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PART III - DEVELOPMENT OF A COMPETITIVE NATIONAL ELECTRICITY MARKET

Part III of the Electricity Act 2023 comprises sections 6 through 14. This part outlines the legislative and structural reforms aimed at transforming Nigeria's electricity market into a competitive national marketplace. It also explains the Nigerian Electricity Regulatory Commission (NERC)’s role in overseeing the market transition, managing market operations, and ensuring financial viability across various stages. Key highlights include:

1. Transition from National Electric Power Authority (NEPA) to Privatisation:

Physical unbundling of NEPA into 18 companies under the Power Holding Company of Nigeria (PHCN).

Licensing these companies as separate entities for generation, transmission, and distribution.

2. National Integrated Power Projects (NIPP):

Initiated to address infrastructure deficits and fast-track development within the Nigerian Electricity Supply Industry (NESI).

Licensing of Independent Power Producers (IPPs).

3. Management of Liabilities and Non-Core Assets:

Establishment of NELMCO to manage PHCN’s liabilities and non-core assets transitioning into the privatized phase.

4. Training Initiatives:

Incorporation of the National Power Training Institute of Nigeria (NAPTIN) for workforce development in the electricity sector.

5. Bulking Purchase and Trading:

Creation of Nigerian Electricity Bulk Trading Plc (NBET) to manage bulk electricity purchase and resale.

6. Introduction of Rule and Contract-Based Market:

Implementation of interim, pre-transitional, and transitional rules to regulate market stages.

7. Regulatory Oversight and Development:

The Commission’s ongoing role in ensuring smooth progression to medium and long-term market stages, monitoring compliance, and advising on market conditions.

8. Market Evolution:

Guidance on transitioning responsibilities of market participants to establish a sustainable and competitive electricity market environment.

9. Market Stage Declaration:

The Commission presents reports to the President and National Assembly and can declare a new market stage when conditions are met, ensuring it aligns with pre-defined market rules.

10. Medium and Long-Term Market Operations:

Sales in the medium-term market adhere to specific market rules and grid code.

The long-term market requires amendments to market rules and introduction of appropriate tariff schemes.

11. Market Rules and Grid Code:

Developed and approved for national grid operation and market governance.

Includes provisions for order permissions, penalties, and dispute resolutions.

12. Amendments to Market Rules:

Approved by the Commission and published 22 days before taking effect.

The Commission can suspend rule application if necessary to address market exigencies.

13. Eligible Customers and Eligibility Conditions:

Directives released by the Commission specifying eligible customer classes.

The Commission monitors market stages to determine when eligibility conditions are met and can review previously declared customer classes.

14. Transition Charges:

If directives lead to inadequate revenue for licensees, the Commission may introduce competition transition charges.

These charges support distribution licensees impacted by customer classification changes, ensuring they meet financial commitments.

15. Public Engagement:

The Commission may conduct public hearings when determining transition charges to gather input from interested parties.