POWERING NIGERIA’S ENERGY SECTOR: KEY FEATURES OF THE ELECTRICITY ACT 2023
Introduction
Nigeria, Africa’s most populous nation and largest economy has long grappled with the challenges of providing reliable and affordable electricity to its citizens and businesses. In an effort to revamp and modernize the energy sector, Nigeria’s government enacted the Electricity Act of 2023 (“The Act”). This landmark legislation aims to address the shortcomings of previous regulatory frameworks and lay the foundation for a robust and sustainable electricity market. In this article, we explore the key features of Nigeria’s Electricity Act 2023 and their potential impact on the nation’s power sector.
- Market Deregulation and Privatization
One of the central tenets of the Electricity Act 2023 is the further deregulation and privatization of the Nigerian electricity market. It provides guidelines for the privatization of state-owned assets in the power sector, encouraging private sector participation and investment.1 States now have the mandate to enact their own laws and set up electricity regulatory commissions as regards generation, supply, and transmission.2 It allows states to operate and establish power stations within its territory and the authority to regulate electricity markets, grant licenses to private investors, operate independent power plants and distribute to electricity users. Currently, only Lagos, Edo, and Kaduna states have electricity market laws and can independently regulate their markets while other states be regulated by the NERC.
The Act aims to create an open and competitive market structure that encourages private sector participation and investment. It introduces provisions to foster transparency, fair competition, and increased efficiency in the generation, transmission, and distribution of electricity.
POWERING NIGERIA’S ENERGY SECTOR: KEY FEATURES OF THE ELECTRICITY ACT 2023
- Independent System Operator (ISO)
To ensure the smooth operation and coordination of the power system, the Electricity Act establishes an Independent System Operator (ISO) i.e. the separation of the system operator (SO) from the Transmission Systems Provider (TSP) as they currently exist under the Transmission Company of Nigeria (TCN).3 The ISO will be responsible for managing the transmission network, maintaining system stability, and ensuring fair access to the grid for all market participants. This separation of system operation from market activities aims to enhance grid reliability and encourage private investment in the transmission infrastructure.
The Act outlines the functions and powers of the ISO, including system planning, operation and maintenance.4
- Consumer Rights and Protection
Recognizing the importance of protecting consumer interests, the Electricity Act 2023 includes provisions for consumer rights and protection where consumers have access to accurate billing information, transparent tariff strictures, and prompt complaint resolution.5 It mandates the establishment of the Power Consumer Assistance Fund (PCAF), a fund to subsidize underprivileged power consumers as well as manage the assets and handle the procedures for disbursement.6
POWERING NIGERIA’S ENERGY SECTOR: KEY FEATURES OF THE ELECTRICITY ACT 2023
- Renewable Energy and Rural Electrification
In line with global trends and Nigeria’s commitment to sustainable development, the Electricity Act 2023 places a significant emphasis on renewable energy and rural electrification. It promotes the integration of renewable energy sources into the national grid and encourages the development of off-grid solutions to reach underserved communities. The Act incentivizes investments in renewable energy projects, including feed-in tariffs and tax incentives, and sets renewable energy targets to reduce reliance on fossil fuels.7
- Cost-Reflective Tariffs
The Electricity Act recognizes the need for cost-reflective tariffs as a means to attract private investments, ensure the financial viability of the power sector, and improve service delivery. It provides a framework for the gradual implementation of tariffs that accurately reflect the costs of electricity generation, transmission, and distribution. This move towards cost-reflective tariffs aims to address the issue of revenue shortfalls in the sector and stimulate infrastructure development.8
- Regulatory Reforms and Oversight
The Electricity Act 2023 establishes the Nigerian Electricity Regulatory Commission (NERC) as the primary regulatory authority for the power sector. The Act strengthens the powers and autonomy of the NERC to enforce compliance, set standards, and promote competition. It also introduces provisions for regular performance assessments of market participants, ensuring accountability and transparency in the sector.9
POWERING NIGERIA’S ENERGY SECTOR: KEY FEATURES OF THE ELECTRICITY ACT 2023
Conclusion
The Electricity Act 2023 represents a significant milestone in Nigeria’s efforts to transform its energy sector. By embracing market deregulation, promoting renewable energy, protecting consumer rights, and strengthening regulatory oversight, the act aims to attract private investments, enhance efficiency, and provide reliable electricity to all Nigerians. While the successful implementation of these reforms will require collaboration, stakeholder engagement, and continuous monitoring, the act lays a solid foundation for Nigeria’s energy future, paving the way for a more sustainable and prosperous nation.
Reference
1 Section 8, Electricity Act 2023
2 Sections 2(2)(b), 63(1) & 230(2)-(9)
3 Section 15, Electricity Act 2023
4 Section 15, Electricity Act 2023
5 Section 119, Electricity Act 2023
6Section 112, Electricity Act 2023
7 Section 164, Electricity Act 2023
8 Section 168, Electricity Act 2023
9 Section 33, Electricity Act 2023
By Ayodele Kotey
