Nigerian Independent System Operator (NISO) Governance & A Sustainable Power Future: Lessons For Nigeria From Global Independent System Operators (ISOs)

Executive Summary

The Nigerian Independent System Operator (NISO), established under the Electricity Act 2023, plays a vital role in advancing Nigeria’s electricity sector reforms through grid management, market operations, and system planning. Its success depends on robust, independent corporate governance. This article reviews NISO’s mandate, draws insights from the Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs)in the United States and India, and proposes governance measures tailored to Nigeria’s context. Key recommendations include formalizing a governance charter, ensuring operational and financial independence, and integrating advanced, secure technologies. These steps are essential to building trust, attracting private investment, and supporting sustainable national development.

1. Introduction: The Importance of a Robust NISO

Context of Nigeria’s Power Sector Reforms

Nigeria’s electricity sector has a long history of systemic challenges, transitioning through various organizational structures in an attempt to achieve a reliable power supply. A key phase in this evolution began with the creation of the National Electric Power Authority (NEPA), formed through the merger of the Electricity Corporation of Nigeria (ECN) and the Niger Dams Authority (NDA)¹. NEPA was later restructured into the Power Holding Company of Nigeria (PHCN).² Despite these institutional changes, the sector remained plagued by inefficiencies, including high transmission and distribution losses, poor maintenance, and frequent outages.³ Public frustration was widespread, epitomized by the popular saying “Never Expect Power Always,” a sarcastic play on NEPA’s acronym that captured the public’s deep mistrust in the system’s ability to deliver reliable electricity. This crisis of confidence eventually prompted wide-ranging reform efforts.

The Electric Power Sector Reform Act of 2005 (EPSRA 2005) marked a turning point, initiating the unbundling of NEPA into 18 successor companies, including six generation companies, one transmission company, and eleven distribution companies, each of which was issued an operating license.⁴ These reforms aimed to introduce efficiency, competition, and

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¹ Nigerian Independent System Operator (NISO), “History of System Operations”, available at: https://nsong.org/AboutUs/History.aspx 

² UP NEPA: A Historical Journey through Nigeria’s Power Sector • The Electricity Hub

³ Adebayo, A. V. & Ainah, P. K. (2024). Addressing Nigeria’s Electricity Challenges: Past, Present, And Future Strategies. American Journal of Applied Sciences and Engineering, 5(2) 1-16. AJASE5_21-16-11.pdf 

⁴ Ebigenibo G. S. (2021).  Nigerian Power Sector: A new structure required for effective and adequate power generation, transmission and distribution, Global Journal of Engineering and Technology Advances, 2021, 07(01), 006–018 Available at: https://gjeta.com/sites/default/files/GJETA-2021-0035.pdf

private-sector participation. In 2013, the sector underwent further transformation with the privatization of the generation and distribution companies. However, despite these ambitious changes, many foundational issues persisted. Generation capacity remained inadequate, while ageing infrastructure, overbilling, and electricity theft continued to undermine progress⁵. The enduring legacy of dysfunction and public dissatisfaction underscores the critical importance of NISO’s mandate: to build trust, enforce accountability, and deliver tangible improvements.

Establishment of NISO under the Electricity Act 2023

Recognizing the need for further reform, the Electricity Act 2023 (EA 2023) was enacted, repealing the EPSRA 2005 and providing a more comprehensive legal and institutional framework for a privatized, contract and rule-based competitive electricity market in Nigeria. A cornerstone of this new legislation is the explicit unbundling of the Transmission Company of Nigeria (TCN) into two distinct entities: the Independent System Operator (NISO) and the Transmission Service Provider (TSP)⁶.

Previously, TCN held a dual mandate, responsible for both electricity transmission and system operations. This dual role presented an inherent conflict of interest, as the entity responsible for owning and maintaining transmission assets also managed the grid’s real-time operations and market functions. Such a structure created a perception of the prioritization of transmission owner interests over overall grid efficiency or fair market access for all participants. The EA 2023 and the subsequent Nigerian Electricity Regulatory Commission (NERC) Order No: 2024/45 on the Establishment of the Independent System Operator for the Nigerian Electricity Supply Industry (“NERC Order No: 2024/45”) directly address this by formally establishing NISO and outlining the incorporation process, timelines, and asset transfer procedures⁷. This explicit legal mandate for NISO’s independence, achieved through “ring-fencing” its system operation functions from TCN, represents a foundational governance decision. This structural separation is designed to enforce impartiality and foster a truly competitive market environment.

