A COMPARATIVE ANALYSIS OF LEGAL FRAMEWORK FOR CONSUMER PROTECTION IN THE NIGERIAN ELECTRICITY SUPPLY INDUSTRY

ABSTRACT

Since 2000, Nigerian government has been reforming its electricity sector. The reform became necessary to overcome the structural problems that led to the collapse of the sector. Key features of the reform include liberalization and privatization. Today, generation and distribution of electricity are in the control of private sector yet there is not much improvement, especially in the quality of service to consumers. In a private electricity market, operators are focused on profitability. This may impact adversely on customer welfare unless there is a strong and responsive regulatory regime that enforces quality of service standards and protects the rights of customer to fair and just pricing and access to adequate, reliable, and affordable electricity. This paper considers the performance of the Nigerian electricity supply industry in satisfying the expectations of customers. It audits the legal and institutional regimes for the customer in the electricity sector and analyzes whether the regimes are adequate and contextualize to the unique challenges of the Nigerian market. It reviews the performance of the electricity regulators in enforcing these standards, punishing non-compliant operators, and compensating customers. Using a combination of doctrinal and non-doctrinal approach, and analytical methodology, the paper finds that although the legal regime for customer protecting in the electricity market are to a great extent adequate, the institutions that are saddled with the responsibility of enforcing the laws do not enforce them efficiently. In this wise, the paper recommends ways of improving both the minute deficiencies in the law and the weak enforcement mechanism in order to guarantee customer welfare in the Nigerian electricity market.

 

CHAPTER ONE 

GENERAL INTRODUCTION

1.1 BACKGROUND

Since the invention of electricity, it has become essential to human life and to every nation of the world. The electricity sector is a vital sector of a nation’s economy because apart from the domestic needs of electricity, it is pivotal to the economic development of a nation and correlates with success rate in poverty alleviation efforts. For these reasons there is a need for the electricity sector to be efficient. Natural gas, Oil, Hydro, and Coal are the four different types of conventional energy sources for power production. In Nigeria, electricity generation is heavily dependent on petroleum. This has affected the development of the other forms of energy, particularly renewable sources like solar and wind. It is estimated that about 81% of the total generated capacity in Nigeria’s electricity market is from gas-fired plants.^[1]

The Nigerian Electricity power sector has undergone transition and transformation. It was once vertically integrated, where the National Electricity Power Authority (NEPA) generates, transmits, and distributes electrical energy to businesses and homes in Nigeria. But the Nigerian

Electricity Power Sector did not start with NEPA. It started with a 27megawat coal-fired plant in Ijora in 1896^[2]. Later the Electricity Corporation of Nigeria and the Niger Dam Authority were established. Both merged in 1972 as NEPA, a vertically integrated public monopoly.^[3] In 2001,

 

the National Electric Power Policy (NEPP) liberalized the sector to allow private sector participation. As part of the reform, NEPA was later unbundled into eighteen companies six

Generation companies (Genco’s), eleven Distribution companies (Discos), and one transmission company.^[4] This was followed by the creation of the Nigerian Electricity Regulatory Commission in 2006 to regulate and monitor Nigeria’s power sector^[5]. However, since the unbundling and privatization of the sector, power supply has not improved in Nigeria. Consumers still lay complaints about inadequate supply of electricity, pricing, unsafe operations, and other issues that plague the Nigerian electricity supply industry. This paper seeks to analyze consumer protection in the Nigerian Electricity supply industry, the existing and proposed framework to effectuate the protection, the efficacy of such frameworks, and ultimately, offers recommendations.

1.2STATEMENT OF THE PROBLEM

Although Nigeria has been generating electricity for over a century, the growth of electricity infrastructure in the country has been inexplicably slow and power supply remains inadequate. This was one of the problems that led to the privatization of the generation and distribution sector of the electricity industry. However, it may seem as though this problem rather adapted to the new development rather than being solved. According to the 2016 World Bank statistics on population and electricity access, 40.7% of the Nigerian population are not connected to the national power grid^[6]. For those who are connected, 90% of the electricity demanded is not

 

supplied^[7]. Nigeria presently has the capacity to generate about 13.5 GW, but the average operational capacity is 3,879 MW of which about 74% is in transmission, and 27.7 load is rejected at distribution, leaving Nigeria with 2,519 MW.^[8] This is far below the demand rate of the country, which translates that some consumers would get below the expected, while some would not be supplied at all.

