Tinubu assents to electricity bill, okays states, individuals to generate power

• Nigerians optimistic of improved supply
• ‘No economic efficiency in amendment’

President Bola Tinubu, yesterday, assented to the electricity bill passed in July 2022 seeking to repeal the Electricity and Power Sector Reform Act, 2005. It becomes the Electricity Act, 2023

The Electricity Act now consolidates all legislations dealing with the electricity supply industry to provide an omnibus and ideal institutional framework to guide the post-privatisation phase of the Nigerian Electricity Supply Industry (NESI) and encourage private sector investments in the sector.

The primary aim of the bill, as stated in its very first section, is to create a comprehensive legal and institutional framework to guide NESI, de-monopolise the generation, transmission, and distribution of electricity at the national level, and empower States, companies and individuals to generate, transmit and distribute electricity.

States would also be able to issue licenses to private investors who have the ability to operate mini-grids and power plants within the State, but such State licenses are not to extend to inter-state or transnational distribution of electricity.

Nigeria’s constitution, as amended, provides for shared power between the Federal and state government in terms of making laws for electricity, but this is not the practice on account of the Electricity Reform Act, which empowers NERC to carry out regulation across the country.

The Electricity Act establishes that NERC’s powers to regulate within Nigeria are without prejudice to the powers of the states to make laws and create electricity markets within those states and to regulate those markets.

It mandates how NERC transitions regulatory responsibilities from itself to state regulators when they are established. Until that happens, NERC will continue to regulate electricity business exclusively carried out in those states.

Investigations by The Guardian revealed that the new law restates the position and clarifies the authority and powers of the states and federal. It means that Nigeria will not have one single market regulated from Abuja, but could have at least 3 independent regulators.

This means that states like Kaduna, Lagos, and Edo can begin to regulate their own electricity market, as they have already created laws for their electricity markets. The other states will continue to be regulated by NERC until they pass their laws.

NERC will still carry out cross-border regulations, generation, and transmission across states.

Lawmakers, under the bill, are granted the power to carry out oversight responsibilities and function over the National Electricity supply industry 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 in which the government has not divested its equity holdings, and irrespective of the Ministry where such entities are placed for administrative supervision by the Ministry.

Electricity pylons.Reuters/Neil Hall

Under the Nigeria Electricity Bill, electricity generation licensees are obligated to meet renewable generation obligations as may be prescribed by NERC. As such, 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 act aims to create a market for renewable energy and thereby stimulate investments in the sector and provide the promotion of renewable energy in the country.

The Electricity Act also mandates the imposition of renewable purchase obligations on distribution or supply licensees.
It also states that 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 the Commission may determine from time to time, without a license.

Nigeria’s journey to this current status started first with clarifying the position of the constitution that recognises joint regulatory powers leading to the constitutional amendment assented to in March by former President Muhammadu Buhari.

Meanwhile, Nigerians are optimistic about the ongoing constitutional amendment that will grant more power to the states, especially when it comes to electricity. The constitutional amendment seeks to decentralise electricity distribution, which many believe will lead to significant improvements in access to electricity across the country.

The amendment proposes that states can generate, distribute, and transmit power within their respective borders, which means that state governments will have more control over power generation and distribution in their states, thus making it easier to identify and address the challenges that have inhibited progress towards reliable electricity supply.

Nigeria, with a population of over 200 million people, has been plagued by inadequate power supply for decades. According to the World Bank, the country has an installed generation capacity of over 13,000 MW but generates an average of 4,500 MW, which is grossly insufficient.

The new Act, it is believed, will help address the problem of grid instability, which has led to frequent blackouts. With more decentralised power supply, states that are not connected to the national grid will have a better chance of generating their own power and connecting with neighboring states.

The move towards decentralised power supply is expected to have a significant impact on job creation. It is expected that decentralisation will create jobs in the production, distribution, and maintenance of power facilities, as well as in the development of new renewable energy sources.

On March 17, 2023, an Act to alter certain provisions of the 1999 Constitution of the Federal Republic of Nigeria (the “1999 Constitution”), to allow constituent states within the Nigerian federation (the “States”) to generate, transmit, and distribute electricity in areas covered by the national grid and for related matters (the “NESI Constitutional Amendment”) came into force, following assent to the said Act by former president, Muhammadu Buhari.

Speaking with The Guardian, Executive Director, Research and Advocacy for the Association of Nigerian Electricity Distributors (ANED), Sunday Oduntan said the passing of bill is a good way forward, noting that the privatisation of the power sector is a long journey.

Oduntan said the bill amendment will create more healthy competition, enabling states as a federation unit in a federal republic to get involved, noting that the country needs to be metered.

He said the Discos “are now looking forward to working with all the state governments and even local councils on providing adequate electricity for all.

Principal Action Coordinator, Joint Action Platform for Electricity Consumers Right, Ayodele Olawoye, said the amendment is a win for state-focused electricity market in furtherance of the federal government’s bid to promote competition, transparency and efficiency in the industry.