NISO’s Foundational Mandate and Strategic Significance

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⁵ Arowolo, W. Perez, Yannick. (2020) Market reform in the Nigeria power sector: A review of the issues and potential solutions. Energy Policy. Volume 144, September 2020, 111580. Market reform in the Nigeria power sector: A review of the issues and potential solutions – ScienceDirect

⁶ Raymond Ofagbor, Ndentuokid Essang, June 13, 2024, “Legal and commercial implications of The Electricity Act, 2023 for the Nigerian Electricity Supply Industry (NESI)” available at: https://businessday.ng/news/legal-business/article/legal-and-commercial-implications-of-the-electricity-act-2023-for-the-nigerian-electricity-supply-industry-nesi/  

⁷ Opeoluwani Akintayo, 4th May 2024, NERC Unbundles TCN, Establishes Independent System Operator. Available at: https://www.channelstv.com/2024/05/04/nerc-unbundles-tcn-establishes-independent-system-operator/  

NISO’s core functions, as stipulated by the EA 2023 and NERC Order 2024/45, are extensive and critical for the stability and growth of the Nigerian Electricity Supply Industry (NESI). These responsibilities include:

Table 1: NISO’s Mandated Functions under the Electricity Act 2023

NISO’s stated vision is to “Operate the grid system efficiently to ensure open access, safe, reliable and economic electricity supply”.⁸ This vision extends beyond merely maintaining grid stability; it explicitly links grid reliability and efficiency to broader national objectives of economic growth and sustainable energy. This implies that NISO’s governance role is not purely technical but also proactively involves market development and investment attraction. The organisation’s commitment to coordinating the grid “without bias” and making market decisions “without fear or favour” directly addresses the imperative for strong ethical governance. This commitment is essential to counter historical perceptions of corruption and inefficiency that have plagued Nigeria’s power sector and to rebuild investor and public confidence⁹. For NISO to achieve its ambitious goals, its board and executive team must possess not only deep technical expertise in power systems but also a strategic vision for market evolution and a profound understanding of the drivers of private investment.

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 ⁸ Welcome To NISO

⁹  Ibid

2. Core Governance Principles of an Independent System Operator (ISO) and Their Relevance to NISO

Effective governance for an Independent System Operator (ISO) is built upon a set of foundational principles that collectively ensure the entity operates in the public interest, fosters fair competition, and maintains grid reliability. These principles are widely recognized across successful electricity markets globally.¹⁰ They are:

I. Operational Independence
ii. Financial Independence
iii. Board Independence
iv. Transparency & Accountability
v. Fairness & Non-Discrimination
vi. Efficiency & Adaptability

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 ¹⁰ Micheal G. Pollitt, August 2011, “Lessons from the History of Independent System Operators in the Energy Sector, with applications to the Water Sector” University of Cambridge Economic and Social Research Council, available at: https://www.researchgate.net/publication/254396599_Lessons_from_the_History_of_Independent_System_Operators_in_the_Energy_Sector_with_applications_to_the_Water_Sector. 

INTERNATIONAL BENCHMARKING: LESSONS FROM ESTABLISHED ISO MODELS

Examining the governance structures and operational models of established Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs) globally provides invaluable insights for NISO’s development. These models offer a spectrum of approaches to achieving independence, reliability, and market efficiency.

3. The United States ISO/RTO Models

The United States electricity system is characterized by three main interconnections, with seven ISOs/RTOs managing competitive wholesale markets across approximately two-thirds of the grid.¹¹ These entities are responsible for operating regional grids, administering wholesale electricity markets, and providing reliability planning for their respective bulk electricity systems. They are typically nonprofit organizations, with their activities overseen by the Federal Energy Regulatory Commission (FERC), which ensures non-discriminatory access to the transmission system.¹²

Governance Structures: US ISOs/RTOs are governed by independent boards of directors, which are subject to strict independence requirements designed to prevent financial conflicts of interest with market participants.¹³ For example, the Midcontinent Independent System Operator (MISO) board comprises nine independent members in addition to its CEO.¹⁴ Another example is ISO New England (ISO-NE), whose board members are prohibited from having any financial interest in companies active in New England’s wholesale markets.¹⁵ These boards typically establish various committees, such as Audit & Finance, Human Resources & Governance, Markets, System Planning, and Technology

