By Cynthia Ezekwe
President Bola Ahmed Tinubu has assented to the Electricity Act 2023 set to encourage the de-monopolization of Nigeria’s electricity generation, transmission, and distribution of electricity, enabling states, companies, and individuals to generate, transmit and distribute electricity.
The Electricity Act which was initially passed by lawmakers in July 2022, will replace the Electricity and Power Sector Reform Act of 2005, and also provides a framework to guide the post-privatization phase of the Nigerian Electricity Supply Industry (NESI) as well as encourage private sector investments in the sector.
Furthermore, it allows states to issue licenses to private investors who can operate mini-grids and power plants within the state, though it precludes interstate and transnational electricity distribution.
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 also outlines how NERC can transition regulatory responsibilities from itself to state regulators when they are established, as it points out that until a state has passed its electricity market laws, NERC will continue to regulate electricity business exclusively carried out in those states.
According to the ACT, 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 with a capacity not exceeding 100 kilowatts (KW) in aggregate at a site, or such other capacity as NERC may determine from time to time, without a license.
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. It also mandates the imposition of renewable purchase obligations on distribution or supply licensees.
The Electricity Act also grants lawmakers the power to carry out oversight responsibilities and function over the Nigeria Energy Systems Integrator (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.