Legislation Review - The Electricity Act 2023 – Part II
3. Licensing
Section 63 of the Electricity Act 2023 provides for authorised persons that can generate and transmit electricity subject to the provisions of the Act. These persons (include an individual, company, partnership or any other association of individuals, whether incorporated or not). A licensee shall comply with the provisions of its license, regulations, codes, orders, and other requirements issued by the NERC – Section 64 of the Electricity Act 2023.
Pursuant to Sections 64, 65, 66, 67, 68 and 69 of the Electricity Act 2023 respectively, the following Licence can be granted by the NERC (a) Generating Licence (b) Transmission Licence (c) System Operation Licence (d) Distribution and Supply Licence (e)Trading Licence.
A person may generate electricity not exceeding 1 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 NERC may determine without a license. Section 63 (2)(a) of the Electricity Act. Further, a person may construct, own, operate an undertaking for the generation, transmission, distribution and sale of electricity inclusive of owning a mini-grid, IEDN/IEDNOs or its IETN/IETNOs within a state under a law enacted by the House of Assembly of a State, provided that the license does not authorize inter-state or transactional distribution of electricity in Nigeria - Subsection 63 (2)(b) of the Electricity Act. The Act empowers the NERC to take adequate steps towards sanctioning any person that breaches the provisions of the Act, especially as it relates to Section 63 of the Electricity Act.
(a) Application for License
The submission of an application for a licence to the NERC is governed by Section 71 of the Electricity Act 2023 and the Application for Licence Regulation 2010 No: NERC-R-0110A.
An application for a license shall be made to the Commission in the form and manner prescribed and be accompanied by the prescribed fee and such information or documents as may be prescribed or as the Commission may require. The application process is explained in subsections (2)-(8) of Section 71. Notwithstanding the subsections, the Commission may establish simplified procedures for undertakings and businesses that are limited in size and scope to expedite the application and licensing process.
The grant of the license is usually subjected to such terms and conditions as may be prescribed, or as the commission may reasonably determine, including terms and conditions prescribing the use of a tariff methodology approved by the NERC under Part X of the Act – Section 72 of the Electricity Act.
(b) Renewal and Amendment of License
A license granted pursuant to the provisions of the Electricity Act 2023 can be renewed in accordance with Section 73 of the Act by the submission of an application for its renewal before it expires in the form and manner and within the period prescribed by the NERC accompanied by the prescribed fee, if any.
The Electricity Act also allows for the amendment of a license or any of its terms and conditions by the NERC. This amendment can be implemented (a) if the licensee requests the amendment; or (b) if the amendment is under a condition of the license imposed under section 72(7) of the Electricity Act; or (c) upon receiving a complaint from any consumer, eligible customer, consumer association, association of eligible customer or other licensee.
(c) Intervention Powers in the Case of a Failing License
Pursuant to Section 75 of the Electricity Act, the Commission is statutorily empowered to on its initiative or upon a complaint from any consumer, eligible customers, consumer associations, a shareholder in a licensee company or a licensee, inquire into the conduct or functioning of any licensee in carrying out its obligations under its license and the provisions of this Act. Subsection (2) states the procedure for the exercise of such intervention powers.
(d) Enforcement and Sale of Undertakings of Licenses
The NERC is statutorily empowered to enforce the terms of the license in the case of non-compliance or contravention or even the likely contravention of the terms and conditions of its grant pursuant to Section 76 of the Electricity Act 2023. This enforcement power is without derogation from its power to intervene in the case of a failing license under Section 75 of the Act.
Section 76(2) states the procedure for the exercise of enforcement powers and it requires the service of a notice and allowing the licensee to make representation to the Commission within such period from the date of service of the notice as it shall specify.
Section 77 of the Electricity Act authorises the NERC to make an order regarding the sale of the undertaking of the licensee in accordance with its provisions in those cases where the NERC revokes a licence under Section 75(4) of the Electricity Act.
4. Consumer Protection, Competition and Market Power
(a) Consumer Protection Standards
Pursuant to Section 119 of the Electricity Act 2023, the Commission shall develop in consultation with the licensees, the following (a) customer service standards (b) quality of service and supply standards; (c) customer complaint handling standards and procedures; (d) procedures for dealing with and assisting where necessary, customers who have difficulty in paying bills; (e) procedure for applying for electricity service etc.