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¹¹ Who Manages the Electrical Grid in the United States? Who Manages the Electrical Grid in the United States? | The City Dark

¹² ibid

¹³ Kathy Hitchens, November 2022, “What is the Difference Between ISO and RTO?” Available at: What’s the Difference Between ISO and RTO? | PCI

¹⁴ MISO Board of Directors

¹⁵ Board of Directors

committees, to oversee specific functions and ensure specialized expertise. Formalized stakeholder processes, involving numerous committees and working groups, are also integral to their decision-making and policy recommendation processes, fostering broad industry engagement.

Market Operational Challenges: A significant and ongoing challenge for all US ISOs is the increasing integration of variable renewable energy sources and the growing demand from large, often inflexible loads like data centres.¹⁶ This necessitates advanced modelling, stochastic optimization techniques, innovative approaches to assessing capacity contribution and ensuring system flexibility by actively exploring options for large load additions, and enhanced demand response programs.

The US experience demonstrates that even with robust governance frameworks, the rapid integration of variable renewable energy and growing, inflexible loads present significant operational and market design challenges.¹⁷ NISO must proactively build governance mechanisms that facilitate adaptability and innovation in market design to effectively accommodate Nigeria’s energy transition and economic growth. Renewable integration and its challenges with large load additions are not merely technical problems but demand governance that supports flexible market mechanisms and proactive long-term planning. NISO, being a newly established entity, has a unique opportunity to design its governance to be inherently adaptable to these future trends, learning from the continuous evolution observed in more mature markets.

4. India’s GRID-INDIA (POSOCO) Model

The Grid Controller of India Limited (GRID-INDIA), formerly known as Power System Operation Corporation (POSOCO), offers another highly relevant model for review in the course of NISO’s development.

Evolution: GRID-INDIA was initially established in 2009 as a wholly-owned subsidiary of Power Grid Corporation of India (PGCIL).¹⁸ However, in 2017, it gained independent status as a wholly-owned government of India company, separating its equity shareholding from PGCIL and transferring it to the Ministry of Power. This transition was driven by a clear recognition of the need for an independent and neutral system operator in India’s increasingly competitive electricity market.¹⁹

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¹⁶ Independent System Operators (ISO) U.S. Electric Grid

¹⁷ PJM Inside Lines, November 1, 2024- PJM to FERC: Colocated Load Growth Requires Guidance to Manage Reliability, Risks, Cost and Regulatory Issues, PJM to FERC: Colocated Load Growth Requires Guidance to Manage Reliability, Risks, Cost and Regulatory Issues | PJM Inside Lines

¹⁸ T&D News, 2024, “GRID-INDIA conferred ‘Miniratna” status” Available at: GRID-INDIA conferred “Miniratna” status – Your Gateway to Power Transmission & Distribution

¹⁹ Swarna Kesavan, April 10, 2021, “Evolution of System Operations: A journey of growth, reforms and POSOCO’s emergence as an independent entity” Available at: Evolution of System Operations: A journey of growth, reforms and POSOCO’s emergence as an independent entity – Power Line Magazine

Governance and Structure: GRID-INDIA oversees the seamless and uninterrupted operation of the Indian Power System, comprising five Regional Load Despatch Centres (RLDCs) and the National Load Despatch Centre (NLDC).²⁰ It holds the status of a Public Sector Enterprise, with a substantial degree of financial and operational autonomy, allowing its board of directors to undertake significant capital expenditures and strategic decisions without prior approval from the Ministry concerned. The board composition typically includes a Chairman and Managing Director, alongside functional directors responsible for Market Operation, System Operation, Human Resources, and Finance.²¹

Independence: The move to become an independent government company was explicitly aimed at achieving financial self-reliance and autonomy for the load dispatch centres. This separation from the transmission owner (PGCIL) was a crucial step towards ensuring the neutrality and impartiality of system operations, aligning with the principles of an independent system operator.