Apart from the gap between the demand and supply curve in the electricity industry, other issues still threaten this industry. Tariff pricing is another issue that affects consumers in the NESI. Tariffs are a source of funding to the electricity sector, but what cost is fair? Due to rising supply cost, coupled with inflation, currency devaluation etc., tariffs can become excessive and unaffordable^[9]. When tariffs are excessive, the consumers are being unduly exploited to pay a cost way higher than the quantity and quality of supply delivered. The reality of this problem is worse in a country like Nigeria where almost half of its population is living in abject poverty.^[10]

Infrastructural inadequacy can also affect the consumers. Inadequate or substandard infrastructure that exists across the entire value chain can affect the quality of service the consumer is entitled to.^[11] This technical challenge is one of the reasons why the Nigerian electricity sector has not seen much development, and electricity supplied is way below that demanded.

 

Negligence by electricity companies and failure by Nigerian Electricity Regulatory Commission (NERC) to conduct due diligence imposes significant costs on distinct categories of consumers. in 2017, The Network for Electricity Consumers Advocacy of Nigeria (NECAN) reported the death of 366 Nigerians by electrocution because of man-made factors, another forty-two persons reportedly lost their lives in thirty-eight fatal accidents caused by faulty systems in the electricity distribution arm of the power sector in the first five months of 2018.^[12] These operational failures need to be addressed to ensure the protection of consumers.

Considering all these shortcomings of the NESI, it is important to examine the legal and institutional regime for consumers’ protection in the industry. This paper further seeks to analyze relevant legislations to understand the clarity and comprehensiveness of the statutory mandate of the NERC to protect electricity consumers in Nigeria. The laws under focus here include the Electric Power Reform Act and the Nigerian Competition and Consumer Protection Act. Focus on the latter will be subsidiary. Furthermore, the paper questions the effectiveness of the sector’s regulator, NERC, in developing regulatory regime and implementing to promote consumer welfare in the sector, the degree of awareness of this regulatory regime and the satisfaction or otherwise of consumers of electricity services.

1.3 RESEARCH QUESTIONS

1. What are the practices that affect consumer rights in the electricity supply industry in

Nigeria?

2. To what extent are consumer rights protected in the Nigeria electricity supply industry?

 

3. Are the legal frameworks sufficient to protect consumers of the Nigerian electricity supply industry?
4. To what extent are the institutions for the protection of consumer right in the Nigerian electricity supply industry efficient?

1.4 AIM AND OBJECVTIVES

The aim of this study is to examine the problems consumers face in the Nigerian electricity supply industry, and how various laws and institutions protect these rights of the consumers.

The objectives of this study are:

1. To examine the practices that affects the rights of consumers in the Nigerian electricity supply industry.
2. To determine the extent to which consumer rights are protected in the Nigerian electricity supply industry.
3. To determine the extent to which laws and institutions are efficient in the protection of consumer right in Nigeria.

1.5 SCOPE AND LIMITATION

SCOPE

This research is centered on the Nigerian Electricity supply Industry, so the Electric Power Sector Reform Act 2005 is the main legislation that is used to analyze consumer protection in the sector. Other legislations used for the research work are the Constitution of the Federal Republic of Nigeria 1999 (as amended) and the Federal Competition and Consumer Protection Act 2018.

This study also examines some institutions which are important in the protection of consumers in the Nigerian electricity supply industry. The institutions examined in this study are the Nigerian

Electricity Regulatory Commission and the Federal Competition and Consumer Protection Act. Essentially, this study discusses these legal and institutional frameworks and their efficacy in protecting the consumer of the Nigerian Electricity Supply Industry.

LIMITATION OF STUDY

Four factors affected my ability to effectively conduct this research. The factors are:

1. Financial Constraint: The researcher had limited financial resources to fully execute the study. A study of this nature requires adequate funds to enable the researcher to exhaust all points and relevant study areas. The inadequacy of funds has affected the quality and precision of work as the researcher was unable to purchase some important research materials both online and physically. This challenge was minimized through sourcing for funds from parents, friends, and relatives. Management of available funds was another way that this challenge was minimized.
2. Time Constraint: The time allocated for this paper was not adequate to conduct extensive research, especially as the researcher had to combine this study with other academic engagements. The nature of this study requires dedication and adequate time to capture the aims and objectives set out to achieve. This challenge may affect the precision and quality of the study. Proper time management and sacrificing extra hours helped the researcher tackle this limitation.
3. Covid-19 Pandemic: The covid-19 pandemic restricted the researcher from conducting some in-person interviews and on-sight research. The researcher mitigated the impact of this limitation through the use of online platform for interviews.
4. Difficulty in Accessing Relevant Research Materials: The Researcher had trouble in accessing all the relevant material needed for this study. Some of these research materials were either not available for public use or were difficult to access. Because of this limitation, the researcher had no option but to make use of the available materials for this study. This limitation consequently affected the quality and precision of the study, but the research was able to minimize this challenge by making good us of the available materials and going the extra mile to source for more materials.

