In 2013, the Transmission Company of Nigeria (TCN) was issued two licenses for electricity transmission and system operations. Since then, the TCN has been saddled with the responsibility of transmitting power across the nation and operating as an independent system operator ("ISO"). This dual mandate granted the TCN oversight of the national grid and the authority to manage Nigeria's transmission infrastructure, including substations and transmission lines. However, playing the dual role of a transmission service provider and a system operator resulted in challenges in operational performance, notably highlighted by the incessant grid collapses.
On the strength of the Electricity Act (EA), 2023, which directed the incorporation of an entity to be licensed as an ISO to perform the market and system operation functions previously performed by the TCN, the Nigerian Electricity Regulatory Commission ("NERC") through an Order titled "Order on the Establishment of the Independent System Operator (Order No: NERCC/2024/45)" unbundled the TCN into two entities: the Nigerian Independent System Operator Nigeria Limited ("NISO") and the Transmission Service Provider ("TSP").
In this article, we focus on the recent transformation of TCN into the NISO and the TSP, the potential opportunities the unbundling presents for enhancing operational efficiency and grid reliability and the key things to consider prior to the conclusion of the transfer.
Formation of the NISO and TSP
The EA, 2023, provides the legal framework for the creation of the NISO and TSP. In line with Section 15(2) of the EA, the TCN is expected to retain its TSP license and is responsible for the development and maintenance of the power transmission infrastructure as per its license terms, upon the incorporation and issuance of an ISO license by the NERC. This Section also outlines clear guidelines for the incorporation, governance and licensing requirements of the ISO. Additionally, it specifies the procedures for the transfer of assets and liabilities from the system operations segment of the TCN to the ISO.
In a bid to ensure that roles and responsibilities are clearly spelt out with the aim to enhance grid stability and promote regulatory compliance in Nigeria's power sector, the NERC through Order No: NERCC/2024/45, announced the unbundling of the TCN and the establishment of a new entity, called NISO, which was expected to have been incorporated by 31 May 2024 by the Bureau of Public Enterprises.
As expected, the primary objective of the NISO is to perform the market and system operation functions previously held by the TCN. Other objectives of the NISO include:
- Asset Management: The NISO is to hold and manage assets and liabilities related to market and system operations on behalf of designated stakeholders as may be specified by the NERC.
- Contract Execution: The NISO is expected to execute all market and system operation related contractual rights and obligations transferred from the TCN.
- Ancillary Services Management: The NISO will be responsible for negotiating and entering into procurement contracts for ancillary services with relevant entities, including independent power producers and successor generation licensees.
- Resource Allocation: The NISO is to ensure that all income and property whether derived or transferred to it by the TCN is applied solely towards promoting its operational objectives.
By performing these objectives, the NISO is expected to play a significant role in fostering a robust and sustainable power market.
Potential Benefits of the Unbundling of the TCN
The unbundling of TCN into the NISO and TSP presents significant opportunities for Nigeria's power sector, some of which include:
- Operational Focus: With distinct roles and responsibilities, the NISO can focus solely on system operations, ensuring better coordination, efficiency, and grid stability while the TSP can concentrate on infrastructure development and maintenance, potentially leading to improved overall operational performance.
- Access to Financing: The clarity in roles between the NISO and TSP should assist in significantly enhancing investor engagement, thereby facilitating substantial capital injection within the power sector.
- Grid Reliability: The specialized focus of NISO on system operations should significantly enhance grid reliability. Through improved monitoring, proactive maintenance, and optimized operational strategies, the NISO can ensure minimal downtime and disruptions in power supply, thereby improving overall grid reliability.
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