President Asiwaju Bola Tinubu has given his assent to the 2023 Electricity Act, just ten days after assuming office.
The new legislation replaces the Electricity and Power Sector Reform Act 2005 and is set to provide a comprehensive framework for guiding Nigeria’s electricity sector in the post-privatization phase.
The Act aims to encourage private sector investments and promote the de-monopolization of the electricity supply industry.
It grants states the authority to issue licenses for mini-grids and power plants within their jurisdiction, while the Nigerian Electricity Regulatory Commission (NERC) will regulate the electricity sector at the national level.
The signing of the Electricity Act 2023 comes at a crucial time for Nigeria’s power sector, which has faced numerous challenges.
The law is expected to address some of these issues by promoting competition and attracting private investments.
With the de-monopolization of electricity generation, transmission, and distribution, states, companies, and individuals will have the opportunity to participate in these areas, leading to increased efficiency and reliability.
However, the Act restricts interstate and transnational electricity distribution, while granting states the power to create electricity markets and regulate them within their jurisdiction.
Under the new legislation, NERC will play a crucial role in regulating the electricity sector within Nigeria.
The Act enables NERC to transition its regulatory responsibilities to state regulators once established.
Until then, NERC will continue to regulate electricity business in states without electricity market laws. Lagos, Edo, and Kaduna States, which already have electricity market laws in place, can immediately begin regulating their markets.
Furthermore, the Act empowers lawmakers to oversee the Nigerian Electricity Supply Industry through dedicated committees in the Senate and House of Representatives, ensuring effective governance and accountability.
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Additionally, the Electricity Act 2023 places emphasis on renewable energy generation. Licensees for electricity generation must fulfill renewable generation obligations prescribed by NERC.
This means that electricity generating companies will be required to generate power from renewable sources, purchase renewable energy-generated power, or acquire renewable energy instruments.
The Act also imposes renewable purchase obligations on distribution or supply licensees, promoting the adoption of renewable energy throughout the sector.
Furthermore, the Act allows for the construction, ownership, and operation of small-scale electricity generation and distribution facilities without the need for a license, provided they meet the specified capacity thresholds determined by NERC.