Market Mechanisms: GRID-INDIA plays a pivotal role in facilitating competitive wholesaleelectricity markets, administering settlement systems and is actively involved in major powersector reforms. GRID-INDIA’s journey from a subsidiary to an independent government company provides a highly relevant blueprint for NISO. This transition underscores the importance of a phasedapproach to achieving full independence, with a strong focus on financial self-reliance and a clear delineation of roles from the transmission owner. NISO’s unbundling from TCN mirrors thisprocess, suggesting that NISO can directly learn from GRID-INDIA’s experience regarding the practicalities of achieving sustained autonomy and fostering robust market development.

5. Specific Corporate Governance Needs for NISO

Drawing upon the foundational principles of ISO governance and the invaluable lessons from established international models, NISO requires a meticulously tailored corporate governance framework. This framework must address its unique context within the Nigerian Electricity Supply Industry (NESI) and lay the groundwork for its long-term success.

Board Structure and Composition

The NERC Order No 2024/45²² provides the Nigerian Electricity Regulatory Commission (NERC) with significant authority to shape NISO’s governance, specifying that NISO “may be a company limited by shares or have such ownership and governance structure as the Commission may specify”. The specified structure must have robust independence criteria

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²⁰ Indian PSU, 2024, “GRID-INDIA Is Now A Miniratna Company” Available at: GRID-INDIA Is Now A Miniratna Company – Indian PSU | Public Sector Undertaking News

²¹ Power Grid Corporation Of India Ltd Board of Directors | BlinkX

²² NERC ORDER NO: NERC/2025/057 on the Mandatory Integration of Grid-Connected Generating Units Into the New SCADA/EMS for the Nigerian Electricity Supply Industry. Available at: Order on the Mandatory Integration of GenCos into the SCADA Project

for constituting NISO’s board, mirroring best practices from leading ISOs like MISO and ISO-NE. This goes beyond mere compliance, representing a proactive design choice for impartiality and credibility.

Director Qualifications: The current composition of the Board of Directors of NISO reflects itscompliance with the EA 2023 which provides in Section 30 that the Independent SystemOperator shall be subject to the National Code of Corporate Governance (Nigerian Code ofCorporate Governance, 2018), having a Non-Executive Chairman, a Managing Director, fourExecutive Directors, four Non-Executive Directors, all with at least 10 years of cognateprofessional or management experience in an electricity generation, transmissions, systemoperation or distribution company, and a representative of the Ministry of Power, not below the rank of a director.²³

Key Board Committees: In order to effectively discharge its oversight functions, the board needs to establish various board committees, including the following:

• Audit & Finance Committee: This committee is responsible for overseeing financial reporting, internal controls, and audit functions, ensuring financial integrity and compliance.
• Risk Management Committee: Tasked with identifying, assessing, and monitoring operational (e.g., grid stability, outages), financial, cybersecurity, and strategic risks, and ensuring appropriate mitigation strategies are in place.
• Human Resources & Governance Committee: Oversees executive compensation, succession planning, and ensures adherence to governance principles and ethical standards within the organization.
• Market Oversight Committee: This committee would monitor market performance, identify potential design flaws, and ensure fair and competitive market operations, potentially working in conjunction with an independent market monitor.
• System Planning Committee: Responsible for overseeing long-term transmission planning, ensuring resource adequacy, and facilitating the integration of new technologies into the grid.

Ensuring Operational and Financial Autonomy

Asset and Liability Transfer: The NERC Order 2024/45 explicitly mandates TCN to transfer all assets and liabilities pertaining to its market and system operation functions to NISO by August 31, 2024. The successful and transparent execution of this transfer is paramount for NISO’s financial independence. In order to guarantee a clean financial and operational break from TCN, NISO’s governance must ensure rigorous oversight and auditing of this transfer envisaged by the NERC Order.

Ring-fencing Revenue: NISO’s income and property, whether transferred from TCN or derived from its operations, must be applied solely towards its operational objectives, preventing any diversion for other purposes. This aligns with the principle of financially

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 ²³ Section 30(1), (2)a-e of the Electricity Act 2023.

self-reliant load dispatch centres, as observed in the evolution of India’s GRID-INDIA. This financial ring-fencing is critical for NISO to maintain the necessary resources for its core functions and avoid external financial pressures that could compromise its independence.

