution must be respected where state and federal laws conflict, to avoid jurisdictional chaos.

?States can now, under the Electricity Act 2023, develop embedded mini-grid or captive generation. The states could, within a senatorial district, give sector-specific licenses for a particular area. They can now grant a license for up to 5 megawatts, guided by the regulatory framework created by the state, which is what the 11 state electricity regulatory authorities have been established to do.

?They are to look into that legal, institutional, and regulatory framework that would suit the peculiarity of the state. So when a license is given, the generation, transmission, and distribution of such captive power is not going to be linked to the national grid. We have challenges with liquidity, market settlement, and structure in the national grid, so nobody is even advised at the sub-national level and linked to the national grid.

?The licenses could be for a local government, where agro or industrial clusters would be the final off-takers. So the state and national tariffs are going to be distinctly different from each other. We would now have competition, and consumers would now have the choice as we have in the Jos Area,? he said.

On his part, the National Coordinator, All Electricity Consumers Protection Forum, Adeola Samuel-Ilori, said the sector would get better on distribution and supply if the state had solid regulations that could not be circumspect by the Discos ?as they did with NERC regulations which more like operates in a letter, not on spirit.?

Samuel-Ilori argued that a state with firm regulation compliance would help the sector to progress and be more believable by the other stakeholders in service delivery, making more money once the issue of metering is solved and adhered to.

?There is no conflict as the mandate of the state is distinct and pursuant to Electricity Act provisions which specify that once a state takes over the regulatory affairs, the NERC will regiment themselves to the generation and transmission pending when the state will solve the ISO issues which will comprise of grid and generation of megawatts.

?Investors will be more interested in bringing their money once they realise the system is not porous like we witnessed with the NERC management,? he said.

However, Samuel-Ilori expressed concerns over the readiness of the states to run the electricity markets effectively.

?I?m particularly concerned about the states that are receiving freedom to regulate the sector as permitted by the Electricity Act. How ready are they? How viable will the sector be even though it?s lucrative? Would they not let political interests override the economy and public interest so as to do it to the benefit of the people and investors?

?Would the consumers not eventually prefer to be under the old order than the state provisions of the same? As we say, time will tell, but I hope it succeeds, especially in Lagos, where there is a market, buyers, and prospects to grow it,? the consumer activist added.

A Professor of Energy at the University of Lagos, Dayo Ayoade, cautioned against conflicts. The professor urged the Federal Government and the states to put mechanisms in place to foster the growth of the sector during the transition.

He urged the state regulators to be investor-friendly instead of putting up regulations that could scare investors away. States like Lagos, Ogun, Niger, and Plateau are expected to complete their transitions between June and September while Anambra recently passed its electricity law.

Ekiti reacts

The Ekiti State Commissioner for Infrastructure and Public Utilities, Prof. Mobolaji Aluko, advocated for the formation of subnational Discos from the legacy Discos for a smooth transition from national regulation to state regulation.

Aluko, who said the state had set up the Ekiti State Electricity Regulatory Bureau with Dare David as its Executive Secretary, also canvassed domestication of NERC regulations at the state level for minimal disruptions.

Aluko noted that 11 states, including Ekiti, had received regulatory transition orders from NERC, adding that the state government had severally met with the Discos and Gencos in its domain on how the sector would be regulated both at the national and state levels.

On delineation of assets, he said, ?It has commenced. NERC, the state commissioners for power/energy, the various state regulatory agencies, and the Discos across the country have met on a number of occasions in Lagos and Abuja.

?It is important that the transition from national regulation to state regulation be as smooth as possible. This requires first that subnational Discos be formed from legacy Discos, which are then licensed by the state regulatory agencies. The principle here is that you cannot regulate what you didn?t licence.

?Next is that as many NERC regulations as possible should be domesticated at the state level, so that operational disruptions are minimal. Finally, there must be constant dialogue among all market players,? the commissioner stated.

The Ondo State Government also declared that the process of taking over power generation and distribution was ongoing.

The Chairman of the Ondo State Power Company Limited, Johnson Alabi, stated this while speaking with one of our correspondents on Monday.

Alabi, who noted that the state signed the Ondo State Power Sector Bill into law in 2020, said, ?Well, much has been done, as we are aware that Ondo State was the first state to implement and to pass the electricity law in Nigeria, called the Ondo State Power Sector Law 2020. That law established the Ondo State Electricity Regulatory Bureau. It also established the Ondo State Power Company. Those two establishments are very functional as of today.

?The key function of OSERB is to make laws and regulate the electricity markets in the state, and they have been doing wonderfully well. The Ondo State Power Company is the arm that is responsible for the electricity market operations in Ondo State.?

He noted that the agency had met with the Benin Electric Distribution Company over the process of full takeover. (The PUNCH)

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