INTRODUCTION
This article discusses the Electricity Sector Power Reforms Act of 2005 and the innovative changes in the Electricity Act 2023.
Electricity is the bedrock of development for any society. The advent of electricity in Nigeria dates to the late 18th century where power was generated and first consumed by the Colonialists in their residential area in Lagos State; and primarily used to lighten up the streets to curb crimes. Over the years, the Nigerian Government has made efforts to improve its electricity market; these efforts include but is not limited to procuring foreign loans to improve the electricity sector, creation of power ministries and enacting legislation on electricity. The electricity market in Nigeria has experienced downturns and has largely been unable to meet the increasing demands of the nation’s booming economy. This led to several reforms in the electricity sector. The National Electric Power Authority (NEPA ACT) was enacted in 1990 which established NEPA as a commercial entity, with the mandate to develop and maintain a coordinated and improved electric supply to the entire federation. However, the expected outcome of this mandate never materialized. The electricity industry under NEPA was marred by poor operational performance. The quantity of electricity generated was insufficient for the Nation’s economic direction with the fact that only about 426 out of the 774 Local Governments in Nigeria were connected to the Nation’s power grid.
Photo: energymixreport.com
ELECTRICITY SECTOR POWER REFORMS ACT (2005) [“ESPRA 2005”]
The Electricity Sector Power Reforms Act was enacted in 2005 with the aim of improving the electricity sector and providing solutions to the challenges encountered by the previous acts. One of the key changes in the Act is the establishment of Power Holding Company of Nigeria (PHCN) by the National Council as an initial holding company for the assets and liabilities of defunct NEPA. This company was established in line with Section 1 of the Electric Power Sector Reforms Act. The shares of the initial holding company thus established were held by the Ministry of Finance and the Bureau of Public Enterprise on behalf of the federal government. This company was saddled the responsibility of distribution and supply of electricity only. The transmission of electricity was done by the Federal Government through the Transmission Company of Nigeria. The Act provided for the establishment of successor companies in Section 8 which resulted in the emergence of a number of electricity distribution companies, these include Abuja Electricity Distribution Company (AEDC), Ibadan Electricity Distribution Company(IBEDC), Jos Electricity Distribution Company (JEDC), Kaduna Electricity Distribution Company (KAEDCO), Port Harcourt Electricity Distribution Company (PHEDC), Yola Electricity Distribution Company(YEDC), Eko Electricity Distribution Company (EKEDC), Enugu Electricity Distribution Company (EEDC), Ikeja Electricity Distribution Company (IKEDC), Benin Electricity Distribution Company (BEDC), Kano Electricity Distribution Company (KEDC). These companies took over the distribution and the supply of electricity from the Power Holding Company of Nigeria (the initial holding company). The transmission arm of the Electricity supply industry remained under the control of the federal government through the Transmission Company of Nigeria.
NIGERIAN ELECTRICITY REGULATORY COMMISSION [“NERC”] and NIGERIAN ELECTRICITY SUPPLY INDUSTRY [‘NESI’]
NERC was established to oversee the activities in the NESI. NESI is comprised of various parastatals and participants such as Power Generation Companies, Power Transmission Companies, Power Distribution Companies, inter alia, with the sole aim of enhancing and improving the workings in the electricity Sector. The Government supervises this sector through the Ministry of Power. NERC as the chief regulator has among its industrial functions, setting up terms of engagements for participants, issuing of licenses and overseeing electricity prices. They are also saddled with the responsibility of establishing a national electricity market within the various sectors in the NESI. The principle of captive power generation was enshrined in this Act, i.e where a person generates electricity for consumption and with no intention for sale or distribution. Licensing was a condition precedent to generation, transmission, distribution and supply of electricity. However, a person is permitted to generate for captive power generation), so long as the electricity generation does not exceed 1MW. Where generation would exceed 1MW, a license would be required.
RURAL ELECTRIFICATION AGENCY
Section 88(1) of the now repealed Electricity Sector Reform Act (2005) established the Rural Electrification Agency. The agency was established to mainly aid the expansion of the national grid into areas where there were none; the agency was also saddled with the function of providing electricity in areas not covered by the grid. These Projects were sponsored by the funds lodged in the Rural electrification assistance fund.
ELECTRICITY ACT 2023 [“EA2023”]
The President of the Federal Republic of Nigeria, then Muhammadu Buhari, in March 2023, signed 16 constitutional amendment bills into law, including “the Constitution of the Federal Republic of Nigeria (Fifth Alteration) Bill, Nº 33, 2022″ – (the Fifth Amendment”); included as part of the aforementioned amendment bill was the alteration of paragraph 14b of the Concurrent Legislative List (Part II of the Second Schedule to the Constitution), which borders on electricity reform. On 9th June 2023, the current President of the Federal Republic of Nigeria, Bola Ahmed Tinubu, assented to the Electricity Bill 2022, effectively repealing the EPSRA 2005 amongst other Acts.
NOVEL INNOVATIONS OF THE EA 2023 VIS-À-VIS THE REPEALED ESPRA 2005.
