CEM REPORT, POWER| Nigeria’s power sector is on the verge of a significant change with the establishment of the Nigerian Independent System Operator (NISO) by the Nigerian Electricity Regulatory Commission (NERC). This move, outlined in order NERC/2024/45, effectively splits the Transmission Company of Nigeria (TCN) into two distinct entities.
For years, TCN has shouldered the dual responsibility of managing the national grid (system operation) and transmitting electricity (transmission service provider). This arrangement, according to NERC, may have hindered optimal performance.
This Chairman of NERC, Sanusi Garba, who emphasizes the importance of a separate system operator in a statement. “This is a significant development for the Nigerian electricity market. An independent system operator will ensure a more transparent and efficient administration of the power grid, ultimately benefiting electricity consumers.”
“The unbundling of TCN is a critical step mandated by the Electricity Act 2023,” says industry analyst, Adeola Akinde. “A dedicated system operator with a focus solely on grid management can potentially lead to improved efficiency, reliability, and transparency in the Nigerian electricity market.”
National Grid at the Edge
Nigeria’s national grid has faced well-documented challenges in recent years. Frequent grid collapses have resulted in widespread blackouts, crippling businesses and frustrating citizens.
Data from the National Bureau of Statistics (NBS) shows that in 2023, Nigerians on average experienced power outages for over 20 hours a day. This lack of reliable electricity supply has undoubtedly hampered economic growth and development.
The hope is that NISO, with its laser focus on grid management, will be better equipped to tackle these issues.
NISO: Duties and Responsibilities
NISO’s primary responsibility will be to ensure the secure and reliable operation of the national grid. This includes tasks such as:
Monitoring grid stability and taking corrective actions to prevent outages.
Scheduling and dispatching electricity generation to meet demand.
Ensuring fair access to the grid for all market participants.
Managing ancillary services to maintain grid frequency and voltage.
NISO: A Private Company with Public Scrutiny
The new entity, NISO, will be a private company limited by shares, incorporated by the Bureau of Public Enterprises (BPE) under the Companies and Allied Matters Act. This move towards privatization aims to inject efficiency and best practices into grid management.
However, NERC maintains control. The commission will oversee NISO’s operations and hold them accountable for meeting performance targets. Additionally, NISO’s responsibilities are clearly outlined in the Electricity Act 2023 and its operating license.
TCN to NISO Transition
The NERC order, issued on April 30, 2024, by Chairman Sanusi Garba and Vice Chairman Musiliu Oseni, sets a clear timeline for the transition:
Within 30 days (by June 30, 2024): TCN must identify and map all assets and liabilities related to system and market operations. This detailed report will be submitted to NERC and the Bureau of Public Enterprises (BPE).
By May 31, 2024: BPE, through the National Council on Privatisation, is tasked with incorporating NISO as a private company limited by shares. This new entity will operate under the Companies and Allied Matters Act.
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If You Ask Me
While the creation of NISO presents an exciting opportunity for improvement in Nigeria’s power sector, challenges remain.
A critical factor will be the smooth transfer of assets and liabilities from TCN to NISO. The order mandates TCN to complete the identification and mapping of these assets by June 30, 2024. A seamless transition is crucial to avoid disruptions in grid operations.
Another challenge lies in building the capacity of NISO. The company will need to recruit and retain skilled personnel with the expertise to effectively manage a complex national grid.
Despite these hurdles, the potential benefits of NISO are significant. An independent system operator with a clear focus on grid management could lead to:
Improved grid stability and reduced blackouts
A more efficient and competitive electricity market
Increased transparency and accountability in the sector
Greater investment in grid infrastructure
The success of NISO will depend on its ability to address the existing challenges and capitalize on the opportunities for improvement. Nigerians will be watching closely to see if this new chapter in the country’s power sector story delivers the reliable electricity they deserve.
