The Electricity Act 2023, which was initially enacted by MPs in July 2022, has received President Bola Ahmed Tinubu’s approval.
The Electricity and Power Sector Reform Act of 2005 will be replaced by the Electricity Act. It offers a framework to direct the Nigerian Electricity Supply Industry’s (NESI) post-privatization phase and promote private sector investment in the industry.
The national demonopolization of electricity generation, transmission, and distribution in Nigeria gives states, businesses, and private citizens more freedom to produce, transmit, and distribute electricity.
According to the Act, states may grant licenses to private investors so they can run power plants and mini-grids within their borders. However, the Act forbids the distribution of power over state and international borders.
Under the Electricity Act 2023, the Nigerian Electricity Regulatory Commission (NERC) will be able to regulate the electricity sector within Nigeria without prejudice to the powers of the states to make laws and create electricity markets within those states and to regulate those markets.
The Act mandates how NERC can transition regulatory responsibilities from itself to state regulators when they are established. Until a state has passed its electricity market laws, NERC will continue to regulate electricity business exclusively carried out in those states.
For now, Lagos, Edo and Kaduna states already have electricity market laws and can start regulating their market. But for other states without such laws, NERC will regulate. NERC will still carry out cross-border regulations – generation, and transmission across states will still be regulated by NERC.
The Act grants lawmakers the power to carry out oversight responsibilities and function over the NESI through its respective Committees on Power in the Senate and House of Representatives. This is to be carried out notwithstanding the supervisory powers of any government Ministry over government-owned enterprises or other entities operating in the Nigerian electricity supply industry.
Empowering renewable energy
Electricity generation licensees are obligated to meet renewable generation obligations as may be prescribed by NERC. Under the Act, electricity generating companies will be mandated to either generate power from renewable energy sources, purchase power generated from renewable energy or procure any instrument representing renewable energy generation.
The Electricity Act also mandates the imposition of renewable purchase obligations on distribution or supply licensees.
The Act further states that no license is required for anyone to build, own, or operate an undertaking for the generation of electricity with a capacity not exceeding 1 megawatt (MW) in aggregate at a site, an undertaking for the distribution of electricity with a capacity not exceeding 100 kilowatts (KW) in aggregate at a site, or any other capacity that NERC may from time to time determine.