A New Act For The Nigerian Energy Ecosystem

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The Electricity Act 2023 was signed into law by President Bola Ahmed Tinubu on 8th June 2023. The Act repeals the Electric Power Sector Reform Act 2005, and it seeks to encourage a comprehensive private sector involvement and investment across the Nigerian Electricity Supply Industry. The reform began with constitutional amendments which preceded the now passed Electricity Act, 2023.

KEY REFORMS OF THE ELECTRICITY ACT, 2023[1]

  • De-centralization of the electricity market: States, companies and individuals can now generate electricity under the new Act, as the generation, transmission, and distribution of electricity is no longer solely at the National level. This reform in particular encourages private sector involvement in the power industry thereby reducing the burden at the National level and allowing each state attend to its unique needs in relation to electricity as each state has its needs and peculiarities.

  • State Regulation: States can regulate their electricity markets by issuing licenses to private investors who can operate mini-grids and power plants within the state. The Act, however, precludes interstate and transnational electricity distribution. States without regulation will continue to be covered by the Nigerian Electricity Regulatory Commission (“NERC”). The Electricity Act 2023 however, provides how NERC can transition regulatory responsibilities to state regulators when they are established.

  • Establishment of Rural Electrification Agency: The Act reestablishes the Rural Electrification Agency (the “Agency”) and some of the responsibilities of the Agency include promotion of unfettered electricity access to rural areas as well as development of off-grid electrification to rural areas. This is to meet the power generation and distribution needs of rural community members.

  • Renewable Energy: One key reform/ feature of the Act is the promotion of renewable energy. The Act introduces renewable purchase obligations and renewable generation obligations. It charges the NERC with the responsibility of developing and utilizing renewable energy while considering factors such as technology, financial viability, and impact on tariffs to ensure balanced and sustainable approach while also balancing how potential costs are passed on to the end users.

  • Private Participation: It is important to note that any individual may construct, own, or operate an undertaking for generating electricity of a maximum of one megawatt in aggregate at a site, or may set up an undertaking for distribution of electricity with a capacity not exceeding 100 kilowatts in aggregate at a site, without obtaining a license under the new law.

As we continue to face growing global challenges such as climate change, resource depletion, and increasing energy demands, it is imperative that we adopt a balanced and sustainable approach to energy production, consumption, and conservation.

The reforms introduced by the new Electricity Act are therefore laudable. However, implementation of the reforms is important and it is hoped that the reforms would be effectively implemented.

Access an electronic copy of the Electricity Act, 2023 here to read up on the Act.

For enquiries regarding this update and other areas of law, please contact:

Mr. Peter Olaoye Olalere

Associate Partner

oolalere@spaajibade.com

Ms. Niniolaoluwa Ayantoye

Associate Trainee

nayantoye@spaajibade.com

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[1] Electricity Act, 2023 available at https://placng.org/i/wp-content/uploads/2023/06/Electricity-Act-2023.pdf accessed on 5/07/23.

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