NERC AS AN INDEPENDENT REGULATOR
The Nigerian Electricity Regulatory Commission is an independent body, established by the Electric Power Sector Reform Act of 2005 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 has currently six zonal offices in the six geopolitical zones of the country.
Since inception, NERC has recorded significant achievements including the expansion of capacity and network by the issuance of licences for electricity generation, transmission and distribution, 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 as an independent regulator. The EPSR 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 a regulator by an Act of the National Assembly rather than by subsidiary legislation. Section 31 (1) of which says:
" There is established a 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, reform all acts that bodies corporate may by law perform"
Regulatory decisions are to be taken by a board of Commissioners under section 34 (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 96 of the Act may make regulations on all matters on which the Commissions have powers.
2. Funding from internally generated revenue, as well as government subventions. Section 52 of the Act deals with funding for the Commission: "The funds of the Commission shall consist of:
(a) fees, charged 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 pursuant to this Act;
(b) funds allocated to the Commission by the National Assembly, pursuant to 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. (link to table)
Section 5(42) 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 recomendations to the Commission, the National Salaries, Incomes & Wages Commission is to take into account the following principles:
a. Specialized nature of the Commission’s work;
b. The need for financial self sufficiency of the Commissioners;
c. Salaries paid to individuals of equivalent responsibility, experience and skills in the private sector and;
d. The nature of the Commissioner’s expenses.
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. To this end, 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 emphasize on rule based processes, transparency, fairness and continuous consultation.