Decentralisation Of Electricity Transmission and Distribution: Ondo Electricity Law May Be What The Nation Needs

By Dr. Olukayode Ajulo

In the past one month, one subject which has dominated national discourse, and rightly so, is the spate and incendiary of insecurity in the forests, roads and practically everywhere in the country. The clearly unprecedented howbeit frightening and worrisome reports emanating from different corners of the nation have succeeded in ensuring that other critical piece of development news, such as the recently enacted ground-breaking energy law in Ondo State, have had to practically take the back seat.

My interest in the new Ondo State Electricity law was propelled by an initial newspaper report of the public hearing organized by members of the Ondo State House of Assembly to enable the public make inputs to the law. That newspaper headline claimed that the Ondo State Government intended to break the monopoly of the Local Distribution Company. I immediately leveraged my contacts in Ondo State to obtain a copy of the draft bill and thereafter, a copy of the law after the Governor assented to it.

I am a bonafide indigene of Ondo State and a proud one at that. While work and sundry matters have taken me out of my ancestral home in Akoko in the Northern Senatorial District of Ondo State, my kith and kin in Akoko land have had their fair share of horrendous experience bothering on lack of access to electricity, ‘candlelight’ supply, lack of responsiveness and the total absence of care by the Franchise Area Distribution Company. So, my contribution in this piece is thus motivated by two principal considerations: first that the subject is law and secondly because ‘I am involved’.

An American Clergyman, Henry Ward Beecher (1813 – 1887) once famously stated that “a law is valuable, not because it is a law, but because there is right in it”. This is the exciting thrust of the new Ondo State Power Sector Law which has been crafted to give premium to the interest of the people as against the interest of ‘vested interests’ within government or rent seekers and economic hawks. This is where I particularly found the Governor, Arakunrin Oluwarotimi Akeredolu SAN, and his team as well as the honourable members of the state’s House of Assembly worthy of commendation for their courage.

The Position of the Constitution on Electricity generation, transmission and Management in Nigeria

There are two planks upon which the Ondo State Power Sector Law 2020 rests: (i) the constitutionally protected power of the Ondo State House of Assembly to put in place requisite institutional frameworks and authorities for the generation, transmission and distribution of electricity in areas not covered by a national grid system, as enshrined in Sections (14) Part II Second Schedule (under Concurrent Legislative List) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended); and (ii) the inalienable right of states’ Houses of Assemblies of the federation to enact laws for the protection of consumer interests of their constituents.

Before the bold step taken by Ondo State, most people would be forgiven if they thought that electricity was on the Exclusive Legislative list in the 1999 constitution. Indeed, electricity is item number 13, 14 and 15 on the Concurrent Legislative List.[1]

The erroneous impression of exclusivity is most likely promoted and entrenched by the attitude and disposition of successive sectorial handlers at the national level over the past two decades. Today, electricity is de facto managed, supervised and operated exclusively by the national government. This is against the spirit and letters of the constitutional provisions that anticipate a reasonable level of states’ participation in generation, transmission and distribution and the management of the institutional authorities to make that happen. This is also to a reasonable extent responsible for the epic failure of successive administration in the sector as the power sector’s proverbial headache is borne solely by a single head in violation of that eternal principle that advances that problem shared is half solved.

At this juncture, it is instructive to cast a bird-eye view on the relevant provisions of the Constitution from whence they are tucked. Paragraph 14 on the Concurrent Legislative List provides as follows:
14. A House of Assembly may make laws for the State with respect to-
(a) Electricity and the establishment in that State of electric power stations;
(b) The generation, transmission and distribution of electricity to areas not covered by a national grid system within that State; and
(c) The establishment within that State of any authority for the promotion and management of electric power stations established by the State.

As could be gleaned from the above, at the State level, the Constitution charges the State Houses of Assembly with the responsibility of making laws to regulate electricity. This is because law itself is a system of rules created and enforced through social or governmental institutions to regulate behavior (Robertson, 2012). The word ‘regulate’ is from late Latin regulatus, the past participle of regulare which primarily means ‘adjust by rule’. Additionally, Houses of Assembly can make laws for their respective states with respect to electricity and the establishment, in that state, of electric power stations; the generation, transmission and distribution of electricity to areas not covered by a national grid system within that state; and the establishment within that state of any authority for the promotion and management of electric power stations established by the state.

It must be noted that Nigeria’s energy sector is regulated centrally by the Nigerian Electricity Regulatory Commission.[2] This has created the conditions for corruption and unaccountability to thrive. The result is that the supply of electricity is unstable and cannot support economic development. Basically, Nigeria has done the reverse of the fundamental spirit that guided her constitutional provisions on electricity. Under the 2005 Electric Power Sector Reform Act, all regulations concerning electricity are made centrally for the 36 states and their 774 local government areas.

