Energy Law (2)

Articles on laws and regulations that affect energy and electricity generation, transmission, distribution and retailing in Nigeria

ELECTRICITY LAW PRACTICE IN NIGERIA; ROLES/OPPORTUNITIES FOR YOUNG LAWYERS

By

Onyekachi Umah, Esq. LL.M, ACIArb(UK)

Founder, LearnNigerianLaws.com

Convener, #SabiLawLectures

 

DELIVERED ON MONDAY 25 JUNE 2018

AT THE 4TH SABI LAW LECTURES

FOR CORPS LEGAL AID SCHEME ABUJA.

 

LECTURE CONTENT:

  1. HISTORY OF NIGERIAN ELECTRICITY LAW PRACTICE
  2. EVOLUTION OF ELECTRIC POWER SECTOR OPERATORS/REGULATORS
  3. LEGAL FRAMEWORK FOR ELECTRICITY POWER SECTOR
  4. REGULATORS AND STAKEHOLDERS FOR ELECTRICITY LAW
  5. 20 ROLES/OPPORTUNITIES FOR YOUNG LAWYERS IN THE NIGERIAN ELECTRICITY SECTOR
  6. 12 WAYS TO STRATEGICALLY POSITION YOURSELF IN THE ELECTRICITY POWER SECTOR. 

 


  1. HISTORY OF NIGERIAN ELECTRICITY LAW PRACTICE.

Electric power is not new to Nigeria, as such rights, duties, liabilities and legal framework of its stakeholders and participants are not novel although evolving.

 Electricity in Nigeria dates back to 1898 with the installation of the very first generating power plant (60KW) at Marina, Lagos.

Other areas followed, like Kaduna in 1929, Enugu in 1933, Maiduguri in 1934, Yola in 1937, Zaria in 1938, Warri in 1939 and Calabar in 1939. 

 


  1. EVOLUTION OF ELECTRIC POWER SECTOR OPERATORS/REGULATORS.

At the beginning, there was non-unified electricity systems, years after all systems were unified in to a single generator-transmission-distribution institution and recently unbundled and privatized, allowing private investors. Below is an abridged evolution;

  1. Between 1898 and 1950, the Government and Native Authority owned, maintained and operated all systems.
  2. On 1946 the Nigerian Government Electricity Undertaking (NGEU) being an arm of the Public Works Department took over the assets and liabilities of electricity supply in Lagos.
  3. In 1950, the Electricity Corporation of Nigeria (ECN) was created to take over the electric power sector, assets and liabilities across Nigeria.
  4. In 1962, the Niger Dams Authority (NDA) was created to harness the potential of hydropower in Nigeria.
  5. In 1966, Nigeria started grid transmission of electricity across Nigeria.
  6. In 1972, National Electric Power Authority (NEPA) was formed by the merger of NDA and ECN to expand national power network.
  7. In 2005, the was a reform in power sector and the Nigerian Electricity Regulatory Commission (NERC) was established to independently regulate the power sector.
  8. Still on 2005, Power Holding Company of Nigeria (PHCN) was created to takeover over the assets and liabilities of the NEPA for a successful unbundling of NEPA

  


  1. LEGAL FRAMEWORK FOR ELECTRIC POWER SECTOR

 The legal framework of Nigeria Electric Supply Industry (NESI) is made up of the Nigerian Constitution, Acts of parliament, Rules, Codes and Regulations made pursuant to the Acts. Some non-NESI specific Acts do have provisions offering tax incentives to power sector participants. Some of the relevant laws, regulations, rules and codes are listed below:

 

  1. CONSTITUTION OF THE FEDERAL REPUBLIC OF NIGERIA, 1999 (CFRN)
  • empowers both Federal and State governments to legislate and exercise power over electric power (generation, transmission and distribution) concurrently.
  • Federal government covers for in or to any part of Nigeria, between states, and any other country while a state government is for of its state not covered by a national grid system.

 

  1. NATIONAL ELECTRIC POWER POLICY 2001
  • In 1999 the National Council on Privatization (NCP) constituted the Electric Power Sector Implementation Committee (EPIC) to comprehensively study the electricity power industry.
  • National Electric Power Policy (NEPP) 2001 was outcome of the study and was approved by the Federal Executive Council.
  • NEPP created roadmap for unbundling of NEPA, liberalization of power sector and creation of an independent regulatory agency among other things.

