Electricity Act 2023: Power Sector Reform

• This Act repeals the Electric Power Sector Reform Act, No. 6, 2005
• This Act enacts the Electricity Act, 2023
• The Electricity Act, 2023 consolidates laws relating to the Nigerian electricity supply industry
• Provides a comprehensive legal and institutional framework for Nigeria's power sector.
• Covers electricity generation, transmission, system operation, distribution, supply, and trading
• Enforces consumer rights and obligations.
• Provides for a holistic integrated resource plan and policy, that Recognises all sources for electricity generation, transmission and distribution.
• Includes integration of renewable energy to Nigeria's energy mix.
• Aims to attract investments.

Arrangement of Sections

• Part I contains the preliminary provisions
• Part II addresses the National Integrated Electricity Policy and Strategic Implementation Plan.
• Part III focuses on the development of a competitive national electricity market.
• Part IV covers the incorporation and licensing of the ISO (Independent System Operator).
• Part V deals with the establishment, functions, and powers of the Nigerian Electricity Regulatory Commission.
• Part VI is about licensing.
• Part VII concerns the generation of electricity.
• Part VIII establishes the National Hydroelectric Power Producing Areas Development Commission.
• Part IX is about transmission of electricity.
• Part X concerns the distribution and supply of electricity.
• Part XI discusses tariffs and subsidies.
• Part XII is on the acquisition of land and access to land for electricity projects.
• Part XIII deals with consumer protection and licensee performance standards.
• Part XIV concerns competition and market power.
• Part XV is about the Power Consumer Assistance Fund.
• Part XVI establishes the Rural Electrification Agency.
• Part XVII focuses on renewable energy and energy efficiency.
• Part XVIII establishes the Nigerian Electricity Management Services Agency.
• Part XIX is about the National Power Training Institute of Nigeria.
• Part XX outlines offenses and penalties.
• Part XXI contains miscellaneous and supplementary provisions.
• Part XXII includes final provisions.

PART I - PRELIMINARY PROVISIONS (Section 1 and 2)

• Primary objective is to provide a comprehensive legal and institutional framework
• Guide the operation of a privatized, contract and rule-based competitive electricity market in Nigeria.
• Attract private sector investments through transformative policy and regulatory measures in the Nigerian Electricity Supply Industry (“the NESI”).
• Provide a legal and institutional framework to leverage privatization gains.
• Accelerate power generation capacity growth and improve utilization.
• Increase investments in new power generation technology and revamp existing power plants.
• Promote policies to expand power transmission networks in Nigeria.
• Address imbalances in existing transmission infrastructure.
• Stimulate efficient power generation, transmission, and distribution capabilities.
• Achieve national electricity access targets.
• Attain the highest per capita power consumption in Africa within a reasonable timeframe.
• Stipulate consequential, transitional, and saving provisions regarding reforms made under the Electric Power Sector Reform Act, No. 6, 2005 (“the Repealed Act”).
• Provide a clear guide and legal basis for phase-wide development of the Nigerian electricity supply industry, since conclusion of privatization, as implemented under the provisions of the Repealed Act.
• Promote the development of a competitive electricity market.
• Stimulate policies that attract investment across the Nigerian electricity value chain to re-energize economic growth, create jobs, and improve living conditions.
• Provide framework for formulation/adoption of a National Integrated Electricity Policy and Implementation Plan.
• Stimulate policies that address technology limitation and outdated infrastructure, responsible for value chain losses in the NESI.
• Attract sustainable investments in new/efficient power generation technology and revamping existing power plants.
• Eliminate barriers to investments in generation, transmission, distribution, and related sub-sectors.
• Promote policies and regulatory measures to increase geographic coverage in power generation, transmission, distribution, and supply of electricity in Nigeria.
• Provide framework to stimulate development/utilization of renewable energy sources.
• Create enabling environment to attract investment in renewable energy sources, to increase the contribution of renewable energy to the energy mix.
• Framework for improving access to electricity in rural, unserved, underserved, peri-urban, and urban areas, through conventional/ renewable energy off-grid and mini-grid solutions.
• Promote indigenous capacity in renewable energy technology through a framework for local content
• Promote public education on renewable energy production/consumption, increase generation and consumption.
• Recognize third-party investments in NESI infrastructure by private/public sectors.
• Clear framework for cross-border electricity trade in the interest of national security and energy self-sufficiency.
• Promote frameworks for security of electricity infrastructure; prescribe effective punitive measures against electricity theft/other offenses peculiar to the NESI.
• Strengthen the relationship between the federal electricity market and state electricity market.
• The Act applies throughout the Federal Republic of Nigeria, concerning all aspects and segments of the power sector value chain, subject to: section 4 and paragraphs 13, 14, and 15 of Part II, of the Second Schedule to the Constitution.
• The Act does not invalidate any law passed by the House of Assembly of a State regarding generation, transmission, system operation, distribution, supply, and retail of electricity within that State.
• The Act does not invalidate laws passed by the House of Assembly of a State regarding the establishment, promotion, and management of State electricity power stations.
• The Act does not invalidate laws passed by the House of Assembly of a State to sanction/regulate State electricity markets/regulatory authority.
• The Act does not invalidate any collaboration between States/ Local Governments and the Federal Government for rural electrification.
• The Act also includes collaboration between States/ Local Governments and distribution licensees to ensure electricity access.
• The Act does not invalidate laws passed by the House of Assembly of a State to sanction the establishment of a State electricity market and State Integrated Electricity Policy and Strategic Implementation Plan.

