NextierRegulations are made to make individuals and societies comply and behave in a certain manner. Regulations have the effect of law and are considered as a restriction enforced by higher authorities to make people follow the desired code of conduct. It is simply a rule (or order) proposed by an authority to keep the system regulated, and occasionally to enthrone equity.
While regulations are restrictive in nature, it shouldn’t be too restrictive. An overly regulated environment breeds concerns of instability, and in some instances, shows a lack of any plan or direction. It can also be widely considered as a “trial and error” approach by those regulated.
Take football for example. Since time immemorial, the rules of the game have always been enforced by the referee and his linesmen on the football field. The players on the pitch also knew that the referee’s decision was final. The recently introduced Video Assistant Referee (VAR) has come with added rules and procedures that review the on-field referee and linesmen’s decisions. If you follow football closely, these recent add-ons have brought a lot of inconsistency in final referee decisions, and also, created confusion among players.
This seems to be partly the case in the Nigeria Electricity Market. Recall that the Nigerian Electricity Regulatory Commission (NERC) was incorporated in 2005 to regulate the electricity market and promote competition and private sector participation. For over a decade, NERC has been regulating a market with challenges, while also promoting competition and participation. In trying to balance these responsibilities out, NERC may have put out one too many regulations. Don’t get me wrong, proposing several regulations is ideal for the growth of the market. However, when these regulations address the same challenges, then a strong case for an overly regulated market can be made.
Here is a good example. The introduction of the Distribution Franchising Regulation1 (for public consultation) in April 2019 was intended to improve the quality of electricity supply to customers through investment in metering, billing, collection, and network rehabilitation and expansion.
However, this regulation is widely considered to be unneeded in the electricity market. This is because of the attendance of several regulations, such as the Eligible Customer Regulation, Regulations for Embedded Generation, Regulations for Independent Electricity Distribution Networks (IEDN), Meter Asset Provider (MAP) Regulation and Mini-Grid Regulations. This suite of regulations, in one form or the other, was also introduced to address the problem of electricity supply to customers. It could be that the regulation, at this time, does not bring added incentives. It also creates more hurdles to an overly regulated market. Investors may be unwilling to participate in a market that is too regulated without defined incentives for growth and efficiency.
So, how can a regulator promote competition and participation without overregulating the market? By rule of thumb and depending on the status of the electricity market, regulations should be well-defined and decisive, address unrelated challenges, enthrone fairness and promote competition mainly through private sector participation.
To conclude, a well-defined regulation should simply serve the highest public good, while also delivering real change and impact in the electricity market. Remember, less is more.