 

  1. ELECTRIC POWER SECTOR REFORM ACT, 2005
  • Electric Power Sector Reform Act (EPSRA) provides for the creation of an independent regulator and formation of companies to take over the functions, assets, liabilities and staff of the National Electric Power Authority;
  • Provides for competitive electricity markets and resolution of disputes among others.
  • Provides for the independent regulator (the Nigeria Electricity Regulatory Commission) to provide for the licensing and regulation of the generation, transmission, distribution and supply of electricity; to enforce such matters as performance standards, consumer rights and obligations, to provide for the determination of tariffs.

 

  1. COMPANY INCOME TAX ACT
  • Provides tax incentives for companies engaged in gas utilization including power generation companies.
  • The incentives include a 3 year income tax holiday, with possible renewal for additional two (2) years.

 

  1. VALUE ADDED TAX ACT, 1993
  • Pursuant to Parts I and II of the First Schedule to the Act, “Plant, machinery and equipment purchased for utilisation of gas in downstream petroleum operations are exempted from Value Added Tax.

 

  1. INDUSTRIAL DEVELOPMENT (INCOME TAX RELIEF) ACT
  • Provides tax holiday period of 3 years with possible extension up to a maximum of an additional two yearsrelief for industries including “independent power generation utilizing gas, coal and renewable energy sources” as a pioneer “product”.

                                      

  1. CUSTOMS, EXCISE TARIFF, ETC (CONSOLIDATION) ACT, 1995
  • It exempted from custom duties any machinery, equipment or spare part imported into Nigeria by an industry in the exploration, processing or power generation through the utilization of Nigerian gas, for its business.
  1. MARKET RULES FOR THE NIGERIAN ELECTRICITY SUPPLY INDUSTRY 2010 (MR)
  • It is made pursuant to section 26(2) of EPSRA for the operation of the national grid by the system operator; and   for the establishment and governance of markets related to electricity and ancillary services.

 

  1. GRIDE CODE FOR ELECTRICITY INDUSTRY OF NIGERIA
  • It is made pursuant to section 32(2)(b) of EPSRA and contains the day-to-day operating procedures and principles governing the development, maintenance and operation of an effective, well-coordinated and economic Transmission System for the electricity sector in Nigeria.

 

  1. DISTRIBUTION CODE FOR DISTRIBUTION SECTOR OF NIGERIA ELECTRICITY SUPPLY INDUSTRY.
  • It is made pursuant to section 32(2)(b) of EPSRA and designed to facilitate an efficient usage of Electricity for all Users of the Distribution Networks without discrimination and promote competition in the generation and supply of Electricity.

 

  1. METERING CODE FOR NIGERIAN ELECTRICITY SUPPLY INDUSTRY
  • It is made pursuant section 32(2)(b) EPSRA and designed to ensure modern accurate meters systems with reliable communication facilities are deployed across the industry production and supply chain to measure and record energy production and utilization.

 

  1. NIGERIAN ELECTRICITY HEALTH AND SAFETY CODE, 2014
  • It is made pursuant to section 32(1)(e) and (2)(b) EPSRA, creating a legal obligation on licensees, their contractors and persons operating electrical premises to ensure safety at work and  protect health.

 

  1. ELECTRICITY INDUSTRY (ENFORCEMENT) . REGULATIONS 2014.
  • It is made pursuant to section 96 of the EPSRA, 2015 and ensures enforcement, maintenance and adherence by licensees and other participants to the ESPR ACT, Codes and other Regulatory instruments of NERC.

 

  1. UNIFORM SYSTEM OF ACCOUNTS ("USOA") REGULATIONS 2018.

  • It is made pursuant to Section 96 of EPSRA, for implementation of the Uniform System of Accounts Guidelines 2014 on the generation of all accounting reports required by the NERC based on information extracted from the general and subsidiary ledgers of Licensees.

 

  1. METER ASSET PROVIDER REGULATIONS 2018
  • It is made pursuant to section 96 of the EPSRA to encourage the development of independent and competitive meter services in Nigeria electricity supply industry.

 

  1. ELIGIBLE CUSTOMER REGULATIONS 2017
  • Allow third party access to transmission and distribution infrastructures and licensed generation companies with uncontracted capacity to access unserved and underserved customers thus improving the financial liquidity of the electricity industry 


 

  1. CONNECTION AND DISCONNECTION PROCEDURES FOR ELECTRICITY SERVICES 2007
  • Created obligations for Distribution Companies and Rights to Consumers as well as Procedures for Connection and Disconnection of electricity supply.