Safeguards Against Interference: Robust protocols and clear reporting mechanisms must be implemented to protect NISO’s operational decisions, such as generation scheduling, commitment, dispatch, and outage coordination, from political or commercial interference. These safeguards are essential to ensure that technical decisions are made purely based on grid reliability and market efficiency.

Transparency and Information Disclosure

Public Reporting: NISO should establish comprehensive public reporting mechanisms for critical information, including real-time grid status, detailed market data (e.g., prices, demand, supply, ancillary services), operational performance metrics (e.g., frequency of grid collapses, reliability indices), and audited financial statements. This commitment to transparency aligns with NISO’s stated core value of transparency. Given Nigeria’s history of power sector challenges and public distrust, NISO’s transparency initiatives must be proactive and consistent to rebuild public confidence. This involves not just publishing raw data, but also interpreting it, explaining performance trends, and engaging with stakeholders to clarify challenges and progress.

Communication Channels: Developing clear, accessible, and multi-directional communication channels with NERC, all market participants (generators, distribution companies, and eligible customers), and the general public is vital. Effective communication fosters understanding, manages expectations, and builds trust.

Stakeholder Engagement and Dispute Resolution

Formal Frameworks: NISO should establish a multi-layered stakeholder engagement framework, incorporating regular forums, workshops, and specialized committees. This framework should actively solicit input from all diverse market participants, moving beyond mere information sharing to foster genuine consultative and collaborative participation. By actively involving diverse perspectives, NISO can identify potential issues early, build consensus around market rules, and ensure that its operations serve the broader interests of the NESI. This formal, inclusive approach is a governance necessity to ensure industry buy-in, facilitate problem-solving, and enhance NISO’s overall legitimacy.

Dispute Resolution: Implementing robust and impartial alternative dispute resolution (ADR) processes is essential for efficiently resolving conflicts among market participants. Lessons can be drawn from the dispute resolution mechanisms employed by the Electricity Reliability Council of Texas (“ERCOT”) and ISO New England (“ISO-NE”), where disputes are first handled through informal negotiations following a tiered dispute resolution process that then progresses to structured negotiation, and may culminate in binding arbitration.

Risk Management and Compliance Frameworks

Enterprise Risk Management (ERM): NISO must develop and implement a comprehensive ERM program that systematically identifies, assesses, and monitors all categories of risk. This includes operational risks (e.g., grid stability, outages), financial risks, regulatory risks, legal risks, and cybersecurity risks. A robust ERM framework ensures that NISO can anticipate and mitigate potential threats to its operations and financial viability.

Cybersecurity Governance: With NISO’s stated commitment to digitization and automation, including its partnership with Huawei for modern SCADA/EMS infrastructure, robust cybersecurity governance is paramount. Cybersecurity is not merely an IT issue but a critical governance concern. NISO’s reliance on advanced digital systems makes it a prime target for cyber threats. It must therefore ensure adequate investment, expertise, and oversight in cybersecurity to protect this critical national infrastructure. This includes establishing clear policies for data protection, system resilience, and incident response, potentially involving a dedicated Chief Information Security Officer (CISO) and a Technology & Security Committee.

Compliance Monitoring: A strong internal compliance function is essential to ensure strict adherence to the Electricity Act 2023, NERC regulations, grid codes, market rules, and international reliability standards. This function should have clear reporting lines for violations, fostering a culture of accountability and integrity within NISO.

Technological Integration and Data Governance

Strategic Oversight: The NISO Board and its relevant committees should provide strategic oversight for all digitization and automation initiatives, including the SCADA/EMS partnership. This ensures that technological investments are aligned with NISO’s mission and vision, and that they contribute directly to enhancing grid reliability and market efficiency.

Data Integrity and Analytics: Implementing robust policies and systems for ensuring data integrity, quality, and security is crucial for real-time system visibility and smart data analytics. High-quality data is foundational for efficient market clearing, accurate forecasting, and informed operational decision-making.

Innovation Mandate: NISO’s governance should actively encourage continuous innovation in grid management technologies and market design. This adaptability is necessary to accommodate Nigeria’s evolving resource mix, particularly the increasing integration of renewables, storage solutions, and distributed energy resources, as well as changing demand patterns.

