South Africa: An Overview Of The Lagos State Electric Power Sector Reform Law, 2018

Last Updated: 4 April 2018
Article by Noor Kapdi and Robert Parring

Introduction

Lagos State Nigeria (the State), the commercial capital of Nigeria, initiated the Embedded Power Programme in 2017 as part of its project, popularly referred to as the "Light up Lagos Project", to generate and distribute approximately 3,000MW off-grid power for public utility in the State (Project). The Project is a special initiative comprising of street lighting, community electrification and an embedded power programme. The State recently passed into law the Lagos State Electric Power Sector Reform Law (Power Sector Law) on 8 February 2018, to provide for a legal framework to further the objectives of the Project. Under the Power Sector Law, the embedded power programme aspect of the Project is referred to as the Embedded Power Scheme1 (Scheme).

The Scheme was initiated to ensure the improvement of electricity supply through the provision of adequate feedstock2 transmission and distribution infrastructure, as well as supporting efficient tariff mechanisms geared towards the embedded generation of power within the State.

This article presents an overview of the highlights of the Power Sector Law in the context of existing laws in the Nigerian power sector.

Scope of the Law

Establishment of the Lagos State Embedded Power Commission (Commission)

Section 8 of the Power Sector Law established the Commission to act as a liaison between the State and federal agencies in the power sector. The functions of the Commission include, inter alia, to liaise, cooperate and collaborate with federal agencies to ensure the protection of consumer interest and compliance with relevant environmental laws, to promote fair and efficient market practices within the State and ensuring cost reflective tariffs for all projects3. The Commission is vested with powers to make regulations in order to give effect to the provisions of the Power Sector Law4.

The Power Sector Law recognises the supervisory role of the Ministry of Energy and Mineral Resources5 over the Nigerian power sector as a whole. The Power Sector Law further recognizes the statutory and regulatory functions of the Nigerian Electricity Regulatory Commission (NERC), established under the Electric Power Sector Reform Act6 (EPSRA). Despite the establishment of the Commission, the Power Sector Law is not clear on the pre-eminence of the NERC over the Commission in regulatory issues under the Power Sector Law.

Embedded Power Providers (EPPs)

EPPs are companies licensed by NERC to generate and sell power to distribution companies within the State.

The EPPs, in collaboration with the Commission, are responsible for the implementation of the Scheme. The EPPs are required to develop the requisite standard agreements (such as power purchase agreements) with distribution companies, feedstock merchants and special purpose vehicles for embedded generation, and setting out commercial and technical responsibilities of the parties7. The EPPs are required to provide reports of their activities to the Commissioner for Energy and Mineral Resources through the Commission8.

Establishment of the Lagos State Embedded Power Council (Council)

The Council is comprised of a chairman, appointed by the Lagos state governor, and various stakeholders in the Lagos State Power Sector, including one representative of each of the distribution companies in the State9. The Council is established to serve as a form of coordinator with respect to the power sector within the State. The Council's functions include the gathering and dissemination of information relating to state policies, liaising with all state stakeholders, ensuring consumers benefit from competition and efficiency and advising the State on questions relating to the power sector10.

Establishment of the Lagos State Electricity Board

The establishment of the Lagos State Electricity Board is to ensure that the areas previously covered under the repealed Lagos State Electricity Board Law 201511 are now administered by the newly established Lagos State Electricity Board. The Lagos State Electricity Board oversees the establishment of electric power stations, generates, transmits and distributes electricity to areas not covered by the Scheme as well as areas not covered by the State's national grid system12.

Establishment of a Power Task Force

The Power Task Force is to be established to deal with interruptions to the provision of power supply, which include theft and vandalism of electricity infrastructure in the State. This special task force will be charged with ensuring constant uninterrupted power supply to the State13. The Power Task Force as well as other law enforcement agencies in the State have the responsibility of enforcing the provisions of the Power Sector Law14.

In addition to the above, the Power Sector Law creates offences and appropriate penalties for such offences. These offences include theft and damage to electricity supply, harassment, injury and impersonation of officers carrying out duties in the power sector15.

Rural electrification

Similar to the EPSRA, the Power Sector Law provides for rural electrification. The Power Sector Law states that the Commission shall maintain a policy to foster electricity development and promote modalities for rural electrification projects within the State16. The Commission has the duty to collaborate with relevant agencies to engender development, investment and compliance in the process of rural electrification17.

The areas to be known as rural areas shall be so designated by the Governor upon the recommendation of the Commissioner of Energy and Mineral Resources and an executive order published in the gazette shall be made to this effect18.

Conclusion

In essence, the Power Sector Law seeks to create a regulatory framework for the regulation of the power sector in the State. A number of the regulatory bodies, operations and functionaries which the Power Sector Law seeks to establish, already exist in one form or another under national or federal enactments. While the Power Sector Law seeks to give legal impetus to the Project, it remains to be seen how the Commission will function and carry out its role under the Power Sector Law without clashing with or replicating the roles and functions of the Federal Ministry of Power, Works and Housing and the NERC. More importantly, it would be critical to see how any inconsistency under any legal, operational or commercial issues in the Power Sector Law would be determined against the background of the EPSRA and the EPSRA regulations.

Notwithstanding this, the establishment of the Power Sector Law is a step in a positive direction. It has since been the subject of debate as to whether power sector issues should be governed by the federal government and not by the State, given that the State is better tasked in delivering such essential infrastructure. Given the commercial aspirations of the State and its peculiar energy requirements, the Project is welcomed, as it may assist in accelerating the socioeconomic development of the State. We foresee that other states will soon follow in the footsteps of the State and enact similar laws which will encourage the power sector to further develop and accelerate economic growth in their respective states. With appropriate inter-agency and cooperation at federal and state levels, the Power Sector Law would facilitate the delivery of the Project and ensure an immense economic boost to the State.

Footnotes

1. Section 6 of the Power Sector Law.

2. Section 6 of the Power Sector Law. Feedstock means gas, liquefied natural gas, liquefied petroleum gas, compressed natural gas, coal, biomass, waste and such other feedstock options as may be utilised under Scheme

3. Section 9 of the Power Sector Law.

4. Section 44 of the Power Sector Law.

5. Sections 3-5 of the Power Sector Law.

6. EPSRA is an Act of the Federal Republic of Nigeria which regulates the power sector in States which have not implemented a State power sector law.

7. Section 24 of the Power Sector Law.

8. Section 24 of the Power Sector Law.

9. Section 27 of the Power Sector Law.

10. Section 28 of the Power Sector Law.

11. Section 74 of the Power Sector Law.

12. Section 47 of the Power Sector Law.

13. Section 38 of the Power Sector Law.

14. Section 38 of the Power Sector Law.

15. Section 39 of the Power Sector Law.

16. Section 23(1) of the Power Sector Law.

17. Section 23(2) of the Power Sector Law.

18. Section 23 (3) of the Power Sector Law.

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