1.6 SIGNIFICANCE OF THE STUDY

This paper is significant in that it provides a close study of the effectiveness of the legal and regulatory regimes of the Nigerian electricity supply industry. This is important because of the important of electricity services to economic and social development in Nigeria and the present national discourse on the success or failure of the reform of power sector in Nigeria. The analysis in this paper would aid researchers and policymakers in understanding the shortcomings of the present structure and regime of electricity industry. Therefore, it contributes to scholarship in an area that has not witnessed much rigorous scholarship in Nigeria. Also, the recommendations arising from the analysis in the paper would aid legislators in reforming the legal regime of the industry.

1.7 RESEARCH METHODOLOGY

The approach used by this researcher is the doctrinal and non-doctrinal research method.

Doctrinal approach is considered as “normal judicial research”^[13] and it is all about examining

 

legal theory and how it is being formed and implemented.^[14] This approach enables the researcher take more or more legal prepositions, principles, rules, or doctrines as a starting point and analyzes them. It uses a non-doctrinal approach because the researcher employed the use of survey to collect data. This study also uses analytical research methodology because it analyzes the various frameworks responsible for protection of consumers in the Nigerian electricity power sector, as well as their efficacy. Primary, secondary, and tertiary sources are reviewed in this study. The primary materials used are relevant legislations on protection of consumers of the

Nigerian electricity supply industry such as the Constitution, Electric Power Sector Reform Act (EPSR) Act 2005, Federal Competition and Consumer Protection Act 2018. Other materials used are judgments on consumer protection in the NESI by Nigerian courts, newspapers/magazines, law textbooks, and the internet.

1.8 LITERATURE REVIEW

Titilope Ogundipe in his essay titled ‘Electricity Challenges, Power Sector Reforms and Performance of the Nigerian Manufacturing Sector’,^[15] gave a beautiful rendition on the relationship between power supply and economic development. He also examined the harsh reality of the Nigerian Electricity industry and challenges of the power sector reform in Nigeria. He adopted both qualitative and qualitative methodology to provide data on the issues affecting the efficacy of the power sector reform, including chart representations to analyze performance in the electricity sector, such as the total electricity generated, electricity distribution losses, total electricity net consumption, as so on.

 

Olurewaju Aladeitan in his article ‘Electricity Consumer Protection in Nigeria Under the Electric Power Sector Reform Act 2005’,¹⁶ examined the provisions of the Electric Power Sector Reform Act 2005 concerning the protection of consumer rights. He particularly focused on meter reading, billing, and the standards and policies implemented by the Regulator, Nigerian Electricity Regulatory Commission (NERC) to protect consumers. This writer adopted a doctrinal approach as this article places substantial emphasis on primary and secondary sources of law in Nigeria. This writer however did not give much attention to the reality of consumer protection in the Nigerian electricity Sector. From this article it is not easy to decipher if these provisions of the law concerning protection of consumers of the electricity sector are effective.

Yinka Omorogbe and Ada Okoye Ordor in their book titled ‘Ending Africa’s Energy Deficit and the Law’,¹⁷ gave an extensive view on achieving sustainable Energy for all of Africa. They brought together various experts in the energy sector to discuss issues stalling the progress of energy sector in Africa, examining various challenges from different institutions, and into the need to develop adequate financial and fiscal frameworks.

Sam Amadi in his essay ‘Improving Electricity Access Through Policy Reform: A Theoretical Statement on Legal Reform in Nigeria’s Power Sector’,¹⁸ gave a comparative analysis on the

failure of the electricity sector reform to yield significant results. He argued that the failure of the electricity power sector reform is a failure of law. This essay also suggests that privatization of

 

¹⁶ Olurewaju Aladeitan, ‘Electricity Consumer Protection in Nigeria Under the Electric Power Sector Reform Act 2005’ (2019) Research Gate <https://www.researchgate.net/profile/Olanrewaju–

Aladeitan/publication/337022740_ELECTRICITY_CONSUMER_PROTECTION_IN_NIGERIA_UNDER_THE_

ELECTRIC_POWER_SECTOR_REFORM_ACT_2005/links/5dc145df4585151435e98fcf/ELECTRICITYCONSUMER–PROTECTION–IN–NIGERIA–UNDER–THE–ELECTRIC–POWER–SECTOR–REFORM–ACT–

2005.pdf?origin=publication_detail> accessed 2^nd November 2021.