6. Conclusion

The creation of the Nigerian Independent System Operator (NISO) under the Electricity Act 2023 marks a significant step in reforming Nigeria’s power sector. Its success depends not just on technical grid management, but primarily on establishing strong, independent, and transparent governance. Such a framework will build trust among market participants, attract private investment, and ensure fair operations. By learning from international models and adapting them to Nigeria’s unique context, NISO can help drive reliable electricity supply, economic growth, and sustainable development.

REFERENCES

1. Nigerian Independent System Operator (NISO), “History of System Operations”, available at: https://nsong.org/AboutUs/History.aspx

2. UP NEPA: A Historical Journey through Nigeria’s Power Sector • The Electricity Hub

3. Adebayo, A. V. & Ainah, P. K. (2024). Addressing Nigeria’s Electricity Challenges: Past, Present, And Future Strategies. American Journal of Applied Sciences and Engineering, 5(2) 1-16. AJASE5_21-16-11.pdf

4. Ebigenibo G. S. (2021). Nigerian Power Sector: A new structure required for effective and adequate power generation, transmission and distribution, Global Journal of Engineering and Technology Advances, 2021, 07(01), 006–018 Available at: https://gjeta.com/sites/default/files/GJETA-2021-0035.pdf

5. Arowolo, W. Perez, Yannick. (2020) Market reform in the Nigeria power sector: A review of the issues and potential solutions. Energy Policy. Volume 144, September 2020, 111580. Market reform in the Nigeria power sector: A review of the issues and potential solutions – ScienceDirect

6. Raymond Ofagbor, Ndentuokid Essang, June 13, 2024, “Legal and commercial implications of The Electricity Act, 2023 for the Nigerian Electricity Supply Industry (NESI)” available at: https://businessday.ng/news/legal-business/article/legal-and-commercial-implications-of-the-electricity-act-2023-for-the-nigerian-electricity-supply-industry-nesi/

7. Opeoluwani Akintayo, 4^th May 2024, NERC Unbundles TCN, Establishes Independent System Operator. Available at: https://www.channelstv.com/2024/05/04/nerc-unbundles-tcn-establishes-independent-system-operator/

8. Welcome To NISO

9. Ibid

10. Micheal G. Pollitt, August 2011, “Lessons from the History of Independent System Operators in the Energy Sector, with applications to the Water Sector” University of Cambridge Economic and Social Research Council, available at: https://www.researchgate.net/publication/254396599_Lessons_from_the_History_of_Independent_System_Operators_in_the_Energy_Sector_with_applications_to_the_Water_Sector.

11. Who Manages the Electrical Grid in the United States? Who Manages the Electrical Grid in the United States? | The City Dark

12. ibid

13. Kathy Hitchens, November 2022, “What is the Difference Between ISO and RTO?” Available at: What’s the Difference Between ISO and RTO? | PCI

14. MISO Board of Directors

15. Board of Directors

16. Independent System Operators (ISO) U.S. Electric Grid

17. PJM Inside Lines, November 1, 2024- PJM to FERC: Colocated Load Growth Requires Guidance to Manage Reliability, Risks, Cost and Regulatory Issues, PJM to FERC: Colocated Load Growth Requires Guidance to Manage Reliability, Risks, Cost and Regulatory Issues | PJM Inside Lines

18. T&D News, 2024, “GRID-INDIA conferred ‘Miniratna” status” Available at: GRID-INDIA conferred “Miniratna” status – Your Gateway to Power Transmission & Distribution

19. Swarna Kesavan, April 10, 2021, “Evolution of System Operations: A journey of growth, reforms and POSOCO’s emergence as an independent entity” Available at: Evolution of System Operations: A journey of growth, reforms and POSOCO’s emergence as an independent entity – Power Line Magazine

20. Indian PSU, 2024, “GRID-INDIA Is Now A Miniratna Company” Available at: GRID-INDIA Is Now A Miniratna Company – Indian PSU | Public Sector Undertaking News

21. Power Grid Corporation Of India Ltd Board of Directors | BlinkX

22. NERC ORDER NO: NERC/2025/057 on the Mandatory Integration of Grid-Connected Generating Units Into the New SCADA/EMS for the Nigerian Electricity Supply Industry. Available at: Order on the Mandatory Integration of GenCos into the SCADA Project

23. Section 30(1), (2)a-e of the Electricity Act 2023.