Lagos State Takes Control of Electricity Market: What It Means for Power Distribution

Lagos State Takes Control of Electricity Market: What It Means for Power Distribution

Lagos State has officially assumed control of its electricity market, marking a transformative moment for Nigeria’s power sector. The shift comes following the transfer of regulatory oversight from the Nigerian Electricity Regulatory Commission (NERC) to the Lagos State Electricity Regulatory Commission (LASERC). This move aligns with the Electricity Act 2023 and the amended Constitution, granting states regulatory authority over intrastate electricity markets.

The landmark announcement was made at NERC’s headquarters in Abuja, with Lagos State’s Commissioner for Energy and Mineral Resources, Biodun Ogunleye, lauding NERC’s leadership in facilitating the transition. This handover makes Lagos one of the few Nigerian states with full regulatory control over its electricity market, heralding a significant step in decentralizing the country’s power sector.


Performance Under NERC: Ikeja Electric and Eko Disco

Under NERC’s regulation, Ikeja Electric Plc (IE) and Eko Electricity Distribution Plc (EKEDP) were responsible for power distribution in Lagos. While both companies made strides in infrastructure development and customer service, they often fell short in delivering reliable electricity.
Ikeja Electric had commendable initiatives like prepaid metering and digital payment systems but struggled with infrastructure challenges, frequent outages, and billing controversies. Similarly, Eko Disco introduced programs to improve service delivery, yet issues such as load shedding and inconsistent supply persisted.

A key challenge under NERC was the regulatory body’s nationwide focus, which often led to broad, one-size-fits-all policies. NERC’s approach to tariffs, metering, and service obligations sometimes lacked the specificity needed to address Lagos’ unique power demands as a commercial hub. While the commission implemented critical policies like the Service-Based Tariff (SBT) and National Mass Metering Programme (NMMP), enforcement and monitoring were inconsistent.


The Transition to LASERC: New Opportunities for Sub-Discos

The shift to LASERC oversight requires IE and EKEDP to establish subsidiaries—IE SubCo and EKEDP SubCo—to manage electricity distribution exclusively within Lagos. These new entities must incorporate within 60 days from December 5, 2024, and obtain licenses from LASERC. The transition, including regulatory and operational changes, is expected to conclude by June 4, 2025.

Under LASERC, the sub-Discos could benefit from more tailored regulations. Lagos’ distinct needs—ranging from supporting its economic vibrancy to managing the power demands of a mega city—will likely influence LASERC’s policies. These new sub-Discos could adopt innovative approaches to infrastructure development, service delivery, and customer engagement, setting a benchmark for other states.


Potential Upsides of LASERC’s Regulation

1. Localized Governance: LASERC can create policies that directly address Lagos’ electricity challenges, avoiding the bureaucratic delays associated with national regulations.


2. Enhanced Accountability: With the regulatory body closer to the market, monitoring and enforcement could be more rigorous.


3. Investment Opportunities: The streamlined regulatory environment may attract private investors, leading to infrastructural upgrades and improved service reliability.


4. Consumer-Centric Policies: LASERC can prioritize metering, address billing disputes more efficiently, and push for greater transparency in service delivery.


Possible Challenges

1. Transition Period Risks: Shifting regulatory control could lead to operational disruptions if not carefully managed.


2. Resource Constraints: LASERC, as a relatively new body, may face capacity and expertise limitations in its early stages.


3. Coordination with National Grid: Lagos remains connected to the national grid, necessitating collaboration with NERC and Transmission Company of Nigeria (TCN) to avoid regulatory conflicts.


Achieving Optimal Results: The Way Forward for LASERC

To maximize the benefits of this regulatory shift, LASERC should:

Develop Clear Regulatory Frameworks: Establish comprehensive guidelines that promote transparency, efficiency, and accountability.

Engage Stakeholders: Maintain open communication with electricity consumers, the sub-Discos, and private investors to align policies with market realities.

Implement Performance-Based Regulation: Introduce incentives for service improvements and penalties for non-compliance to drive the sub-Discos towards better performance.

Focus on Infrastructure Development: Prioritize projects that reduce losses in transmission and distribution, improve grid reliability, and expand access to underserved areas.

Promote Renewable Energy: Encourage investments in sustainable energy solutions to complement grid supply and enhance energy security.


Conclusion: A New Dawn for Lagos’ Power Sector

The transition to LASERC regulation marks a bold step towards a more efficient and responsive electricity market in Lagos State. While NERC played a critical role in setting regulatory standards at the national level, the localized approach under LASERC offers a fresh opportunity to address longstanding issues in electricity distribution. If well-managed, this move could transform Lagos into a model for power sector reform, showcasing how state-level governance can drive innovation, improve service delivery, and ultimately empower the economic heartbeat of Nigeria.