PART II - NATIONAL INTEGRATED ELECTRICITY POLICY AND STRATEGIC IMPLEMENTATION PLAN (Sections 3-5)

• The Federal Government, through the Ministry responsible for power, will initiate the preparation and publication of an Integrated National Electricity Policy and Strategic Implementation Plan within one year from the Act's enactment.
• Collaboration with government authorities and stakeholders will guide overall development of Nigeria's electric power sector.
• The National Electricity Policy and Strategic Implementation Plan should encompass:
  • Development of the electric power sector utilizing resources like coal, natural gas, nuclear, solar, wind, hydro, and hydrogen.
  • Captive generation or stand-alone systems for rural areas and non-conventional energy systems.
  • Rural electrification and bulk purchase/management of local distribution in rural areas.
  • Public-Private Partnerships for access to electricity in all areas.
  • Power-source specific policies including waivers and subsidies to stimulate renewable energy.
  • Overall electricity value chain development with emphasis on generation, transmission, distribution, and supply infrastructure to ensure reliability and minimize losses.
  • Other aspects of the power sector requiring policy direction, considering changes and global developments.
• The National Integrated Electricity Policy and Strategic Implementation Plan must be approved by the Federal Executive Council.
• The National Integrated Electricity Policy and Strategic Implementation Plan approved by the Federal Executive Council shall be reviewed, as needed, at least every five years.
• Initiated, formulated, deliberated, and adopted by the Ministry of Power, per Act's guidelines.
• Approved by the FEC before final publication in the Federal Government Gazette for implementation.
• Key responsibilities of the Minister:
  • government policy determination, formulation and monitoring for the Nigerian electricity supply industry.
  • issuing general policy directions to the Commission on matters concerning electricity.
  • advising the Federal Government on all matters pertaining to the Nigerian electric power sector.
  • promoting the development of local content in the Nigerian electricity supply industry.
  • promoting gender mainstreaming in the design and implementation of electricity projects and programmes.
  • issuing policy directives on cross-border electricity trading.
• The Ministry responsible for power will initiate and coordinate broad sectoral policies and implementation frameworks for overall development of the electric power sector in Nigeria.
• Key Ministry functions include:
  • executing public-private partnership agreements.
  • coordinating activities of the power sector, coordinating with States and Local Governments regarding proposed government subsidies and their roles in implementation extant National Electricity Policy and Strategic Implementation Plan.
  • handling policy matters relating to research and development.
  • participating in bilateral and multilateral relations affecting the power sector.
  • advising the Minister on matters pertaining to conventional and renewable energy development and utilisation.
  • recommending to the Federal Government through the Federal Ministry responsible for such exemption from customs levies and other duties on equipment and machinery.
  • recommending to the Federal Government through the Federal Ministry responsible for finance, such financial incentives necessary for the development, production and utilization of conventional and renewable energy source.
  • Undertaking feasibility studies and maintain data with a view to availing the same to developersto.
  • undertaking research, development and dissemination of appropriate conventional and renewable energy technologies.
  • promoting the use of biomass for electricity

PART III - DEVELOPMENT OF A COMPETITIVE NATIONAL ELECTRICITY MARKET (Sections 6-14)