Comparatively, most countries of the world often decentralize authority within the power sector in order to simplify the management of the sector. They also decentralize the sources of energy generation, transmission and distribution and the means of funding the sector.

The concentration of the power sector in the Central unit as operative in Nigeria is inimical to the growth of the Sector. The central regulator cannot monitor all the stakeholders effectively. The result is corruption, poor service delivery and use of substandard equipment without fear of consequence. Gas pipelines are sometimes vandalised by frustrated citizens whose local needs are not understood or met.

This pseudo-exclusivity that vitiates the position of the constitution in the matter of electric power is what the Governor of Ondo State has now boldly challenged and cleverly sidestepped in a way that I predict would someday become the new national standard, once other governors see what Ondo State has done.

A Snippet of the Ondo State Power Law

While I am aware that Lagos State Government has passed the embedded Power law[3], in my opinion, what stands the Ondo State law apart is the determination to provide clear guidance for areas outside the national grid and the extensive effort put into removing any iota of ambiguity in the definition of what geographical space within the state qualifies as ‘area outside the grid’.

It must be noted that whereas the constitution generously saddles states of the federation with roles in areas outside a national grid system, the constitution does not expressly define or provide parameters for the identification of “areas not covered by a national grid system”.

As silly as that interrogation may appear, it is crucial to the determination of the thin line that represents the state – federal boundary especially in the event that a court of competent jurisdiction in future attempts to settle the role-delineation once and for all. Of course it is trite to assert that the framers of the 1999 constitution understood “areas not covered by a national grid system” in its most basic interpretative format – as a place that does not receive electricity from a network that could be classified as belonging to or being part of the national grid. The Ondo State new law on Electricity captures this theme and set out clear guidelines that positively weaponize it in favour of the common people.

Having settled what could potentially be contentious, the law set to incentivise investment process in electricity in Ondo State by empowering the Governor and the State Executive Council to grant exclusivity permits to investors and offgrid service providers for a number of years subject to continuous favourable performance. The law also protects such investments as critical assets of state.

The reader is no doubt by now wondering about the leaning of the Ondo State law in areas under the national grid. The law provides for a clear framework for embedded power that would enable additional private sector investors to enter into embedded power relationship with the local distribution company subject to the regulation of the Nigerian Electricity Regulatory Commission (NERC). The law stipulates jail term for culprits of energy theft or meter bypass, vandalism and electricity infrastructure sabotage. The tricky part of the law which should be of interest to the generality of Nigerians however, is the framework put in place to protect consumers across the state regardless of whether the location is on the grid or outside a national grid system.

The law invokes consumer protection themes, outlaws bulk metering of communities anywhere within the state and mandate that electricity transactions across Ondo State shall primarily be driven by a two way contract of individual buyer and seller. This radical and novel provision – according to an introductory note on the law by Tunji Ariyomo, the Special Adviser on Energy – treats “electricity outputs as any typical product for which the fundamental contract is between the buyer and the seller thereby challenging the erroneous mind-set that implied a state protection for egregious violation of consumer rights and privileges; an epidemic that has stifled last mile responsiveness of electric product distributors. This is the raison d’etre of the mandate to empanel a state’s ombudsman, within easy reach of the people, for the protection of consumers’ interests in any part of the state”.

That introductory note further states that “the paradox is not lost on the Ondo State Government, that while the word consumer occurs only once in the entire 1999 Constitution (as amended) and incidentally that is solely in relation to electricity – the electric power sector is by far one in which interests of consumers have been intolerably inverted and recklessly violated”.

In the next and concluding part of this public engagement, I will endeavour to drill deeper into specific clauses in the law in order to both inform and educate the public about clever work-around that I have observed in the law and how other states of the federation can leverage this knowledge to make a huge local difference in their states.

[1] See the case of AG FEDERATION V. AG LAGOS STATE (2013) LPELR-20974(SC) where the Supreme Court held that as for the Concurrent Legislative List, it is clear that both the National and State Assemblies can competently legislate on a matter concurrently.

[2] The Nigerian Electricity Regulatory Commission was established in 2006 pursuant to the provisions of Section 31 of the Electric Power Sector Reform Act, 2005.

[3] The Lagos State House of Assembly passed its Power Sector Reform Law of 2018 which makes provisions for the establishment of an embedded power scheme for the (i) scaling up of transmission and distribution infrastructure, (ii) provision of adequate feedstock for power generation and (iii) development of the cost effective tariffs to support embedded power generation among others.

Ajulo, a legal practitioner contributed this piece from Abuja

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