 

REPEALED LAWS

Kindly note that the below laws are no longer in existence in Nigeria. 

  1. ELECTRICITY ACT, 1929 repealed by the Electricity Power Sector Reform Act, 2005. (S. 99, EPSRA)
  2. NATIONAL ELECTRIC POWER AUTHORITY (NEPA) ACT, 1972 repealed by the Electricity Power Sector Reform Act, 2005. (S. 99, EPSRA)

 


  1. REGULATORS AND STAKEHOLDERS FOR ELECTRICITY LAW 

With the Electricity Power Sector Reform Act, there is a general regulator for the entire sector, sub-sector regulators, government owned entities and stakeholders.  

  • Government through legislations created regulators for the electricity sector and several other participatory government agencies and institution for an efficient and competitive market.
  • Regulatory Agencies are; Nigerian Electricity Regulatory Commission, Federal Ministry of Power, Energy Commission of Nigeria, Rural Electrification Agency, Presidential Committee on Power, National Council on Privatisation, Bureau of Public Enterprise and Nigerian Electricity Management Services Agency.
  • Other major institutions are Nigerian Bulk Electricity Trading PLC, Transmission Company of Nigeria, Gas Aggregation Company of Nigeria, Nigerian Electricity Liability Management Company Limited and Niger Delta Power Holding Company Limited.

 

  1. FEDERAL MINISTRY OF POWER. It is part of the executive arm of federal government. Minister of power is to give general directions to NERC on matters of electricity including overall system planning and co-ordination. (S. 33, EPSRA). 
  1. NIGERIAN ELECTRICITY REGULATORY AGENCY (NERC) created in 2005 technical and economic regulation of Nigerian Electricity Supply Industry and creation of a fair market.
  2. ENERGY COMMISSION OF NIGERIA;Established in 1988 by Energy Commission of Nigeria Act charged to coordinate and supervise all energy functions and activities in Nigeria.
  3. RURAL ELECTRIFICATION AGENCY Established by EPSRA to promote access to electricity in rural areas in Nigeria. (S. 88(1)).
  4. NIGER DELTA POWER HOLDING COMPANY LIMITED. It is a government owned power generation and distribution company owning open and combined cycle gas turbine plants. It was founded in 2004 and was formerly known as the National Integrated Power Project.
  5. NATIONAL COUNCIL ON PRIVATIZATION AND BUREAU OF ENTERPRISE It planned and implemented power sector privatization policies.
  6. BUREAU OF PUBLIC ENTERPRISE Established by Public Enterprises (Privatization and Commercialization) Act, implement privatization and commercialization policies of National Council on Privatization.
  7. ADVISORY POWER TEAM OF THE VICE PRESIDENT OF NIGERIA. It is established to drive the implementation of the roadmap on power, monitor same.
  8. NIGERIAN BULK ELECTRICITY TRADING PLC. It is a NERC licensed bulk electricity trader
  9. TRANSMISSION COMPANY OF NIGERIA. It has NERC license for electricity transmission, system operation and electricity trading which is ring fenced
  10. NIGERIAN SYSTEM OPERATOR. It is the arm of Transmission Company of Nigeria licensed to provide system operation services to the Nigerian electricity supply industry
  11. OPERATOR OF THE NIGERIAN ELECTRICITY MARKET. It is arm of Transmission Company of Nigeria licensed to function as the Market Operator of the wholesale electricity market.
  12. GAS AGGREGATION COMPANY OF NIGERIA. It implements the Nigerian Gas Master Plan (NGMP) commercial framework and to stimulate growth of natural gas utilization in the Nigerian domestic market.
  13. NIGERIAN ELECTRICITY LIABILITY MANAGEMENT COMPANY LIMITED/GTE. Established to assume and mange the non-core assets, all liabilities and other stranded obligations of defunct PHCN
  14. NATIONAL POWER TRAINING INSTITUTE OF NIGERIA. It is to design, develop and deliver training courses to enhance the skills and capacity of both technical and non-technical power utility personnel.
  15. NIGERIAN ELECTRICITY MANAGEMENT SERVICES LIMITED. Established to enforce Technical Standards and Regulations, Technical Inspection, Testing and Certification of all Categories of Electrical Installations, Electricity Meters and Instruments

 


  1. 20 ROLES/OPPORTUNITIES FOR YOUNG LAWYERS IN NIGERIA ELECTRICITY SECTOR

Young lawyers are considered in Nigeria, as lawyers who are not more than 7 years old in the bar. The opportunities below are for them and even older lawyers. The Opportunities will be considered either as services that can rendered or positions to render services.

