A Review of the Nigerian Energy Industry

NERC puts caveat on issuance of unsolicited electricity licences

30 October 2014, Abuja – The Nigerian Electricity Regulatory Commission (NERC) has disclosed that it will henceforth suspend issuance of new licences for electricity generation in the country.

It said unless proven to have met a ‘good cause’ condition, applications for generation licences would not be considered.

Power-TransmissionxNERC listed the ‘good cause’ conditions upon which licences would be issued to include renewable energy-based power projects such as solar, wind, biomass or small hydro which require no fuel supply agreement and in respect of which feed-in-tariffs have been approved with no capacity charge component.

Others include environment-related projects where a guaranteed fuel source for the generation of power may be a solution to waste disposal challenges, projects that would contribute to the stability of Nigeria’s grid system and captive generation plants with excess generation capacity to the national grid.

It also said generation projects with available fuel source would fall into the category that would receive its attention for issuance of licence.

The development was contained in a statement from NERC’s media unit on Wednesday in Abuja.

It explained that the new regulation was formulated from its consultative rule-making process as required by its business rules.

The regulation, NERC posited, became necessary when it was discovered that just a few of the 80 licences for new Independent Power Plants (IPPs) that it issued in 2006 had been activated so far.

“These regulations were made to ensure that licences are issued upon the reasonable expectation that the purposes for which licences are issued are met. The background to this was necessary on the fact that since inception in 2006, the commission had issued over 80 new entrants IPP licences, of which much less than were being actively developed.

The regulations came into effect on February 11 and provide for the processes to be used by a buyer in procuring additional electricity generation capacity,” it said in the statement.

The commission further noted that the new regulations would minimise opportunities for speculative licence applications, financial manipulation, fraud or corruption, as well as facilitate private sector involvement in the provision of generation capacity on the basis of rules that provide certainty, transparency and fairness of the procurement process and outcome.

“In accordance with the provisions of these regulations, the commission has stopped the further processing of licene applications with the exception of those coming under the ‘good cause’ provision as determined by it,” it added in the statement.

It however stated that licences applications that were filed before the regulations came into force would be processed.
Similarly, NERC directed the Nigerian Bulk Electricity Trading Company Plc (NBET) to commence necessary preparation, in collaboration with parties that include the System Operator, Market Operator, Transmission Services Provider and the Gas Aggregation Company of Nigeria (GACN), for the first electricity Power Purchase Agreement (PPA) procurement round expected to be undertaken by June in 2015.

NBET in this regard, has set the requirements for its engagement in such unsolicited power procurement. NBET disclosed that it would demand four mandatory requirements to be met in order it to consider such engagement.

The requirements, NBET explained, included land with registered title deed, complete Environmental Impact Assessment (EIA) that meets the approval and standards of the federal ministry of environment, comprehensive evaluation study and provisional evacuation approval from the Transmission Company of Nigeria (TCN) as well as gas supply agreement from a reputable gas supplier.


– This Day

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