NERC Orders Creation of NISO to Unbundle Nigeria's Power Sector

The Nigerian Electricity Regulatory Commission (NERC) has issued a directive to split the Transmission Company of Nigeria (TCN) and establish the Nigerian Independent System Operator Limited (NISO), effective May 1, 2024. This development aligns with the objectives outlined in the repealed Electric Power Sector Reform Act 2005 (EPSRA) and the Electricity Act (EA) of 2023.

Why this matters: The unbundling of Nigeria's power sector has significant implications for the country's energy landscape, as it aims to increase efficiency and transparency in the electricity market. This development could lead to improved power supply and reduced energy costs for Nigerian citizens and businesses, ultimately contributing to the country's economic growth and development.

Under the new structure, NISO will be responsible for holding and managing all assets and liabilities related to market and system operation on behalf of designated stakeholders, including market participants and consumer groups as specified by NERC. Theindependent systemoperator will also execute all market and system operation-related contractual rights and obligations previously held by TCN.

The transfer process is expected to be completed no later than August 31, 2024, with TCN mandated to hand over its system operation license to NERC within seven days thereafter. Following the unbundling, TCN will retain its Transmission Service Provider license and will be responsible for overseeing transmission assets and liabilities, as well as performing relevant functions related to developing andmaintaining powertransmission infrastructure.

The establishment of NISO aims to enhance the efficiency and transparency of Nigeria's electricity market and system operations while fostering a more robust regulatory framework that supports sustainable energy development and ensures reliable power supply across the nation. The NERC order, dated April 30, 2023, was jointly signed by NERC Chairman Sanusi Garba andVice ChairmanMusiliu Oseni.

As outlined in the memorandum of association (MOU),"The company shall hold and manage all assets and liabilities pertaining to market and system operation on behalf of market participants and consumer groups or such stakeholders as the Commission may specify. "NISO will also be empowered to negotiate and enter into contracts for the procurement of ancillary services with independent power producers andsuccessor generationlicensees.

The Bureau of Public Enterprises (BPE) has been mandated to incorporate NISO as a private company limited by shares under the Companies and Allied Matters Act (CAMA), 2020, by May 31, 2024. This development is part of a sweeping overhaul aimed at redefining Nigeria's electricity sector and enhancing operational efficiency and performance within the electricity value chain.

The Electricity Act 2023, enacted on June 9, 2023, provided the regulatory framework for the establishment and licensing of the Independent System Operator (ISO) and the transfer of assets and liabilities from TCN. With the creation of NISO, Nigeria takes a significant step towards unbundling its power sector and improving the overall performance of the electricity industry.

Key Takeaways

• NERC splits Transmission Company of Nigeria (TCN) into two entities: TCN and Nigerian Independent System Operator Limited (NISO).
• NISO to manage market and system operations, while TCN focuses on transmission assets and liabilities.
• Unbundling aims to increase efficiency, transparency, and reliability in Nigeria's electricity market.
• Transfer process to be completed by August 31, 2024, with TCN handing over system operation license to NERC.
• NISO to enhance electricity market efficiency, foster sustainable energy development, and ensure reliable power supply.