On June 6, 2023, President Bola Ahmed Tinubu officially enacted the Electricity Act, 2023, also known as the Act. This legislation is a direct response to the Federal Government’s determination to hasten Nigeria’s energy transition and enhance the regulation of the Nigerian Electricity Supply Industry (NESI). Its primary goal is to ensure optimal functionality and efficient service delivery within the industry. The Act essentially invalidates the Electric Power Sector Reform Act of 2005 and combines the laws pertaining to the NESI. It establishes a complete and institutional structure for Nigeria power sector. The Act encompasses various aspects such as electricity production, transmission, distribution, supply, trading, system operations, electricity-related violations, and the enforcement of consumer rights and responsibilities.
Furthermore, it includes measures to establish a comprehensive and unified strategy that acknowledges each and every origin of power production, transmission, and distribution in Nigeria. This incorporates the seamless integration of sustainable energy sources into the country’s overall energy composition. The Act’s implementation signifies the middle phase of a three-part reformation plan. It all began with the Constitutional Amendment that aimed to eliminate constitutional limitations on the ability of States to pass laws regarding power generation, transmission, and distribution. The journey will be done when electricity laws are established by the different State assemblies.
The Electricity Act has introduced significant changes worth mentioning.
It provides a structure for a competitive electricity market in Nigeria to attract private sector investment, covering regulations for licensing, tariffs, subsidies, land acquisition, renewable energy, rural electrification, and consumer protection. The Electricity Act is applicable nationwide and covers all aspects of the power industry, but any laws enacted by the State House of Assembly or joint efforts between the State, Local Government, and Federal Government regarding the electricity market remain unaffected. This Act presents a series of important changes that will impact the power industry.
One of them is the enactment of a comprehensive policy and strategic implementation plan for the nationwide integration of electricity. According to Section 3, the Ministry of Power is required to publish the National Integrated Electricity Policy and Strategic Implementation Plan (NIEPSIP) in the Federal Government Gazette within one year of the Electricity Act’s initiation. Its purpose is to guide the growth of the electric power industry in Nigeria. Formulated with input from stakeholders and approved by the Federal Executive Council, the NIEPSIP aims to use different resources for power generation, transmission, distribution and supply; enhance infrastructure; promote rural electrification; foster public-private partnerships; provide waivers and subsidies; and oversee progress of the electricity value chain. It is reviewed every 5 years.
Legislation also outlines transition of the power market.
Additionally, the reform creates a thriving domestic energy market through competition. The law outlines the gradual transition of the energy market as stipulated by the Electric Power Sector Reform Act of 2005 (which is no longer in effect) and subsequent advancements. The National Electricity Regulatory Commission is in charge of overseeing the transition. Under the Electricity Act, the medium-term stage requires following the Market Rules and Grid Code for buying and selling of electricity and related services. The Commission has power to amend the Market Rules, setting parameters for the long-term market stage. The new law explicitly recognizes the role of the System Operator in the issuance and alteration of the market rules and grid code. Nevertheless, any modifications carried out by the System Operator necessitate approval from the Commission.
Then, there is the formation and authorization of the Autonomous Network Administrator (ANA). The new law requires that the Transmission Company of Nigeria Plc (TCN) must establish a new entity with a specific ownership and governance structure determined by the Commission. This newly formed entity will then need to apply to the Commission for a license to operate as an Independent System Operator (ISO) and carry out the functions assigned by the Act in relation to market and system operations. It requires TCN to transfer all market and system operation assets and liabilities to the ISO, who will also take over the regulation of current transmission licenses.
Institutional frameworks established by the new bill.
Finally, it implements suitable institutional frameworks within the realm of the Act. The provisions of the Act extensively cover the creation, management, structure, tasks, and authority of significant power sector entities. These entities, as established by the law, consist of the National Electricity Regulatory Commission (NERC), the National Hydroelectric Power Producing Areas Development Commission (N-HYPPADEC), the Rural Electrification Agency (REA), Nigerian Electricity Management Services Agency (NEMSA), and the National Power Training Institute of Nigeria (NAPTIN). Although the agencies mentioned are not entirely new, the Act has implemented particular provisions to guarantee that all crucial electricity-related entities are encompassed within one comprehensive legislation.
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