Outlined below are the key events and actions that have defined the development of NERC and the Nigerian
Electricity Supply Industry (NESI) in general.

NERC AS AN INDEPENDENT REGULATOR

The Nigerian Electricity Regulatory Commission is an independent body, established by the Electric Power Sector Reform Act of 2005 (repealed), now the Electricity Act of 2023 to undertake technical and economic regulation of the Nigerian Electricity Supply Industry. The Commission is to, among others license operators, determine operating codes and standards, establish customer rights and obligations and set cost reflective industry tariffs. The Commission has its head quarters in Abuja, and currently has presence in most states of the country through its Forum Offices which function as the first level of escalation for customer complaints that are not resolved by the electricity distribution companies (DisCos).

Since inception, NERC has recorded significant achievements including the expansion of capacity and network by the issuance of licences for electricity generation, transmission, distribution and trading as well as the development of industry codes and standards, market rules and a multi-year tariff order. In addition, the Commission has issued various regulations and orders that have created an attractive and stable electricity market in Nigeria.

These achievements have been made possible by ensuring that market transactions are rule based and regulatory interventions are preceded by robust consultative and stakeholder engagement processes to ensure transparency, fairness and accountability.

These qualities of transparency, fairness and accountability are critical to NERC Nigeria’s independent apex regulator. The Electricity Act was thorough in ensuring this independence. The Act gave statutory recognition to, and enshrined the principle of regulatory independence, by providing:

1.     For the creation of the apex regulator of the NESI by an Act of the National Assembly rather than by subsidiary legislation. Section 33 (1) of which says:

” There is established the Nigerian Electricity Regulatory Commission (in this Act, referred to as “the Commission”), which shall be a body corporate with perpetual succession which can sue or be sued in its corporate name and subject to this Act, perform all acts that bodies corporate may by law perform”

Section 33(3) further states that: “The Commission shall be the apex regulator of the NESI and shall be an independent body in the performance of its functions and exercise of its powers under this Act”.

Regulatory decisions are to be taken by a board of Commissioners under section 35 (1) which states that the Commission shall consist of seven full time Commissioners appointed by the President subject to confirmation by the Senate.” These Commissioners, under section 226 of the Act may make regulations on all matters on which the Commission have powers.

2.      Funding from internally generated revenue, as well as government subventions. Section 53 of the Act deals with funding for the Commission: “The funds of the Commission shall consist of:
(a) fees, charges and other income accruing to the Commission from licensees and other things done by it in terms of this Act, excluding any fines or penalties recovered under this Act;
(b) funds allocated to the Commission by the National Assembly, under a request by the Commission for additional funds required to meet its reasonable expenditures; and
(c) such other moneys as may vest in or accrue to the Commission, whether in the course of its operations or otherwise.

Currently, the Commission collects 1.5% of market revenue as regulatory charge vide the Market Operator. In considering the regulatory fees and charges, it should be noted that:

i. NERC’s responsibility is to regulate standards of performance for all electricity licensees and monitor performance to ensure that those standards are met and maintained or even exceeded;
ii. The regulatory charge is used not only to finance the work of the Commission, including monitoring and enforcement, but is also used to finance the activities of other market working groups, panels and committees through which much of the consultative, dispute resolution, rule-making and protection of public interest (especially the rights of customers) is achieved.

3.     The Commission has the authority to employ the kind of staff it needs, and pay them salaries and allowances that are competitive,that are capable of retaining them and incentivising them.

Section 43 empowers the Commission to pay to the Commissioners such salaries and allowances as they determine, having regard to the advice of the National Salaries & Wages Commission. In making recommendations to the Commission, the National Salaries, Incomes & Wages Commission is to take into account the following principles:

1. Specialized nature of the Commission’s work;
2. The need for financial self sufficiency of the Commissioners;
3. Salaries paid to individuals of equivalent responsibility, experience and skills in the private sector;
4. The nature of the Commissioner’s expenses; and
5. Such other considerations that may be necessary to arrive at a fair and competitive salaries and allowances remuneration for Commissioners.

By the provision of the Act, the Commission has the right to approve appropriate salaries for the Commissioners after due consideration of the recommendations of the National Salaries, Incomes & Wages Commission. The ultimate authority is that of NERC. it is in pursuance of the Act that the pioneer Commissioners approved the salaries and allowances of staff and themselves.

The Commission believes deeply in the value that its regulatory independence creates for an electricity market that can only thrive in an environment of certainty. The Commission performs its regulatory functions effectively with the benefit of the laws of independence enshrined in its Act, and by recognising that regulatory independence also coexists with respectful interdependence. As the market develops, it is hoped that the Commission can fully remove itself from government funding. In the mean time, we will continue to emphasise on rule-based processes, transparency, fairness and continuous consultation.