The signing of the long-awaited Petroleum Industry Bill into law by President Buhari on 16th August 2021 received mixed reactions from stakeholders and ordinary Nigerian citizens. It has led to several conversations in different circles with industry experts and stakeholders analysing what it could mean for them. It has also prompted several questions from Nigerians with limited knowledge of the energy industry. More than ever, Nigerians are curious about laws that govern processes that directly affect them. To understand what guides the government’s decisions/processes in the energy industry, one should know the legal and regulatory framework.
LEGAL AND POLICY FRAMEWORK
The National Electric Power Policy (NEPP) 2001
The first action in a reform plan of the power sector was in response to the deficient power supply system. The purpose of this policy was to establish a liberal electricity market in Nigeria and privatise the industry. Before this policy, the electricity industry was under the management of the public sector. The plan also encouraged power generation from all sources of energy and even renewable sources.
Electricity Power Sector Reform Act (EPSRA) 2005
In another wave of sector reforms, the EPSRA was enacted to solve the problems of unreliable power supply, this time by repealing the enabling law of the National Electric Power Authority (NEPA). This dissolution of NEPA left its assets and operations available to private companies; promoting competition in the market. It replaced NEPA with the National Electricity Regulatory Commission (NERC), the new principal sector regulator.
The Environmental Impact Assessment Act 1992
In response to the damaging effects of power extraction and production on the environment, this Act sought to encourage eco-friendly energy activities. It is difficult to execute a project without first considering its impact on the environment. In practice, electricity generators or producers can only be granted a license to start a project, if their mandatory assessment to the Federal Ministry of Environment is successful. This is under section 2 of the Act.
National Renewable Energy and Energy Efficiency Policy (NREEEP)2015
This policy demonstrates the willingness to include renewable energy sources in the general energy framework and provide Nigerians with access to sustainable and affordable power. Approved by the Federal Executive Council in 2015, this policy seeks to improve energy efficiency and provide solutions to advance the renewable energy industry.
Nigerian Electricity Management Services Agency (NEMSA) Act 2015
This NEMSA is responsible for enforcing the technical standards in the power sector. The Act uses standards created by the NERC in collaboration with the Standards Organisation of Nigeria (SON) to regulate the technical processes. Processes including electrical inspections, certifications of installations, testing of meters and ensuring these instruments are fit for purpose.
Nigerian Electricity Regulatory Commission (NERC)
The NERC, established by the EPSRA in 2005, regulates the activities of the power sector. This agency is the principal regulator tasked with issuing and revoking licences concerning the generation, transmission and distribution of power in Nigeria. It is also authorised to make rules and regulations to govern the electricity sector.
NERC Mini-Grid Regulations
Issued by the NERC, these regulations establish a framework for the development and operation of mini-grids. Mini-grids are isolated electricity generators using distributive networks to supply electricity to a small group of customers outside the national grid. To bridge the power access gap, the government offers incentives to mini-grid projects.
Rural Electrification Agency (REA)
The REA was established by the EPSRA to provide Nigerians in rural areas with access to electricity. Through encouraging renewable power generation and creating mini-grids. The REA is empowered to set up and run the Rural Electrification Fund (REF). The goal of this is to provide rural electrification programmes and access to electricity for all.
Standards Organisation of Nigeria (SON)
The SON is in charge of setting the standards on all equipment and materials imported into Nigeria. Including materials used by the energy industry. It ensures they are fit for purpose and meet the quality required for that industry.
Nigerian Electricity Management Services Agency (NEMSA)
The NEMSA focuses on the technical standards of operation in the electricity sector through electrical project inspections. The agency works in collaboration with the SON to see that all electrical equipment meets the industry standards.
The Nigerian Bulk Electricity Trader (NBET)
The NBET is the only utility company authorised to purchase electricity in bulk to resell to distribution companies. This also includes partnerships with renewable energy generators. Its license allows multiple power purchase agreements with power generators and producers which it resells to retailers through vesting contracts. Vesting contracts are regulatory instruments that mandate power generation companies to sell a specified amount of electricity at a specified price.
The Transmission Company of Nigeria (TCN)
The TCN is a product of the defunct NEPA; it regulates the transmission of electricity in Nigeria. It is the transmission service provider and is empowered to issue transmission licenses. The TCN is also an independent system operator and a market operator.
These are the main laws and regulations that govern and influence the activities in the Nigerian energy sector. There is still a power problem in Nigeria with generation not meeting demand. However, it is encouraging to see that some of the laws support the growing renewable energy industry. This is a great step towards increasing generation capacity and incorporating clean energy into the mix. It also shows Nigeria’s seriousness to its Paris Agreement commitment.