Section 120 of the Electricity Act empowers the NERC to develop in consultation with licensees and other interested parties performance standards and codes.
The Power Consumer Assistance Fund is established by Section 122 of the Electricity Act 2023 to be used to subsidise underprivileged power consumers as specified by the Minister in consultation with the NERC.
(b) Competition and Market Power
Section 121 of the Electricity Act 2023 states that the NERC shall have a continuing responsibility to monitor the NESI in regard to its potential for additional competition and to report on this subject, each year to the minister and until a time as the NERC has made a declaration under section 8(1) of the Act, the content of the report shall be as prescribed under the market rules and the content of these reports shall consider whether any of the regulated services in the NESI ought to be exempted from tariff regulation.
Subject to section 105 of the Federal Competition and Consumer Protection Act, the NERC shall have the responsibility to consider in respect of services in competitive markets, the prevention or migration of abuses of market power which includes market concentration, in its decisions and orders regarding matters such as licence applications and the grant of licences, licence terms and conditions, the setting of prices and tariffs and whether or not to approve a merger, acquisition or affiliation.
In the exercise of its powers under Section 121, the NERC shall be entitled to (i) require information from licensees; (ii) undertake inquiries, and (iii) establish or contract with an independent entity to provide monitoring services. In the event that the Commission determines that there is an abuse of market power, it may – (a) issue cease orders as may be required and (b) levy fines to such an amount it may consider appropriate. – Section 121(5) of the Electricity Act 2023.
5. Other Salient Provisions
(a) Tariffs and Subsidies
Section 116 of the Electricity Act 2023 states the various activities that are subject to tariff regulation and the activities are amongst others -
- The generation and trading, in respect of which licenses are required under this Act and where the NERC considers regulation of prices necessary to prevent abuses of market power.
- Transmission, distribution, supply and system operation in respect of which licenses are required under the Act; and
- Electricity distribution franchising or other activity that the NERC may determine as being subject to tariff regulation.
The Federal and State Governments are statutorily authorized, if they so desire to grant any subsidy to any consumer or class of consumers in the tariff determined by the Commission under the Act as stated in Section 117 of the Electricity Act. The NERC is also to ensure strict implementation of cross-subsidies and facilitate the gradual reduction in cross-subsidies with the aim of entirely eliminating cross-subsidies before the declaration of the commencement of a long-term market stage under the Act.
(b) Renewable Energy and Energy Efficiency
The Electricity Act recognises that the NERC shall supports the development and utilization of renewable energy and for this purpose, take the measure stipulated under its Section 164 to increase the contribution of renewal energy to Nigeria’s energy mix by amongst others (i) stipulate in its licensing and fees schedule, simplified licensing and fees regime for issuance of licenses to renewable energy service companies for the provision of electricity to consumers and from renewable energy sources specified under the Act; (ii) issue commercial and technical regulation for connectivity to the grid and distribution network for sale of electricity generated from renewable energy sources to distribution and trading licensees, eligible customers and other consumers; (iii) provision of standard for power purchase agreement with specific requirements and terms for marketing and trading renewable electricity; (iv)provide regulations specifying the role of generation licenses, transmission service provider, ISO distribution licensees in the integration of renewable energy generated capacity into the national grid and distribution network etc.
In terms of commercial activities for renewable energy, Section 165 of the Electricity Act states that it includes generation, distribution, sales and installation for which the NERC may by regulatory instrument limit or expand the scope of activities therein. The NERC is for purposes of implementation of the Act authorised to approve (a) rates chargeable for the purchase of electricity from renewable energy sources by public utilities; (b) charge for mini-grid and grid connection; and (c) rates chargeable for wheeling of electricity from renewable energy sources – Section 164(2).
Section 166 of the Electricity Act requires the FGN to from its commencement introduce such tax incentives as are necessary to promote and facilitate the generation and consumption of energy from renewable energy sources and in accordance with the provisions of the Industrial Development (Income Tax Relief) Act or such fiscal policy framework.