  1. ALTERNATIVE DISPUTE RESOLUTION CONSULTANCY;

-Dispute Resolution Counsellor

Or as a member of Dispute Resolution Panel.

  • Like in any human endeavour, disputes must arise between regulators, stakeholder, participants and or consumers of Nigerian Electricity Supply Industry. Disputes arising from the market between participant are to be resolved by Arbitration. See, Rule 43 of the Market Rules (MR) for the Nigerian Electricity Power Sector, 2010, No. 10 Vol. 97 Federal Republic of Nigeria Official Gazette.
  • Some regulations request that some agreements must have arbitration clauses. Like the Regulation 27 of the Meter Assets Providers Regulation 2018.
  1. EXTERNAL LITIGATION COUNSEL

Over matters that are not arbitralable and arbitral awards.

 

  1. INDUSTRY AGREEMENTS NEGOTIATOR AND DEAL MAKER

The electricity industry has very specialised agreements and lots of terms and terminologies making their deals and meetings special. Hence, a trained lawyer can find a good work being a negotiator and deal maker for industry stakeholders and participants.

 

  1. INDUSTRY AGREEMENT DRAFTSMAN.

The many specialised agreements in electricity sector means that not too many lawyers can draft agreements for electricity biased clients. Hence, a lawyer with interest in the sector will have lots of fruitful engagements in a law firm or as in-house counsel for electricity companies. Some specialised agreements are Gas Sale and Gas Transportation Agreement, Vesting Contracts, Power Purchase Agreements, Engineering, Procurement and Construction (EPC) Agreement, Grid Connection Agreement, Service Level Agreement, Meter Services Agreement and Ancillary Services Agreement.

 

  1. INDUSTRY LICENSE AND PERMIT CONSULTANT.

The Nigerian Electricity Supply Industry is highly regulated from generation of power to manufacture of electrical installations, transmission of power to even installation of electric fence in a private house. There is a need for licenses and permits to engage in any level of business in the electricity sector. Licenses and Permits are tenured and as such need to be renewed often. Hence there is a huge market here for lawyers to guide electricity market participators in applying and obtain licenses, permits and renewal of same from NERC and other stakeholders.

 

  1. DUE DILIGENCE & COMPLIANCE EXPERT

The EPSRA, Codes and Regulations have set a lot of guidelines and procedures for almost every step, change, takeover, commencement and applications by any electricity sector participant. Most market participants engage lawyers to study, interpret and ensure compliance of their organisations to have penalties. Most times, even the regulators engage external solicitors to verify information provided by prospective licensee.

 

  1. CONSUMER RIGHTS ADVOCATE

There is still a huge cry by electricity consumers and claims of Distribution Companies (DISCOs) infringing on their rights. There is a huge demand for petitions to be written, filed and followed up at the NERC for justice to consumers. There is an untapped law practice (legal service provision option) in that sector since many lawyers are not aware of necessary regulations like the Connection and Disconnection Procedures for Electricity Services 2007.       

 

  1. INDUSTRY TAX ADVISER/CONSULTANT

Taxation is law and part of the services a lawyer and a law firm can render. The Nigerian electricity sector has some tax exemptions and holidays for market participants under the Company Income Tax, Value Added Tax, Industrial Development (Income Tax Relief) Act, CUSTOMS, EXCISE TARIFF, ETC (CONSOLIDATION) ACT, 1995.  There is need for lawyers (electricity sector tax advisers) that understand and can advise market participants on available tax exemptions and help in obtaining them.   

 

  1. INDUSTRY CORPORATE AND INVESTMENT LAW CONSULTANT.

As a regulated national sensitive sector, corporate formation and changes in companies participating in the electricity sector is monitored and subject to approval and consent of NERC. Hence there are opportunity for lawyers with sound understanding of corporate law practise in Nigeria as well as electricity power sector to advise and guide power sector participants.

 

  1. PROJECT FINANCE CONSULTANTS.

The quest to increase Nigerian electricity generation as well the ongoing construction and maintenance of long term projects across Nigeria have created a demand for project finance consultants. A lawyer with a good understanding of Nigerian electricity sector, finance, economics and sector permutation has a huge opportunity here.

 

  1. DEBT RECOVERY AGENT.

Control of losses is a huge part of electricity business. There is a huge loss of revenue in the electricity supply chain especially between distribution companies/retailers and consumers. There is opportunity for lawyers that can design cost effective business healthy approach towards recovery of debts owed by consumers and other market participants.    