¹⁷Yinka Omorogbe and Ada Okoye Ordor, Ending Africa’s Energy Deficit and the Law (Oxford University Press

2018)

¹⁸Sam Amadi, ‘Improving Electricity Access Through Policy Reform: A Theoretical Statement on Legal Reform in Nigeria’s Power Sector’ in Yinka and Ada Okoye Ordor (eds), Ending Africa’s Energy Deficit and the Law (Oxford University Press 2018), 344-376.

the sector might not have been the answer to the problems that faced the energy sector. However, the writer did not focus on the quality of consumer experience in the Nigerian electricity industry post-privatization, it instead focused on the legal and economic theories underlining the entire power sector reform.

Kingsley Jeremiah in his essay ‘Addressing Consumer Challenges in the Nigeria’s Electricity

Market’,¹⁹ was able to capture a simplified report of the challenges which consumers face in the

Nigerian Electricity market. He pointed out the functions and obligations of Nigerian Electricity Regulatory Commission and the failure of the Regulator in the protection of consumers against exploitation and other unsafe practices in the electricity market. This paper uses an analytical research methodology to analyze and determine issues consumers of the Nigerian electricity market face.

Kingsley Onuoha in his article ‘The Electricity Industry in Nigeria: What are the options Available to Improve the Sector?”,²⁰ adopts the quantitative and analytical research methodology. He uses quantitative data to determine the electricity supply capacity and rate of consumption of electricity. He analyzes the success of the power sector reform and innovations that can improve the electricity sector. This writer critically examines challenges that affects the electricity sector like corruption, political issues, price reforms, and technical issues. He however did not pay attention to the legal frameworks that are relevant to the Nigerian Electricity Sector.

 

¹⁹Kingsley Jeremiah, (n 12).

²⁰ Kingsley Onuoha, ‘The Electricity Industry in Nigeria: What are the options Available to Improve the Sector’

(1010)                       Research                       Gate                        <https://www.researchgate.net/profile/Kingsley–Onuoha–

2/publication/228283290_The_Electricity_Industry_in_Nigeria_What_are_the_Challenges_and_Options_Available

_to_Improve_the_Sector/links/571c839808ae408367bd77b6/The–Electricity–Industry–in–Nigeria–What–are–theChallenges–and–Options–Available–to–Improve–the–Sector.pdf?origin=publication_detail> accessed 25^th October

2021

Chibuzor Anyanechi, Adewale Ajayi, Segun Sowande and Martins Arogie in the article titled

‘Nigerian Electricity Supply Industry Highlights – Energy and Natural Resources’²¹, examined the new innovations in the NESI such as the increased investment in Nigeria renewable power and mini-grid sectors, order on the structured replacement of obsolete meters of end-use consumers signed by the Nigerian Electricity Regulatory Commission, pre-engineering contract for the  presidential power initiative signed by the federal government, approval for additional electricity grant for regional off-grid electricity access project by World Bank. This article uses an analytical research methodology to analyze these recent innovations. However, the writers did not expatiate on the mischief these new innovations sought to cure, or the efficacy of these innovations to the consumers of electricity.

Adrian J. Bradbrook in his essay titled ‘Achieving access to modern Energy Servises: A Study of Legal Strategies’,^[16] he critically examined access to energy service as a human right. He analyzed arguments for access to energy services under first generation rights- civil and political rights, second-generation rights- economic, social, and cultural rights, and third generation right- right to development. This writer adopted a doctrinal and analytical approach to this study. He examined the provisions of international conventions and Declarations, such as the International Covenant on Civil and Political Rights (ICCPR), International Covenant on Economic Social and Cultural Rights (ICESCR), United Nations Declaration on the Right of indigenous people and the United Nation Declaration on the Right to Development.

 

²¹ Chibuzor Anyanechi and others, (n 2).

Ayodele Oni in his book titled ‘The Nigerian Electricity Market: Understanding the Transactional, Legal, & policy issues’^[17], critically analyzed the history of the Nigerian Electricity market, the functions and limitations of institutions like the NERC, The Hydro Electric Power

Producing Areas Commission (HEPPAC), Infrastructure Concession Regulatory Commission,

Nigerian Electricity Management Services Authority, National Environmental Standards Regulatory and Enforcement Agency. He also examined relevant issues like tariff and pricing, metering and disconnection issues, consumer protection and licensee performance standards, electricity theft, licensing and permits, taxation, and several other issues that affect the electricity market.

