The NEPA in PHCN: How Nigerians Pay for Darkness (Part 1)

By the year 2000, a state-owned monopoly, the National Electric Power Authority (NEPA), was put in charge of the generation, transmission and distribution of electric power in Nigeria. NEPA operated as a vertical integrated utility company, and had a total generation capacity of about 6,200 MW from 2 hydro and 4 thermal power plants. This ended up becoming a problem, as there was unstable and unreliable electric power supply situation in the country, with consumers frequently exposed to power cuts and long period of power outages. It was an industry characterised by lack of maintenance of power infrastructure, outdated power plants, low revenues, high losses, power theft and non-cost reflective tariffs.

In 2001, the reform of the electricity sector began with the promulgation of the National Electric Power Policy which had as its goal, the establishment of an efficient electricity market in Nigeria. It had the overall objective of transferring the ownership and management of the infrastructure and assets of the electricity industry to the private sector, with the consequent creation of all the necessary structures required to forming and sustaining an electricity market in Nigeria.

The Federal Government of Nigeria (FGN) thus, took further steps towards the Restructuring of the Nigerian Power Sector to establish an electricity supply that is efficient, reliable and cost-effective throughout the country, and which will attract private investment. Subsequently, another Power Sector Reform Act was enacted in 2005, transferring the public monopoly of NEPA to Power Holding Company of Nigeria (PHCN) which was unbundled into 18 Business Units (BU); vis 11 Distribution companies; six Generation companies and one Transmission company.

The Transmission Company of Nigeria (TCN) is one of the successors of the unbundled PHCN, and is currently an asset held under the custodianship of the Federal Ministry of Power. It will initially remain publicly owned. TCN has the responsibility for the management of operation, maintenance and expansion of the 132kV and 330kV transmission system. The Bureau of Public Enterprise (BPE) recently appointed a Management Contractor, Manitoba Hydro International (MHI) for TCN which took over the functions of Transmission Service Provider, System Operator and Market Operator to undertake the overall management of TCN.

System Operations (SO) function was established as a sector within the defunct Power Holding Company of Nigeria under the Transmission sector. The SO has now evolved into a semi-autonomous sector under TCN, and upon acquiring its licence, will operate as an independent company in future. The main responsibility of the System Operator is to operate the transmission system and the connected installed generation, in a safe and reliable manner. SO is also responsible for the overall security and reliability of the grid system, economic dispatch of available generation resources and maintaining system stability. SO has seven functional departments namely; Operations/Control, System Planning, SCADA, Communications, Technical Services, Transitional Electricity Market and System Performance. SO is headed by the Executive Director (System Operation). The operational control hierarchy is as follows:

• National Control Centre (NCC), Osogbo.
• Three Regional Control Centres (RCCs) at Shiroro, Ikeja West and Benin. With proposed control centres at Kano, Alaoji and Gombe.
• Eight Regional Operations Coordinating units (ROCs) at Benin, Enugu, Port-Harcourt, Bauchi, Kaduna, Shiroro, Osogbo and Lagos – several Area Control Centres covering 330kV and 132kV substations, which fall under the supervision of the ROCs.

The mission statement was exercising grid control to maintain an efficient, coordinated and economic supply of electricity in accordance with the grid code and operational procedures. The vision was to operate the grid system efficiently, to ensure open access, safe, reliable and economic electricity supply

In 2005, the Electric Power Sector Reform (EPSR) Act was enacted and the Nigerian Electricity Regulatory Commission (NERC) was established as an independent regulatory body for the electricity industry in Nigeria. In addition, the Power Holding Company of Nigeria (PHCN) was formed as a transitional corporation that comprises of the 18 successor companies (6 generating companies, 11 distribution companies and transmission company), all created from NEPA.

In 2O10, the Nigerian Bulk Electricity Trading Plc (NBET) was established as a credible off-taker of electric power from generation companies. By November 2013, the privatisation of all generation and 10 distribution companies was completed, with the Federal Government retaining the ownership of the transmission company. The privatisation of the 11th distribution company, was completed in November 2014.

Nigeria, known to have Africa’s largest economy, has one of the world’s worst power sectors, producing an average of 5,000 megawatts of electricity for a population of about 215 million since the establishment of its electricity institutions. According to World Bank Report, over 80 million people do not have access to the national grid; and power shortages cost the country $29 billion per annum. By comparison, South Africa, the continent’s second biggest economy, generates about 55,000 megawatts for a population of only about 58 million. Successive governments have tried, but failed to reform Nigeria’s energy sector. The main problems are decaying infrastructure, low investment, debts, and poor management. There are also “operational inefficiencies”, so said PricewaterhouseCoopers (PwC), in a 2020 report.

The Operation of the Power Sector

Transmission 

The Transmission Company of Nigeria (TCN), manages the electricity transmission network in the country. It is one of the 18 companies that was unbundled from the defunct Power Holding Company of Nigeria (PHCN) in April 2004, and is a product of a merger of the transmission and system operations parts of PHCN. It was incorporated in November 2005, and issued a transmission licence on July 1, 2006. The TCN is presently fully owned and operated by the Government, and as part of the reform programme of the Government, it is to be reorganised and restructured to improve its reliability and expand its capacity.

TCN’s licensed activities include electricity transmission, system operation and electricity trading. It is responsible for evacuating electric power generated by the electricity generating companies (GenCos) and wheeling it to distribution companies (DisCos). It provides the vital transmission infrastructure between the GenCos and the DisCos’ Feeder Sub-stations. TCN consists of three operational departments:

1. Transmission Service Provider (TSP)

The TSP oversees the development and maintenance of the transmission infrastructure. It is responsible for the national inter-connected transmission system of substations and power lines, and providing open access transmission services. Its role is to maintain the physical infrastructure that make up the transmission grid, and expand it to new areas.

2. System Operations (SO)

The SO manages the flow of electricity throughout the power system, from generation to distribution companies. It operates the Grid Code for the Nigerian Electricity Supply Industry (NESI). The SO has the responsibility for ensuring that the transmission grid lines are reliable, and maintaining the technical stability of the grid through its operations of planning, dispatch, and control of the electricity on the grid.

3. Market Operations (MO)

The MO administers the market rules of the NESI. It is responsible for the administration of the Electricity Market, and promoting efficiency in the market. Specifically, the roles of MO include implementing and administering the Nigerian Electricity Market Rules; drafting and implementing the Market Procedures; administration of the Commercial Metering System, by ensuring that each trading point has adequate metering systems in place; administration of the Market Settlement System; Administration of the Payment System and commercial arrangement of the energy market, including Ancillary Services; supervising Electricity Market Participants’ compliance with and enforcing the Market Rules and the Grid Code. The functions also encompass periodic reporting on the implementation of the Market Rules; capacity building of market of Participants on the Market Rules and Procedures and Trading Arrangements, finally, at the long-term stage of the electricity market, of the MO is to ensuring and promoted competition among market participants.