The Electricity Act 2023: What Does It Mean For Nigeria?

President Bola Ahmed Tinubu’s recent assent to the Electricity Act 2023 marks a significant milestone in Nigeria’s energy landscape.

This transformative legislation, initially passed by lawmakers in July 2022, consolidates various regulations governing the electricity supply industry.

By providing a comprehensive institutional framework, the act aims to foster a post-privatization era that encourages private sector investments while enabling the de-monopolization of electricity generation, transmission, and distribution at the national level.

In this article, we delve into the key benefits and provisions of the Electricity Act, shedding light on its potential to revolutionize Nigeria’s electricity sector.

State Empowerment: Catalyzing Regional Energy Independence

The de-monopolization of Nigeria’s electricity sector empowers states, companies, and individuals to actively participate in electricity generation, transmission, and distribution. The Electricity Act allows states to issue licenses to private investors for operating mini-grids and power plants within their jurisdiction, thereby fostering local energy self-sufficiency.

However, interstate and transnational electricity distribution remain outside the purview of this Act, preserving the need for strategic coordination at the national level.

Powers of NERC: A Regulatory Paradigm Shift

The Electricity Act 2023 grants the Nigerian Electricity Regulatory Commission (NERC) extensive regulatory powers within Nigeria’s electricity sector.

While respecting the autonomy of states to create their electricity markets and legislate accordingly, NERC plays a pivotal role in transitioning regulatory responsibilities to state regulators once established.

Until individual states enact their electricity market laws, NERC will exclusively regulate electricity businesses conducted within those states. Notably, Lagos, Edo, and Kaduna have already formulated their market laws and can commence market regulation.

For states without such legislation, NERC will continue to regulate electricity activities. NERC will retain its cross-border regulatory authority over generation and transmission activities spanning multiple states.

Legislative Oversight: Reinforcing Accountability

The Electricity Act 2023 empowers lawmakers to exercise robust oversight responsibilities through their respective Committees on Power in the Senate and House of Representatives. This authority extends beyond the supervisory powers of government ministries over state-owned enterprises and entities operating in the Nigerian electricity supply industry.

By ensuring legislative scrutiny, the Act promotes transparency, accountability, and effective governance within the sector.

Renewable Energy Revolution: Paving the Way for Sustainability

Recognizing the urgency of transitioning to renewable energy sources, the Electricity Act mandates that electricity generation licensees fulfill renewable generation duties prescribed by NERC. This groundbreaking provision compels electricity-generating companies to either generate power from renewable sources, purchase renewable energy-generated power or procure instruments representing renewable energy generation. Moreover, the Act imposes renewable purchase obligations on distribution or supply licensees, further driving the adoption of renewable energy solutions.

Encouraging Private Ownership: Unlocking Innovation and Competition

Under the Electricity Act 2023, individuals are now authorized to construct, own, or operate electricity-generating undertakings not exceeding 1 megawatt (MW) in aggregate at a single site.

Similarly, the Act permits the establishment of electricity distribution undertakings with a capacity not exceeding 100 kilowatts (KW) in aggregate at a site, subject to NERC’s determinations. By removing the licensing requirement for smaller-scale projects, the Act opens the doors for innovation, competition, and increased access to electricity for underserved communities.

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