The Electricity Act Amendment (EAA) bill, 2024, was signed into law on 9 February 2024. It seeks to reform the Nigerian electricity sector and addresses the challenges of power generation, transmission, distribution, and consumption.
The EAA introduces several changes and innovations to the Electricity Regulation Act, 2006, which was the previous legal framework for the electricity sector.
Key objectives of the EAA are:
- Promoting the development and environmental protection of host communities of power generating companies (GENCOs) by setting aside 5% of their annual operating expenditures for infrastructure projects in the host communities.
- Establishing the Transmission System Operator SOC Ltd, a new entity that will be responsible for the operation, maintenance, and expansion of the national grid, as well as the coordination and dispatch of electricity from various sources.
- Creating an open market platform that will allow for competitive electricity trading among GENCOs, distribution companies (DISCOs), eligible customers, and other market participants.
- Assigning the duties, powers, and functions of the Transmission System Operator SOC Ltd to the National Transmission Company South Africa SOC Ltd, a joint venture between the Nigerian and South African governments, which will own and manage the transmission assets and infrastructure.
- Enhancing the regulatory and enforcement powers of the National Energy Regulator (NER), which will oversee and monitor the electricity sector and ensure compliance with the provisions of the Act.
Key Benefits of the EAA are:
- Improving the quality and reliability of electricity supply and increasing the availability and diversity of power sources.
- Fostering the development and welfare of host communities, as it will provide them with funds and opportunities for infrastructure projects, such as roads, schools, health centers, and water supply.
- Stimulating the growth and competitiveness of the electricity market, as it will encourage more investment and innovation in the power sector and create more choices and options for consumers and producers of electricity.
- Enhancing the transparency and accountability of the electricity sector, as it will ensure that the NER and other stakeholders adhere to the principles and standards of good governance, and that the electricity tariffs and prices reflect the true costs and benefits of electricity.
Key challenges and Risks to sector and economy at large are:
- It may face legal and political opposition from some stakeholders, such as the existing GENCOs and DISCOs, who may perceive the bill as a threat to their interests and profits, and may challenge its constitutionality and validity in court.
- It may encounter technical and operational difficulties, such as the lack of adequate infrastructure and capacity, the need for coordination and cooperation among various entities and agencies, and the possibility of cyberattacks and sabotage on the transmission system and the open market platform.
- It may require significant financial and human resources, such as the funding and expertise needed to implement and sustain the reforms and innovations introduced by the Act, and the compensation and training needed for the affected workers and communities.
The implementation of the EAA will be monitored by industry operators and prospective investors. It is a positive step in the right direction and if properly implemented, will bring rapid development to the electricity sector.