The Indian electricity supply industry: A model for Nigeria

It is no longer in doubt that although electricity generation in Nigeria started in 1896 it was not until 1929 that the first Utility company (the Nigerian Electricity Supply Company) was established. In the 1950s and 1960s the Nigerian government created the Electricity Corporation of Nigeria to control all existing diesel/coal fired isolated power plants across the country and the Niger Dams Authority to develop hydroelectric power in Nigeria. In 1972, these two entities were thereafter merged into the National Electric Power Authority (NEPA).By the late 1990s it became clear that the publicly owned and operated electricity system was failing to meet Nigeria’s power needs.

Prior to this time, NEPA was responsible for generating, transmitting and distributing electricity, in addition to the responsibility for regulating itself. NEPA operated more or less like a System operator without commercializing the generation, transmission and the distribution of electricity. This perhaps accounts for the moribund nature of most of Nigeria’s electricity facilities. However, on November 1, 2013, President Goodluck Jonathan’s administration took a bold and commendable step by fully liberalizing and commercializing the Nigerian electricity market by unbundling the monopolized Power Holding Company of Nigeria (PHCN). The quite naturally attracted private sector participation of both foreign and local experts in the electricity market.

The liberalization and privatization of the electricity sector in Nigeria marked the end of a phase in the reform of the power sector. But, it also marks the beginning of another phase. It ends the phase of structural transformation of the sector, and marks the beginning of the phase of cultural and technical transformation.

The power transition started in 2001 when the National Council on Privatization, NCP issued the Nigeria Electric Power Policy (NEPP) which culminated into the formal hand over of the power assets on November 1, 2013 at a colorful but memorable ceremony. Many months after the handover, there have been myriads of complaints both from the consumers of electricity as well as the owners of the Successor companies. What is clear is that whatever model Nigeria has adopted for its electricity market now calls for a review. What has become prevalent in the Sector is our reactionary attitude to events as they occur in the Sector.An example of such is the approval of the Interim Rules, the now proposed establishment of the Nigerian Electricity Management Services Authority (NEMSA) etc. 

To sustain the government’s sterling efforts in the ongoing reforms, there is a need to review whatever model Nigeria has adopted vis a vis its peculiar and unique circumstance. Carefully understudying the Nigerian structure, the closest model ascribable to the model adopted in Nigeria is the Indian model. This paper therefore seeks to review that model for a better understanding.

In carefully reviewing the Indian model, it must be noted that Indian has achieved greater capacity and technology sophistication in its electricity market, however, that market model is still ‘work-in-progress (WIP) as is with the Ghanaian model. Admittedly, there are elements Nigeria can learn from but we(Nigeria) need to define what should be uniquely ours.

THE INDIAN ELECTRICITY MARKET: 

As at June 2014, India was reported to be generatingabout 249.488 GW, which is roughly 4.8% of global power generation. With this, India could be said to have such electricity capacity that surpasses those of Japan and Russia. During the 2013-2014 fiscal year, India is reported to have generated about 967 Terra Watt-hour (TWh) (967,150.32 GWh) of electricity (and this excludes electricity generated from renewable and captive power plant), with its total annual generation of electricity from all types of sources being put at 1102.9 TWh. 

It is therefore no surprise that the present electricity reform in India has elicited competitions through international competitive bidding, which has identified transmission as a separate activity and has created wider private sector participation. It is instructive to note that the government of India is working on an electricity model that would generate 24-hour power supply across the states in India. This declaration was made by the Minister of Power, Coal and New and Renewable Energy, PiyushGoyal on Friday, 18, July 2014, where the Minister declared that the government is working on replicating the Gujarat’s JyotigramYojana for rural electrification scheme to be executed through a special purpose vehicle with equity participation from the Power Finance Corporations (PFC), the Rural Electrification Corporation (REC) and the state government. Currently, about 60% of villages in India have been electrified with a further goal of providing complete electrification by 2025.

The essence of this papertherefore, is to critically analyzethe electricity sector in India with specific reference to the regulation and administration, privatization of the power sector, regulatory and other challenges underpinning the electricity sector of India. 

1.2 The Legal Framework, Regulation and Administration of Electricity in India 

1.2.1 The Current Legal Structure of Electricity in India 

The Electricity Act, 2003, is the principal legislation for electricity in India. The Act consolidated all laws of electricity relating to generation, transmission, distribution and trading of electricity in India. It further created the independent regulatory commission and other statutory bodies tasked to develop the electricity market with their respective roles set out under the Act. 

1.2.2 Electricity Administration in India

Electricity is a concurrent legislative List as provided under the Entry 38 in List III of the 7thSchedule of the Constitution of India which states as follows:

Section 3 (1)

“The Central Government shall, from time to time, prepare the National Electricity Policy and tariff policy, in consultation with the State Governments and the Authority for development of the power system based on optimal utilization of resources such as coal, natural gas, nuclear substances or materials, hydro and renewable sources of energy”.

Section 3 (2)

“The Central Government may, from time to time, in consultation with the State Governments and the Authority, review or revise, the National Electricity Policy and tariff policy referred to in sub-section (1)”.

At the central level, the Ministry of Power is the apex central government body that regulates electricity in India.  This Ministry was created on July 2, 1992, with the responsibility of planning, policy formulation, processing of projects for investment decisions, monitoring project implementation, training and manpower development, and the administration and enactment of legislation with regard to thermal, hydro power generation, transmission and distribution in India. It is also responsible for the administration of the Electricity Act 2003, and the Energy Conservation Act, 2001 in accordance with the policy objectives of the India government. 

1.2.3. Electricity Regulatory framework in India

The Central Electricity Regulatory Commission (CERC), the Central Electricity Authority (CEA), and the State Electricity Regulatory Commission (SERC) are the three regulators of electricity in India. The CERC is a statutory body initially constituted on July 24, 1998 under the Ministry of Power pursuant to the Electricity Regulatory Commission Act, 1998 for whose principal objective was the rationalization of electricity tariffs, formulation of transparent policies regarding subsidies, promotion of efficient and environmentally benign policies, and all other matters connected with electricity tariff regulation in relation to all central government power utilities, inter-state generating companies and inter-state transmission tariffs in India. The CERC is further vested with quasi-judicial functions under Section 76 of the Electricity Act 2003. 

Tolulope Aderemi