President Bola Ahmed Tinubu has signed the Electricity Act 2023, which lawmakers first passed in July 2022.
The Electricity Act will take the place of the 2005 Electricity and Power Sector Reform Act.
It establishes a framework to guide the Nigerian Electricity Supply Industry’s (NESI) post-privatization phase and to encourage private sector investment in the sector.
Some of the functions that the Electricity Act seeks to guide are highlighted below.
The law mandates the de-monopolization of Nigeria’s electricity generation, transmission, and distribution at the national level, allowing states, businesses, and individuals to generate, transmit, and distribute electricity.
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States can issue licences to private investors to operate mini-grids and power plants within their borders under the act. The act, however, prohibits interstate and transnational electricity distribution.
The Nigerian Electricity Regulatory Commission (NERC) will be able to regulate the electricity sector within Nigeria under the Electricity Act 2023, without prejudice to the states’ powers to make laws, create electricity markets, and regulate those markets.
The act specifies how NERC can delegate regulatory authority to state regulators once they are established.
NERC will continue to regulate electricity business conducted solely in those states until those states’ electricity market laws are passed.
For the time being, Lagos, Edo, and Kaduna States already have electricity market laws in place and can begin regulating their markets.
However, NERC will regulate in states where such laws do not exist. NERC will continue to carry out cross-border regulations, regulating generation and transmission across states.
The act empowers lawmakers to carry out oversight responsibilities and exercise control over the NESI through the Senate and House Committees on Power.
This is to be done regardless of any government ministry’s supervisory powers over government-owned enterprises or other entities operating in the Nigerian electricity supply industry.
Electricity generation licensees are required by NERC to meet renewable generation obligations.
The act requires electricity generating companies to either generate power from renewable energy sources, purchase power generated from renewable energy or purchase any instrument representing renewable energy generation.
The Electricity Act also requires distribution or supply licensees to meet renewable purchase obligations.
The act also states that without a licence, anyone may construct, own, or operate an undertaking for generating electricity not exceeding 1 megawatt (MW) in aggregate at a site, or an undertaking for distribution of electricity not exceeding 100 kilowatts (KW) in aggregate at a site, or such other capacity as NERC may determine from time to time.