With the current 2023 Electricity Act that President Bola Ahmed Tinubu signed into law on Thursday, June 8, it’s now obvious and easy for many state governments to attract more investments into Nigeria’s power sector and improve access to electricity in their respective states.
Earlier, the National Assembly had, in July 2022, passed the bill leading to the Electricity Act 2023 to repeal the Electricity and Power Sector Reform Act, 2005.
The Electricity Act consolidates all legislations dealing with the electricity supply industry to provide an ideal institutional framework to guide the post-privatisation phase and encourage private sector investments in the sector.
The primary aim of the Act, as stated in its first section, is to create a comprehensive legal and institutional framework to guide the Nigerian electricity supply industry (NESI).
Nigeria has been having energy supply challenges, with about 86 million people unconnected to the national grid and lacking access to electricity.
The electricity sector has remained stagnant over time with the government still paying subsidy of N70 billion annually to keep the sector afloat, despite privatisation.
Industry watchers posit that with the new Act, states can now expand opportunities and play key roles in building power plants and complementing the Federal government’s efforts on the transmission expansion project, while also curbing energy theft in the power industry.
“Section 209-224, for instance, talks about the power theft law in detail. This is an area that I expect states to establish power theft agencies.
Once this is done, investors’ confidence on investing in the sector will grow. Remember that revenue collection is a major challenge, and the Act addresses that,” a power sector governance expert and energy lawyer, Chuks Nwani, told our correspondent.
Nwani further said that states can now establish their electricity boards as provided by the Act to look at areas of infrastructure protection, metering, and network expansion investment with the Transmission Company of Nigeria (TCN).
To a development economist, Kelvin Emmanuel, the new Act offers opportunities for states to play a leading role in the deregulated electricity market.
Emmanuel said, “It is a positive development. What the President has basically done with the generation and transmission is they now rest with the Nigerian Electricity Regulatory Commission (NERC), while distribution rests with states’ distribution boards.
“The reality is that transmission capacity is to be unbundled, which impacts the ability of the distribution companies (Discos) to get the load from the generating companies. You will see the states playing more roles to cover prepaid meter penetration rates and cover costs for supplied power.”
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The new law, the economist elaborated, would see more states key into investments in the Discos, which had been struggling to stay afloat. Some of them had even gone into administration.
He said, “When you consider lots of outstanding debts running into trillions of naira in the sector, you note that the Federal government has struggled over time, and the states need to support with their own roles.”
Notably, the new Act de-monopolises electricity generation, transmission, and distribution at the national level to empower states, companies, and individuals to generate, transmit and distribute electricity.
States will also be able to issue licences to private investors who can operate mini-grids and power plants within the state. Still, such state licences are not to extend to inter-state or transnational distribution of electricity.
“This is the culmination of two years’ work, to update the electricity law and bring it in line with what the constitution actually provides,” one source said.
Nigeria’s constitution, as amended, provides for shared power between the Federal and state governments in terms of making laws for electricity.
Nigeria’s journey to the new law started with clarifying the position of the constitution on joint regulatory powers, leading to the constitutional amendment that former president, Muhammadu Buhari, assented to in March.
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 will be transitioning regulatory responsibilities from itself to state regulators when they are established. Where regulators have not been established, NERC will continue to regulate the electricity business.
This means that states like Kaduna, Lagos, and
Edo can begin to regulate their own electricity markets as they have already created laws for them. The other states will continue to be regulated by NERC until they pass their laws.
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, three independent regulators.
The NERC will still carry out cross-border regulation in generation and transmission across states.
Lawmakers under the Act are granted the power to carry out oversight responsibilities through the 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.
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 one megawatt (mw) in aggregate at a site, or an undertaking for the 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 licence.