(c) Offences and Penalties - Section 208 to 220 of the Electricity Act 2023 statutorily create several offences ranging from theft of electricity, theft of electric lines and materials, offences of receiving stolen electricity, interference with meters or works of licenses, negligent breaking or damaging electricity materials, false declaration, offences by companies, abetment to unlawful use of information by inspector, obstruction, and impersonation.
Section 221 of the Act confers the Attorney-General of the Federation and Attorney-General of the respective States of the Federation with the power to prosecute offences under the Act, while relevant authorities including securities agencies may prosecute only after prior consent of the respective Attorneys-Generals. Section 223 of the Act confers the Federal High Court and the State High Courts with concurrent jurisdiction to try offenses under the Act.
6. Miscellaneous and Final Provisions
(a) Power of the Commission to make Regulations
Section 226 of the Electricity Act 2023 statutorily empowers the Commission to make regulations prescribing all matters which by the Act are required or permitted to be prescribed or which, in the opinion of the Commission, are necessary or convenient to be prescribed for carrying out or giving effect to this Act. Subsection 2 states what the regulations made by the commission may provide for. The Regulations made by the commission shall be published in the Federal Government Gazette by the Commission.
(b) Local Content in the Power Sector
Section 227 of the Electricity Act 2023 requires the Commission to monitor and ensure compliance with local content requirements as provided under the Commission's Regulations on National Content Development for the Power Sector, 2014, or any other amendment with such modification or amendment as to bring it into conformity with the provisions of this Act. The Commission shall consult with any principal local content regulatory and enforcement body as may be established by an Act of the National Assembly, in coordinating and monitoring compliance with local content requirements for the power sector.
(c) Protection of Investment in the Power Sector
Section 228 of the Electricity Act 2023 states that without prejudice to the provisions of the Nigerian Investment Promotion Act and the terms and conditions of licenses or contracts entered into by investors in the Nigerian power sector, the Electricity Act guarantees asset protection, right to sale or transfer licensee undertaking in the event of revocation of licenses or compensation in the event of any forceful takeover in the interest of national security.
(d) Consequential and transitional Provisions
Section 230 of the Electricity Act 2023 provides for the consequential and transitional provisions brought about by the Electricity Act 2023. Some of which include; according to the provisions of Section 230 (1) (a) of the Electricity Act, the agencies established under this Act including any other entity established under the Repealed Act shall continue to operate and perform their respective functions as if the Repealed Act or the Acts repealed and enacted were in effect and the provisions of this Act shall apply accordingly with respect to their functions, legal personality, and all their activities. By the provisions of Section 230 (1) (c) of the Electricity Act, any tariff, price, levy or surcharge which was in effect and chargeable within any area in respect of the provision of electricity to consumers before the commencement of this Act shall continue to be in effect and chargeable in respect of the provision of electricity to those or similar consumers by a licensee who provides electricity within the area concerned until alternative provision is made in respect of such tariff, price, surcharge, under the provisions of this Act.
With regard to the electricity market, the state may establish a law at any time, establish an electricity regulatory authority for the state and so on. Section 230 (2) of the Electricity Act.
(e) Repeal and Savings Provision
Section 231 of the Electricity Act 2023 repeals the Electric Power Sector Reform Act No. 6, 2005 and other Acts of the National Assembly such as the Hydroelectric Power Producing Areas Development Commission Act, 2010 and the Nigerian Electricity Management Services Agency (Establishment Etc.) Act No. 6, 2015.
Significantly, Section 231(3) of the Electricity Act, serves as a saving provision for anything done or any action taken or purported to have been done or taken including any rule, notification, inspection, order or notice made or issued or any appointment, confirmation or declaration made or any license, permission, authorization or exemption granted or any direction given under the Repealed Act, shall in so far as it is not inconsistent with the provision of the Act, be deemed to have been done or taken under the corresponding provision of the Act.
Qualifications and Disclaimers: This Publication is prepared strictly for informational purposes. It should not be relied upon or serve as a substitute for proper legal advice. Counsel will not be held liable for any action or inaction that is premised strictly on this Business Legislation Review.
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