President Bola Tinubu has given his approval to the electricity bill, which was passed in July 2022 with the intention of repealing the Electricity and Power Sector Reform Act of 2005. This bill has now transformed into the Electricity Act, according to sources within the presidential villa as reported by Waffi TV.
The newly enacted Electricity Act consolidates all existing legislations related to the electricity supply industry, providing a comprehensive and ideal institutional framework. Its purpose is to guide the Nigerian Electricity Supply Industry (NESI) during the post-privatization phase and encourage private sector investments in the sector.
The primary objective of the bill, as stated in its initial section, is to establish a comprehensive legal and institutional framework for NESI. It aims to break the monopoly on electricity generation, transmission, and distribution at the national level, empowering states, companies, and individuals to participate in these activities.
Furthermore, the bill allows states to issue licenses to private investors for operating mini-grids and power plants within their respective states. However, these licenses do not extend to inter-state or transnational distribution of electricity.
“This is the result of two years of work to update the electricity law and align it with the provisions of the constitution,” said one source.
In line with the constitutional amendment enacted in March, Nigeria’s constitution recognizes the shared power between the federal and state governments in making laws concerning electricity. However, the actual practice has deviated from this due to the Electricity Reform Act, which grants regulatory authority to the Nigerian Electricity Regulatory Commission (NERC) nationwide.
The Electricity Act clarifies the authority and powers of both the federal and state governments, ensuring that NERC’s regulatory powers within Nigeria do not hinder the states’ ability to make laws and establish electricity markets within their jurisdictions.
The act mandates NERC to transition its regulatory responsibilities to state regulators once they are established. Until that happens, NERC will continue to regulate electricity businesses exclusively conducted within those states.
This means that states like Kaduna, Lagos, and Edo can now regulate their own electricity markets since they have already enacted laws for this purpose. However, the other states will remain under the regulation of NERC until they pass their own laws.
The new law reaffirms the position and clarifies the authority and powers of both the federal and state governments. As a result, Nigeria will no longer have a single market regulated from Abuja, but could have at least three independent regulators, according to an expert interviewed by Waffi TV.
NERC will still be responsible for cross-border regulations, specifically regarding generation and transmission across states.
Under the bill, lawmakers are granted the power to oversee the National Electricity Supply Industry through their respective Committees on Power in the Senate and House of Representatives. This power is independent of any supervisory authority held by government ministries over government-owned enterprises or other entities operating in the Nigerian electricity supply industry, as long as the government has not divested its equity holdings. The bill also ensures that administrative supervision is not limited to a specific ministry.
Additionally, the Nigeria Electricity Bill imposes renewable generation obligations on electricity generation licensees as determined by NERC. This means that electricity generation companies will be required to generate power from renewable energy sources, purchase renewable energy-generated power, or acquire renewable energy instruments. The aim is to create a market for renewable energy and stimulate investments in the sector.
The Electricity Act also mandates the imposition of renewable purchase obligations on distribution or supply licensees.
Lastly, the act states that anyone can construct, own, or operate an undertaking for generating electricity up to 1 megawatt (MW) in aggregate at a site or an undertaking for electricity distribution with a capacity not exceeding 100 kilowatts (Kw) in aggregate at a site, or as determined by the Commission. Importantly, no license is required