.. BPE, MOFI emerge as NISO shareholders
… TCN to focus on developing, maintaining power transmission infrastructure
… as Engr. Dr. Eje steers NISO
…all employees under defunct System Operator transfered to NISO with equal terms
Oredola Adeola
The Nigerian Electricity Regulatory Commission (NERC) has issued a new Order for the establishment of the Nigerian Independent System Operator Limited (“NISO”) effective from 1 May 2024, to 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 NERC may specify.
This was contained in the Commission’s order, tagged ORDER NO: NERC/2024/45, issued on April 30, 2024, jointly signed by Sanusi Garba, and Musili Oseni, Vice Chairman, NERC in compliance with the Section 15 of the Electricity Act (the “EA” or “Act”) 2023 came into effect on 9 June 2023.
According to the NERC’s Order, which was also envisaged on the repealed Electric Power Sector Reform Act 2005 (“EPSRA” or the “Repealed Act”), TCN is expected to transfer the function of system operation for the national grid to an Independent System Operator (“ISO”).
This therefore means that the new NISO which is expected to be incorporated by the Bureau of Public Enterprise (BPE) no later than May 31, 2024, will now carry out all market and system operation-related contractual rights and obligations transferred to it by the Transmission Company of Nigeria (TCN).
NISO is expected to carry out all market and system operation-related contractual rights and obligations novated to it by the TCN, including the right to negotiate and enter into contracts for the procurement of ancillary services with independent power producers, successor generation licensees, etc.
NISO is expected to generally carry out market and system operations functions as specified under the EA and the terms of its license in the interest of market participants and system users.
It is also expected to carry out all market and system operation-related contractual rights and obligations novated to it by TCN.
The Order establishing NISO also mandates that the income and property transferred to it by the TCN shall be applied solely towards the promotion of its objects as outlined in its incorporation Documents.
The Commission ordered that no portion thereof shall be paid or transferred directly or indirectly by way of dividend, or bonus otherwise howsoever, by way of profit to the subscribers, provided that nothing herein contained shall prevent the payment in good faith of remuneration to any contractor or staff of the company in return for any services rendered to the Company.
The Order further established that the transfer function of system operation shall be concluded no later than 31 August 2024 when TCN is expected to fully hand over its system operation licence to NERC within 7 days of that date.
Advisors Reports recalled that under the guideline of the now repealed Electric Power Sector Reform Act 2005 (“EPSRA” or the “Repealed Act”) the TCN was a successor company issued with 2 (two) separate licences to operate as the transmission service provider and system operator for the national grid system by the Commission.
Meanwhile, the new Order by NERC has therefore stipulated that the incorporation of ISO, as a private company limited by shares under the Companies and Allied Matters Act, no later than 31 May 2024, will grant the new body the responsibility of carrying out the market and system operation functions based on the provision of the EA and the terms and conditions of the system operation licence issued to TCN.
Acting on the provision of Section 15 of the EA, regarding the incorporation and licensing of the ISO, the TCN being the successor company issued the license that covers Transmission Service Provider, market, and system operation functions under the EPSRA 2005, was expected to take such steps to incorporate NISO which may be a company limited by shares or have such ownership and governance structure.
It also stated that NISO, once incorporated under the provisions of that section shall immediately apply to the NERC and be licensed to carry out such market and system operation functions as stipulated under the Electricity Act(EA).”
The Order emphasised that upon incorporation and issuance of an ISO license by the Commission, the TCN shall transfer to the ISO all the assets and liabilities it held pertaining to its market and system operation functions.
The ISO is by the order expected to be subject to such powers and duties under the terms of its license and the provisions of this Act about market and system operation.
Advisors Reports therefore gathered that the TCN shall henceforth retain its Transmission Service Provider license and shall be responsible for transmission assets and liabilities and perform such functions as are relevant to the development and maintenance of the power transmission infrastructure by the terms of its license as may be issued by the Commission and the provisions of the Electricity Act.
The Commission shall, through an order, put in place a clear plan and timeline for the transition process in subsections (1) and (2) of this section above to avoid disruption of industry operations.
NERC noted that it has held several stakeholder consultations and public hearings on the determination to help ISO achieve the objective of its creation.
The stakeholder’s consultations by NERC were also to prepare the ISO for the separation of the System Operator (“SO”) and Market Operator (“MO”) from TCN, as well as the opportunity to establish an appropriate legal entity/structure for the ISO, including clarity on the ownership and governance structure for the new entity.
NERC therefore emphasised that the outcome of the consultations and hearings indicated that the Nigerian
The Electricity Supply Industry (NESI) requires an ISO to provide confidence to market participants.
Advisors Reports further gathered that the initial subscribers of NISO at the preliminary stage are the Bureau of Public Enterprises (“BPE”) and Ministry of Finance Incorporated (“MOFI”), while the final shareholding structure of NISO shall be determined after further consultations with government, market participant and industry stakeholders.
The Commission has also ordered TCN to conclude the identification and mapping of the assets and liabilities for the system/market operation portion of its business and forward the same to the regulator and the BPE no later than 30 June 2024.
NERC also emphasised that every person employed by TCN to perform market and system
operations immediately before the Transfer Date shall be transferred to the service of NISO on terms not less favourable than those enjoyed by him/her immediately before his/her transfer.
It further established that the service rendered by such employee transferred from TCN shall be deemed service with NISO to determine employment-related entitlements as specified in relevant laws of employment in Nigeria.
Advisors Reports has therefore confirmed that Engr. Dr. Edmond Eje, is by the latest development expected to steer NISO towards a new era of efficiency and reliability in Nigeria’s electricity market and system operations.
