FG Unbundles TCN Into Two Separate Entities

FG Unbundles TCN Into Two Separate Entities

…Order BPE To Incorporate NISO Within 30 Days

The Federal Government through the Nigerian Electricity Regulatory Commission (NERC) on Friday announced the unbundling of the Transition Company of Nigeria (TCN) into two separate entities, to be known as ‘Nigerian Independent System Operator’ Nigeria Limited (“NISO”), Transmission Service Provider (TSP).

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The directive is contained in NERC Order No: NERC/2024/45, dated 30th of April 2024, and
jointly signed by Sanusi Garba, and Musiliu Oseni, Chairman and Vice Chairman of NERC respectively, and made available to newsmen in Abuja on Friday.

According to the statement, the Order seeks to mandate TCN to comply with the provisions of the Electricity Act (EA) on the incorporation of the ISO; provide clear directives to TCN to incorporate the ISO; and provide TCN with the procedure for the transfer of the assets and
liabilities of the market and system operations portion of the business that currently vests in TCN to the ISO.

NERC stated that the Order shall take effect from May 1, 2024 and shall remain in force until amended or revoked by a subsequent Order issued by the Commission.

Giving a background to the rationale behind the unbundling of the agency, the NERC stated that: “The Transmission Company of Nigeria Plc (“TCN”) as a successor company was issued 2 (two) separate licences to operate as the transmission service provider and system operator for the national grid system by the Commission.

“The repealed Electric Power Sector Reform Act 2005 (“EPSRA” or the “Repealed Act”) envisaged that TCN would transfer the function of system operation for the national grid to an Independent System Operator (“ISO”).

“The Electricity Act (the “EA” or “Act”) 2023 came into effect on 9 June 2023
and this piece of legislation went beyond the Repealed Act by providing clearer guidelines for the incorporation, governance structure and licensing of the ISO, as well as the transfer of the assets and liabilities of the system
operations portion of TCN to the ISO.

“Section 15 of the EA provides as follows on the incorporation and licensing of the ISO

“The Transmission Company of Nigeria Plc (hereinafter referred to as “TCN”), being the successor company issued the license that covers Transmission Service Provider, market and system operation functions under the repealed Act shall in accordance with the terms of its license and within such stage or period of the market as the Commission may in a written directive specify, take such steps as are necessary under the Companies and Allied Matters Act, 2020 to incorporate an entity, the Independent System Operator which may be a company limited by shares or have such ownership and governance structure as the Commission may specify and the entity once incorporated pursuant to the provisions of this section shall immediately apply to the Commission and be licensed by the Commission as an Independent System Operator to carry out such market and system operation functions as stipulated under this Act its license and such terms and conditions as the Commission may direct.”

Continuing it stated that “Upon incorporation and issuance of an ISO license by the Commission, pursuant to subsection (1) of this section the TCN shall transfer to the Independent System Operator (hereinafter called “the “ISO” in this Act), all the assets and liabilities held by the Transmission Company of Nigeria Plc pertaining to its market and system operation functions and the Independent System Operator shall be subject to such powers and duties of an independent System Operator under the terms of its license and the provisions of this Act in relation to market and system operation; the TCN shall 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 in accordance with the terms of its license as may be issued by the Commission and the provisions of this 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.

“The Commission hereby Orders as follows:
“BPE shall incorporate, no later than 31 May 2024, a private company limited by shares under the Companies and Allied Matters Act to carry out the market and system operation functions stipulated in the EA and the terms and conditions of the system operation licence issued to TCN.

“The name of the company shall, subject to availability at Corporate Affairs Commission, be the Nigerian Independent System Operator of Nigeria Limited (“NISO”).
“The object clause of the Memorandum of Association of the NISO as provided in section 16(2) of EA shall be as follows: 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 the Commission may
specify; to carry out all market and system operation-related contractual rights and obligations novated to it by the Transmission
Company of Nigeria; to negotiate and enter into contract for the procurement of
ancillary services with independent power producers, successor generation licensees, etc and generally carryout 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; to carry out all market and system operation-related contractual
rights and obligations novated to it by the Transmission Company of Nigeria; the income and property transferred to it by the TCN or
whensoever derived shall be applied solely towards the promotion of its objects as set forth in its incorporation Documents and 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” reads the statement in parts.