The Electricity and Power Sector Reform Act of 2005 will be replaced by the Electricity Act. It offers a framework to direct the Nigerian Electricity Supply Industry's (NESI) post-privatization phase and promote private sector investment in the industry.
The national de-monopolization of electricity generation, transmission, and distribution in Nigeria gives states, businesses, and private citizens more freedom to produce, transmit, and distribute energy.
According to the Act, governments may provide licenses to private investors so they can run power plants and mini-grids inside their borders. However, the Act forbids the delivery of power over state and international borders.
According to the Electricity Act of 2023, the Nigerian Electricity Regulatory Commission (NERC) would have the authority to oversee the nation of Nigeria's electricity market without interfering with the states' authority to enact legislation, establish electricity markets within, and oversee those markets.
The Act specifies how NERC might delegate its regulatory duties to state regulators once they are constituted. Until a state passes legislation governing its power market, NERC will continue to oversee all electricity-related transactions made in those states.
Currently, certain states in the nation, including its commercial center Lagos, Edo, and Kaduna, have energy market regulations in place and are able to begin regulating their markets. However, NERC will govern other states without such legislation. The generation and transmission of electricity across state lines will continue to be governed by NERC.
The Act further states that no license is required for anyone to build, own, or operate an undertaking for the generation of electricity with a capacity not exceeding 1 megawatt (MW) in aggregate at a site, an undertaking for the distribution of electricity with a capacity not exceeding 100 kilowatts (KW) in aggregate at a site, or any other capacity that NERC may from time to time determine.
Renewable generating requirements as they may be set by NERC must be met by electricity generation license holders. Electricity-producing firms will be required by the Act to either produce power from renewable energy sources, buy power generated from renewable energy sources, or acquire any instrument that represents the output of renewable energy.
The Electricity Act also requires that distribution or supply licensees be required to make renewable energy purchases.