• This Act recognizes the legal validity of NESI reform from vertically integrated Authority to the privatisized phase.
• The legality of physical unbundling of the Authority to 18 companies and transfer of the assets, liabilities and staff of the Authority to the Power Holding Company of Nigeria (PHCN) is recognised.
• Licensing of the 18 successor companies that emerged from the PHCN as distinct generation, transmission, and distribution companies as contained in the list set out in Part I of the First Schedule to this Act is recognised.
• Introduction of the National Integrated Power Projects (NIPP) to address infrastructural deficit and fast-track NESI development is recognised.
• Licensing of Independent Power Producers (IPPs) contained in the list set out respectively in Parts II and III, First Schedule to this Act. is legally recognised.
• Establishment of the Nigerian Electricity Liability Management Company LTD/GTE(NELMCO) to assume responsibility for liabilities and non-core assets of PHCN and successor companies. This includes responsibility for other assets or receivables within the NESI leading to privatization of successor companies; Regarding management of tariff deficits accumulated during the post-privatisation stage by successor companies, any extended mandate must be approved by the National Council on Privatization.
• Incorporation of the National Power Training Institute of Nigeria (NAPTIN) for manpower training/coordination in the NESI is legitimate.
• Establishment of the Nigerian Electricity Bulk Trading Plc (NBET)., a company incorporated under the Companies and Allied Matters Act as a trading licensse, is legitimate.
• Introduction of a rule and contract based electricity market and with interim, transitional rules introduced to regulate the ,transitional stages of the market were legitimised.
• The Commission's continuing responsibility in the post-privatisation stage of the NESI is to ensure its development stages or such stages of the market in accordance with such terms, preconditions or features prescribed in the market rules or approved amendment to such rules.
• monitor and ensure that the market operator and market participants in the transitional electricity market perform their responsibilities as stipulated under this Act and the market rules, prescribing timelines for completion of such responsibilities and imposing sanctions to ensure strict and timely compliance where necessary;
• monitor and ensure that the market participants and the market operator perform their responsibilities as stipulated under this Act in relation to preparation for the initiation of the medium and long-term electricity markets stages, respectively, prescribing timelines for completion of such responsibilities and imposing sanctions to ensure strict and timely compliance where necessary;
• prepare and submit annual reports on the market conditions, including advice to the Minister on the end of the transitional electricity market.
• by its directive and within such period as it may specify, direct NBET Pc.
• The Transmission Company of Nigeria Plc may transfer system operation function to ISO with Commission approval.
• The Commission will present report to the President and National Assembly each report, and when the Commission, in consultation with the Minister is satisfied that the electricity market in Nigeria has developed to a point where a more competitive stage than the preceding market ought to be established, declare such a market stage being commenced.
• Market stage declared by the Commission retains features/conditions the under market rules, operational until the Commission shall detennine.
• The sale and purchase of electricity and ancillary services during the medium-term market stage shall be in accordance with the provisions of the market rules and the grid code.
• Commission will introduce a retail tariff scheme under long terrn market.
• There shall be market rules and grid code as developed by the system operator and approved by the Commission for (a) operation of the national grid. and (b) establishment and governance of markets.
• Market rules may include provisions on rule governance, payments, orders, financial penalties, participation rights, termination, etc.
• Market rules may be general or particular.
• Amendments to the market rules shall be developed by the system operator in accordance with the amendment provisions in the market rules with Commission approval.
• The Commission's directive can specify end-use customer classes that can constitute eligible customers.
• The COmmission shall monitor eligible customer declaration with market stages.
• Commission must specify conditions to ensure effective implementation of eligible customers.
• Commission can review customers are already declared by the Minister prior to this Act.
• If Commission determines price decrease, it can issue directives on collection of competition transition charges from eligible customers, fund distribution.

Part IV- Incorporation and Licensing of ISO (Sections 15-32)

• The Transmission Company of Nigeria Plc (TCN) shall incorporate an entity/ISO. Act No. 3, 2020
• The entity, once incorporated,is to be immediately licensed by the Commission as an ISO to perform market and system operation functions.
• TCN shall then transfer market powers to the ISO
• The TCN shall retain service provider responsibility.
• Timeline is set avoiding disruption.
• Terms of incorporation shall be decided by Commission.
• The constitutional document of the ISO submitted to the Corporate Affairs Commission for incorporation must include certain objects:
• To hold and manage assets and liabilities pertaining to market and system operation on behalf of market participants and consumer groups or such stakeholders as the Commission specifies.
• To carry out all market and system operation related contractual rights and obligations novated to it by the Transmission Company of Nigeria.
• To negotiate and enter into contract for the procurement of ancillary services with independent power producers, successor generation licensees, and generally perform market and system.
• income and property be applied solely towards promotion of its objects.
• The functions of the ISO shall be as provided under section 67 of this Act.
• The ISO shall enter into arrangement with an expert/ entity to provide technical support.
• All relevant employees, assets, liabilities, and novation of market and system operation related contractual rights and obligations of the Transmission Company of Nigeria must be transferred to the ISO, and the date for these must be declared.
• A transfer order shall be binding
• A transfer order may specify and describe employees, assets, liabilities, rights and obligations transferred by reference to any class of employees, assets, liabilities, rights and obligations, or by reference to specific employees, assets, etc.
• All agreements of the ISO must be effective and enforcable.
• A transfer order may specify the date the transfer takes effect and any interest in the property.
• The transfer is deemed to have taken effect on a date earlier than the date the transfer order is made, but no earlier than the dates on which the ISO was incorporated and licensed.
• Transfer and associated transactions shall be deemed to have occurred in sequence and at times specified in the order.
• Any liability or obligation transferred, enforced against the ISO.
• The transfer order may contain other dealings, and concerns related to employees, assets, liabilities, rights or obligations.
• Subscribers to incoorporation vest assets to ISO.
• A statment in aregistered document indicates a transfer to the ISO.
• The ISO shall be entitled to enforce/ defend right/obligations.
• Any pending action including arbitration the may be enforced.
• No action shall be commenced against the ISO after expiry date of actions.
• Transferred assets shall not be deemed a breach.
• A forgoing transfers releases the transmissiom Company from any further liability.
• TCN shall provide records to guarantee.
• Comission may amend a transfer order.
• Vestiing of assets required board directions.
• Employee transfers maintain favourable terms and rights.
• Stamp duty charges are exemtp.
• ISO is subject to code governance.
• Comission to allow for board composition with a chairman. members, and a dirrector.
• COmmission to ensure requirements are ment.
• ISO members serve for a fixed initial time term.
• Land protections for land belonging to the ISO are maintained.

