NERC begins consultation process to unbundle TCN

The Nigerian Electricity Regulatory Commission (NERC) has commenced the consultation process to unbundle the Transmission Company of Nigeria (TCN) into the Transmission Service Provider(TSP) and Independent System Operator(ISO).

It said the move was in line with the EPSRA 2004 provision under section 25(b) of the Act, which identifies the Transmission Service Provider (TSP) and System Operations (SO) activities as two separate regulated activities which may be performed by the successor company.

The Commission in a document No. NERC/CP/202, titled: “Towards Greater Independence for the Electricity System Operator,” which was uploaded on its website on Friday, said with the recent tariff Orders issued by the Commission and performance standards, there was a need for greater independence for the operator of the system.

It said: “The Electric Power Sector Reform Act provides for the licensing of the successor transmission company initially charged with responsibility for the building and maintaining the physical national transmission network (often referred to as the “wire business” or “Transmission Service Provider – TSP”) and the system operations function.

“It is envisaged that at a time when the electricity industry is substantially privatized, the Act provides that the holder of the license for the two distinct regulated functions (Transmission Company of Nigeria Plc) may transfer the system operations function to an Independent System Operator (ISO) on such terms and conditions to be decided by the
Nigerian Electricity Regulatory Commission(NERC).”

According to the NERC, the role of System Operator, as provided for, under section 66(1) of the EPSRA
include; generation scheduling, commitment and dispatch; Transmission scheduling and generation outage coordination; Transmission congestion management; International transmission coordination.

Others are: Procurement and scheduling of ancillary services and system planning for long term
capacity; Administration of the wholesale electricity market including the activity of administration of settlement payments, in accordance with the market rules, among others.

It explained that holders of the SO license are expected to ensure neutrality and transparency in the management of the grid by strictly complying with the provisions of the Grid Code and the Market Rules as it affects all market participants.

“The SO and TSP licenses are currently bundled under the auspices of the TCN and there are concerns from market participants in respect of possible conflicts of interest on matters that affect the TSP,” it added.

It stressed that the SO may continue to be a part of the corporate entity of the TCN but operating within the rules of the market in a way that ensures its operational and financial autonomy.

Also, the document suggested that the Federal Government-owned ISO functions may be incorporated into a distinct legal entity wholly owned by the government with its own staff, management and Board of Directors.

“The unbundled SO/MO were considered desirable may be wholly owned by market stakeholders including participants, customer groups and registered as non-profit entity e.g. PJM, CAISO, NYISO,” it added.

In view of these, the Commission sought stakeholder input on “readiness of the electricity industry for the unbundling of the SO function to an independent system operator taking into consideration the stage of market development and the key technical prerequisites for an efficient ISO; “recommend the degree of independence that may currently be granted to the operator of the system without causing disruptions in market stability;

“Where the unbundling of the ISO function is considered appropriate, recommend a possible ownership model and governance structure; and where the unbundling of the ISO function is considered premature, propose possible conditions precedent and timelines for a transition.”

It noted that the system operator, as one of the service providers for the NESI, is currently funded by the electricity market as part of the components of the tariff order.

However, it said where the unbundling of an ISO is considered appropriate, the annual budgets shall be approved in accordance with the provisions in the Market Rules.

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