LEGISLATION BY THE STATES OF THE FEDERATION
Prior to the recent Constitutional Amendments, the Nigerian Constitution vested the National Assembly with powers to legislate on electricity generation, transmission, and distribution, in areas covered by the national grid. The State legislatures on the other hand, were empowered to legislate on the same matters but only in areas not covered by the national grid. This ambiguity effectively crippled states’ interest and foray into the electricity sector. However, with this Fifth Alteration, the amendment of paragraph 14b of the Concurrent Legislative List (Part II of the Second Schedule to the Constitution) laid the foundation for the empowerment of states to legislate on electricity. This was enshrined in the Act through the provision of Section 2(2) of Electricity Act 2023 which further validates the states’ powers to legislate on electricity within each state’s boundaries.
ESTABLISHMENT OF ELECTRICITY REGULATORY AUTHORITY BY STATES
Prior to the EA2023, NESI was exclusively regulated by NERC. Section 32 of the repealed ESPRA2005 established the NERC to have the sole regulatory rights over the Electricity Supply Industry. However, the EA2023 disbanded the powers of the NERC and devolved it into state commissions. Section 230(2)(b) of EA2023 empowers the States of the Federation to establish its own Electricity Regulatory Authority within the state to take over the function of the NERC. The powers of the NERC will combine to exist in a State, until the State has validly established its own Regulatory Authority. By this Act, the States are authorized to create electricity markets, indigenous to their states.
CREATION OF ALTERNATIVE SOURCES OF POWER
The EA2023 provides for diversified sources of power in the sector. Prior to commencement of EA2023, the EPSRA2005 provided regulatory framework for hydrothermal generation of power. However Section 164 of the EA2023 encompassed various sources of power generation such as solar power generation and renewable energy power generation. The EA2023 went further to mandate compulsory purchase of electricity from these sources from bulk electricity purchasers or pay a default fee in lieu. This take-or-pay provision was borne out of the need to increase electricity generation needed for the growth and development of the Nation.
CRIMINALIZATION OF CONSUMER RELATED OFFENCES
The EA2023 finally criminalized some offences related to the consumption of Electricity in Nigeria. Hitherto, offences such as tampering of meters were punished with fines and delayed restoration of the affected meter to the power lines. However, this scenario has been abolished by Section 211 of the EA 2023 which provides for a punishment of N500,000.00 or an imprisonment for a term not more than 3 years.
ESTABLISHMENT OF THE HYDRO ELECTRIC POWER PRODUCING AREAS DEVELOPMENT COMMISSION
One of the key provisions enshrined in the EA2023 is Section 82 of the EA2023 which established the National Hydroelectric Power Producing Areas Development Commission. This Commission comprises of States where hydroelectric power is generated. Currently there are ten states under this commission (Benue, Gombe, Kaduna, Kebbi, Kogi, Kwara, Nassarawa, Niger, Plateau, Taraba). The EA2023 also empowers the National Assembly to designate any other state as part of this Commission in the future if it is affected by the hydroelectric power generated on the rivers in Nigeria. This Commission shall effectively serve and carry out the corporate social responsibility of the Government in respect of activities arising from hydroelectric power generation.
UNBUNDLING OF THE TRANSMISSION, DISTRIBUTION AND SUPPLY SYSTEM
Under the EPSRA2005, the successor companies created out of the Initial Holding company (Power Holding Company of Nigeria) in the distribution chain in NESI were holding joint licenses for distribution and supply to consumers. However, under the EA2023, the distribution and the supply licenses were unbundled and made distinct.
The Transmission Company of Nigeria (TCN) has been the sole company for power transmission in Nigeria. Section 15(2)2 of the EA2023 has therefore provided for the establishment of an Independent System operator (ISO) which shall take over the rights and liabilities of the TCN in respect of the market and systems operation functions, the Act also empowers the Government to enter into public private partnership in the transmission sector of the NESI.
INCLUSION OF ALTERNATIVE DISPUTE RESOLUTION MECHANISM
EA2023, unlike the previous Acts, provides for alternative dispute resolution in event of dispute. Section 115 provides for mediation between a consumer and the Commission in event of an unsatisfactory service by the holder of a distribution or supply license. A licensee reserves the rights to go to court against the Commission in respect of any decision made with regards to its license, but must first exhaust the internal dispute resolution mechanism put in place by the Commission. This makes the exhaustion of an alternative dispute resolution sacrosanct before resort to the Federal High Court which is the court with the original jurisdiction in cases arising from Act.
CONCLUSION
Flowing from the provisions of the EA2023, it is safe to say that it provides a brighter outlook for the future of private investments in generation and transmission of electricity. The Act is a step in the right direction as it aims to help the Nation improve its power deficiency and market sustainability; the provision for alternative source of power is expected to increase the electricity supply in the Country.
The disbandment of the TCN is also commendable as it would lead to active public and private participation in the sector and would consequently improve productivity. There is no doubt that the effect of this Act would be felt greatly in time given to the fact that it addressed the lapses from the previous Act while also providing for current realities and providing a framework for future trends.
The most commendable effect of this Act however is that it has opened the electricity market to investments from the private sector by improving significantly on the hurdles being encountered in the Nation’s electricity industry.
D. CHUKWUEDO, FCIArb (UK), ABR
Nzube EZEOKE
