Tinubu signs bill into law that allows states and individuals to generate, distribute electricity

The Electricity Act 2023, which was initially approved by legislators in July 2022, has received the blessing of the country’s head of state, Bola Ahmed Tinubu.

The Electricity and Power Sector Reform Act of 2005 will be replaced by the Electricity Act in the near future.

It offers a structure that can direct the post-privatization phase of the Nigerian Electricity Supply Industry (NESI) and encourage investments from the private sector in the industry.

The Electricity Act seeks to guide a variety of functions; some of these functions are highlighted below:

The law empowers states, companies, and individuals to generate, transmit, and distribute electricity. This de-monopolization of electricity generation, transmission, and distribution in Nigeria is mandated at the national level by the law.

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Under the provisions of the act, states have the authority to grant licences to private investors, allowing them to operate power plants and mini-grids within the state. Nevertheless, the act makes it illegal to distribute electricity across state lines or internationally.

The Nigerian Electricity Regulatory Commission (NERC) will be able to regulate the electricity sector within Nigeria as a result of the Electricity Act 2023. However, this will not affect the powers of the states to make laws, create electricity markets within those states, and regulate those markets.

The act stipulates the procedures that NERC must follow in order to hand over its regulatory responsibilities to state regulators once those bodies come into existence.

NERC is going to continue to regulate the electricity business that is carried out exclusively in those states until such time as those states pass their own laws governing the electricity market.

At this time, the states of Lagos, Edo, and Kaduna already have laws governing their respective electricity markets and can begin the process of regulating those markets.

However, NERC will regulate other states because those states do not have such laws. The North American Electric Reliability Corporation (NERC) will continue to carry out cross-border regulation, meaning that both generation and transmission between states will continue to be regulated by NERC.

Through their respective Committees on Power in the Senate and House of Representatives, lawmakers are given the authority to carry out oversight responsibilities and functions over the NESI as a result of the act.

This is to be done regardless of the supervisory powers that any government ministry may have over government-owned enterprises or other entities that are active in the industry of supplying electricity to Nigeria.

Licensees that generate electricity are required to fulfil any renewable generation obligations that may be imposed by the North American Electricity Regulatory Commission (NERC).

Companies that generate electricity will be required by the act to either generate power from renewable energy sources, purchase power generated from renewable energy or acquire any instrument representing renewable energy generation. One of these three options must be chosen in order to comply with the mandate.

The Electricity Act includes a provision that compels licensees involved in the distribution or supply of electricity to fulfil renewable purchase obligations.

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According to another provision of the act, a licence is not required for anyone to construct, own, or operate an undertaking for the generation of electricity with a capacity not exceeding one megawatt (MW) in aggregate at a site, or an undertaking for the distribution of electricity with a capacity not exceeding one hundred kilowatts (KW) in aggregate at a site, or such other capacity as NERC may determine from time to time. Both of these capacities are capped at a single location.