PART V - ESTABLISHMENT, FUNCTIONS AND POWERS OF THE NIGERIAN ELECTRICITY REGULATORY COMMISSION (Sections 33-62)

• The Nigerian Electricity Regulatory Commission (the "Commission") Established.
• Apex regulator of the NESI , independent body.

PART VI- LICENSING (Sections 63-79)

• Only those with a licence are allowed to constuct/operate undertakeings to generate/transmit elctricity.
• Except in accorance wth thsi Act.
• One is allowed to construct up to 1 megawat without a license.
• Commission has the power to inquire.
• Commission can penalise Licensee for violations
• The Commission and the ISO shall have a continuing obligation to promote the generation of electricity from renewable energy sources as defined under this Act

PART VII-GENERATION OF ELECTRICITY

Commission shall have a continuing obligation to promote the generation of electricity from renewable energy Grants generation licences May direct generatuibg licensee to operate and maintain under conditions to.

PART VIII - ESTABLISHMENT OF THE NATIONAL HYDROELECTRIC POWER PRODUCING AREAS DEVELOPMENT COMMISSION

Commission shall have a continuiing obligation to prornote hydroelctric power devleopment

PART IX- TRANSMISSION OF ELECTRICITY

Power to isssue private sectro transmistion

PART X- DISTRIBUTION OF ELECTROCITY

Distribution and renewable power support . The commission and the Universal access for rural

PART XV- TARIFFS AND SUBSIDIES

PART XII - ACQUISITION OF LAND AND ACCESS TO LAND

• Relates to acccess, compensation. And relocation. .

PART XIII - CONSUMER PROTECTION AND LICENSEE PERFORMANCE STANDARDS

• Development of consumer service standarads. supply standards

OFFENCES AND PENALTIES

• Part XX outlines various offences related to electricity theft, damage to infrastructure, and non-compliance with regulations.
• Penalties include fines and imprisonment.
• The Act also addresses offences committed by companies and abetment of offences.

MISCELLANEOUS AND SUPPLEMENTARY PROVISIONS

• This section includes provisions for the exemption of electric lines from attachment, powers of licensees to enter premises, power of the Commission to make regulations, local content in the power sector, and protection of investments.

FINAL PROVISIONS

• This section addresses repeal and savings, interpretation, and the citation of the Act.
• It includes schedules related to repealed acts, successor companies, and supplementary provisions.

PART XVI - MISCELLANEOUS

• Contains the Rural Electrification Agency.
• Power to the Rural Electrification Agency to develop , promote projects under section 128 onwards.

The key entities that have responsibilities.

• Nigerian Electricity Regulatory Commission (NERC): The apex regulator of the NESI, responsible for licensing, tariff regulation, setting standards, and ensuring compliance.
• Transmission Company of Nigeria Plc (TCN): Responsible for transmission service provision and system operation.
• Independent System Operator (ISO): Takes over system operation functions from TCN, ensuring efficient market operation.
• Nigerian Bulk Electricity Trading Plc (NBET): A trading licensee holding a bulk purchase and resale license.
• Power Holding Company of Nigeria (PHCN): The initial holding company from which successor companies emerged.
• Licensed Successor generation companies Licenses hold district roles.
• Licensed Distribution Company
• National Economic Council (NEC)

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