1.9 SYNOPSIS OF THE CHAPTERS

This work is divided into five chapters. Chapter one introduces this paper. It has preliminary issues like background, statement of problem, research questions, aims and objectives, scope of limitation, significance of study, research methodology, literature review and synopsis of the chapters. Chapter two deals with the conceptual clarification of terms and History of the Nigerian electricity supply industry. It clarifies the concept of consumer and consumer protection, as well as rationale for consumer protection. It examines both the pre-reform and post-reform conditions of the Nigerian Electricity Supply Industry. Chapter three critically examines the legal and institutional frameworks for consumer protection in the Nigerian Electricity Supply Industry. Chapter four analyses the problems and prospects of consumer protection in the electricity supply industry. It analyses the adequacy of these frameworks, and the effective enforcement of regulation and policy. Chapter five concludes this research with the

findings, summary, suggested areas for further studies and conclusion.

[1] Statista,           ‘Power            Production            Breakdown            by            Source            in            Nigeria             2020’

<https://www.statista.com/statistics/1237541/nigeria–distribution–of–electricity–production–by–source/> accessed 5^th

October 2021

[2] Chibuzor Anyanechi and others, ‘Nigerian Electricity Supply Industry Highlights – Energy and Natural Resources’ (2021) Modaq <https://www.mondaq.com/nigeria/renewables/1063016/nigerian–electricity–supply–industryhighlights> accessed 10^th November 2021

[3] O I Okoro and E Chikuni, ‘Power Sector Reforms in Nigeria: Opportunities and challenges’ (2007) <https://energyjournal.africa/article/download/3386/4057> accessed 6^th October 2021

[4] Ibid.

[5] NERC was created by the Electric Power Sector Power Act 2005

[6] World   Bank     Group,    ‘Nigeria     to    Improve     Electricity    Access    and     Services    to    Citizens’     (2021)

<https://www.worldbank.org/en/news/press–release/2021/02/05/nigeria–to–improve–electricity–access–and–servicesto–citizens> accessed 3^rd October 2021

[7] Center for the Study of the Economics of Africa, ‘Challenges and Interventions Needs in the Nigerian Electricity Supply Industry (NESI)<https://cseaafrica.org/challenges–and–interventions–needs–in–the–nigerian–electricitysupply–industry–nesi/> accessed 4October 2021

 

[8] Ibid.

[9] Bassey           Udo,      ‘Nigerian      Government      78%      Hike      in      Electricity’(2020)            Premium       Times

<https://www.premiumtimesng.com/news/headlines/371174–nigerian–govt–orders–78–hike–in–electricitytariffs.html> accessed 29 September 2021

[10] The World Bank, ‘Economic Overview Nigeria’ (2021)<https://www.worldbank.org/en/country/nigeria/overview> accessed 4 October 2021

[11] Oruwari. H. Otombosoba, ‘Constraints to Efficient Electricity Supply in Nigeria’ (2021) IAEE <https://www.iaee.org/en/publications/newsletterdl.aspx?id=952> accessed 11October 2021

[12] Kingsley Jeremiah, ‘Addressing Consumer Challenges in the Nigeria’s Electricity Market’ (2019) The Guardian Nigerian News <https://guardian.ng/energy/addressing–consumer–challenges–in–nigerias–electricity–market/>  accessed 5October 2021

[13] Black’s Law Dictionary (9^th ed.). (2009)

[14] Niyati Vishwakarma ‘What is a Doctrinal Research’ (2021) <https://www.vaidhalegal.com/amp/what–is–adoctrinal–research> accessed 15^th October 2021.

[15] Titilope Ogundipe, ‘Electricity Challenges, Power Sector Reforms and Performance of the Nigerian Manufacturing Sector’ in Adeola Adenikunju and Akin Iwayemi and Wumi Iledare (eds), Energy Resource

Management in a Federal System: Challenges, Constraints, and Strategies (NAEE 2014), 143-190

[16] Adrian J Bradbrook, ‘Achieving access to modern Energy Servises: A Study of Legal Strategies’ in Yinka and Ada

Okoye Ordor (eds), Ending Africa’s Energy Deficit and the Law (Oxford University Press 2018), 26-44

[17] Ayodele Oni, ‘The Nigerian Electricity Market: Understanding the Transactional, Legal, & policy issues’ (CIPLUS Ltd 2021).

A COMPARATIVE ANALYSIS OF LEGAL FRAMEWORK FOR CONSUMER PROTECTION IN THE NIGERIAN ELECTRICITY SUPPLY INDUSTRY

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