Electricity litigation reduction: SAN advocates clear jurisdictional boundaries between FG, state govts

By Clement Omanibe, Abuja

A Senior Advocate of Nigeria (SAN) has called for clear jurisdictional boundaries between the Federal Government (FG) and states in electricity regulation.

Wole Esan, Deputy Managing Partner of Olaniwun Ajayi Wolemi, made the call at a seminar for High Court judges on the electricity sector, organised by the Nigerian Electricity Regulatory Commission (NERC) on the theme: “Nigeria’s electricity market in transition: law, regulation and the courts.”

State vs Federal Jurisdiction in Electricity Regulation: Potential Legal Conflicts.

He noted that ambiguity created by recent constitutional and legislative reforms could trigger prolonged litigation, undermine investment and threaten stability of Nigeria’s power sector.

The seminar was designed to deepen judges’ understanding of the rapidly evolving legal and regulatory framework governing the electricity industry, following the constitutional amendments and the Electricity Act 2023.

Esan’s presentation was titled: “State vs Federal Jurisdiction in Electricity Regulation: Potential Legal Conflicts.”

According to him, the Fifth Alteration to the Constitution and the Electricity Act had fundamentally redefined the roles of the Federal Government and the states in electricity regulation.

He stressed that the reforms had also created unresolved jurisdictional questions that would increasingly come before the courts.

Esan who drew lessons from countries such as the United States and India, said that Nigeria must develop a coherent framework that clearly delineates regulatory powers if it hopes to minimise disputes and build investor confidence.

“Jurisdictional clarity in electricity regulation is achievable; it tends to reduce rather than multiply litigation, and it is best organised around the nature of the transaction rather than the identity of the parties involved,” he said.

He added that although the constitution now grants states broad powers to legislate on electricity generation, transmission and distribution within their territories, electricity as a commodity does not respect political boundaries.

He explained that electricity operates simultaneously as a physical, commercial and engineering system, making it far more difficult to divide regulatory responsibilities neatly between federal and state authorities.

NERC Headquarters Abuja.

“Electricity does not care about the lines we draw on a map. It flows according to physics, is priced according to national markets, and is financed according to obligations that were incurred collectively,” he said.

He argued that the country’s legal framework now seeks to decentralise regulation, while the electricity market itself remains largely interconnected through the national grid, wholesale market and existing financial obligations.

According to him, that mismatch is likely to become the principal source of legal disputes in the coming years.

He identified several areas where conflicts between state and federal regulators are already emerging, including the application of the constitutional doctrine of “covering the field”, interpretation of the phrase “within that state,” regulation of the national wholesale electricity market, tariff-setting powers, licensing of electricity traders, technical standards and responsibility for legacy sector debts.

Esan questioned whether Section 2(2) of the Electricity Act could prevent courts from applying the constitutional doctrine of covering the field where federal and state laws conflict.

He maintained that only the courts, not the National Assembly, could determine whether federal legislation had occupied a particular field of regulation.

On tariff regulation, Esan noted that while state electricity commissions now assume authority over retail tariffs within their jurisdictions, the wholesale market still operates on nationally determined pricing principles.

He cited the emerging regulatory issues involving the Enugu State Electricity Regulatory Commission as an example of the tensions likely to arise between state regulators and NERC.

Esan also highlighted the possibility of conflicting licensing requirements where electricity traders could be required to obtain both federal and state licences before supplying customers.

He said that varying technical standards introduced by states could undermine the safe and reliable operation of the national electricity grid.

Esan further identified legacy sector debts, which is estimated at about N6.5 trillion owed to generating companies, as another major source of future disputes.

He questioned whether states assuming regulatory authority over electricity distribution should also inherit responsibility for financial obligations accumulated under the previous federal regulatory framework.

Setting the context for the discussion, Esan painted a grim picture of the current state of Nigeria’s electricity industry.

He noted that although Nigeria has installed generation capacity exceeding 13,000 megawatts, actual available generation rarely exceeds 5,200 megawatts.

He added that the transmission network can only wheel about 5,200 megawatts, while more than seven per cent is lost during transmission.

According to him, aggregate technical and commercial losses exceed 40 per cent in some distribution areas.

“The stakes of getting jurisdiction wrong are not abstract; they are measured in blackouts, in stranded investment, and in a national grid that is already operating close to the edge,” he said.

Esan urged courts to adopt a cautious approach when resolving electricity disputes, recognising the highly technical nature of the industry.

He advised judges to distinguish between determining legal and constitutional boundaries and intervening in complex regulatory or engineering matters better handled by specialised regulators.

“Courts are the right forum for determining jurisdictional boundaries, enforcing constitutional limits and protecting legal rights. They are not the right forum for designing tariff methodologies, setting technical standards or determining optimal market design,” he said.

The stakes of getting jurisdiction wrong are not abstract; they are measured in blackouts, in stranded investment.

He stressed that judicial decisions in electricity cases often carry consequences extending beyond the immediate parties, affecting grid stability, electricity supply, investment, financing and consumer welfare.

According to him, courts should therefore consider market stability and the broader public interest when fashioning remedies.

Esan also called for judicial interpretations that preserve investor confidence and contractual certainty, noting that electricity infrastructure projects require massive long-term capital investments.

Where legislation permits more than one interpretation, he said, courts should favour the approach that minimises regulatory disruption and protects legitimate investment expectations.

Esan said the constitutional reforms introducing greater state participation in electricity regulation were necessary and overdue, but cautioned that legal reform alone would not guarantee an efficient electricity market.

He said the judiciary would play a decisive role in shaping the success of the reforms by providing consistent, restrained and technically informed decisions whenever disputes arise.

“I hope that when those cases arrive, they are decided with real appreciation for what is technically and commercially at stake – with restraint where restraint is warranted, and with clarity where clarity can genuinely be given,” Esan said.

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