 

    

  1. GENERAL LAW ADVISER/EXPERT

Electricity market participants like any other company in Nigeria, require some general and less specialised legal services too. Possible areas are; Labour Law, human right enforcement, tenancy, environmental impact assessment, trademarks, copyright, patent, design and technology acquisition and promotion.  

 

  1. CONSULTANT/SECRETARY TO MARKET PARTICIPANTS, STAKEHOLDERS AND OR ASSOCIATION OF MARKET PARTICIPANTS.

There several groups and fora in the industry to purse, maintain and sustain views and welfare of members. There associations for generation companies and even for distribution companies and others. Most of the groups often engage lawyers as consultants and secretaries; lawyers with good understanding of the electricity power sector.

 

  1. HEALTH AND SAFETY LEGAL CONSULTANCY

There is a deep attention on occupational, health and safety in the sector considering the nature of the primary commodity of the sector. There is a defined legal framework for health and safety practise in the sector. Lawyers with understanding of this and further studies on this area are rare in the sector.

 

  1. RESEARCHER, TRAINER AND LECTURER.

There is little literature on this sector and very little trainers and lecturers for transfer of knowledge. So there is a demand with less supply here.

  

  1. ELECTRICITY LAW AID/ATTACHE/SPECIAL ADVISER.

There are very little lawyers working as legal assistants, advisers and aids to judges, legislatures and the executives for a better law making process, amendment bills, laws, interpretation of law and execution of electricity laws.  Most judges rose to the bench before the liberalisation of the sector and as such may lack good understanding of the sector, without continued education. Hence, there is a huge opportunity for younger lawyers with understanding in the sector.

 

  1. EMPLOYMENT IN LEGAL, LICENSING AND ENFORCEMENT DEPARTMENTS OF REGULATORS AND STAKEHOLDERS.

NERC and other stakeholders as well as participants in the power sector have large specialised departments for legal, licensing and enforcement. Lawyers with interest in electricity law are the needed hands in such departments.

 

  1. TECHNICAL PARTNERS AND INVESTORS FINDER.

Nigeria as a growing electricity market emerging from unbundling and privatization, there are many foreign direct investments in the sector. Experienced corporate giants and investors where wooed by Nigerian government and stakeholders to forge sustainable partnership. Lawyers with good understanding of the electricity sector are often consulted and engaged to search, negotiate and bring foreign and local investors into the sector for finders’ fee.

 

  1. NEW CODE/REGULATION ALERT RINGER.

NERC and other concerned stakeholders, make codes and regulations for the sector. There is often little awareness on such new codes and regulations, so market participants, lawyers and the general public run contrary to such regulations out of ignorance.  There is a market for quick, detailed and affordable updates on new codes and regulations. For example, the #NewLawAlert is an initiative of the LearnNigerianLaws.com designed to create prompt and detailed alert on new laws, codes and regulations in Nigeria.

 

  1. ELECTRICITY LAW AND RIGHTS AWARENESS

Considering the pre-reform conservative approaches of NEPA and the general low awareness on laws, rights and duties in Nigeria, most electricity consumers are not aware of their rights and obligations as well as other sector participants. Lawyers have opportunity to create awareness on rights, duties and Nigerian electricity laws and enlighten the public for free or for a fee. The LearnNigerianLaws.com designed and runs a #DailyLawTips and #SabiLawLectures to increase awareness on rights and laws of Nigeria for free. Like this free lecture is the 4th #SabiLawLectures and is set to increase awareness on electricity law in Nigeria among young lawyers.       

 

   


  1. 12 WAYS TO STRATEGICALLY POSITION YOURSELF IN THE ELECTRICITY POWER SECTOR.

 

  1. Get interested
  2. Focus and specialise
  3. Seek continued legal education on electricity
  4. Enrol on online education on electricity
  5. Attend electricity power sector workshops and training
  6. Pursue post graduate degrees in relevant courses
  7. Seek internship in law firms practising electricity law
  8. Seek internship in electricity power sector regulators, participants and stakeholders
  9. Subscribe to free and paid electricity power magazines, newsletters, journals and updates.
  10. Form and join forums for electricity biased lawyers and professionals.
  11. Choose a mentor in electricity power sector and get close.
  12. Let other lawyers and clients know your passion, training and experiences in electricity power sector

 

My appreciation to Dr. Chudi Ojukwu for teaching and mentoring me on electricity law practise and more. A million thanks to my wife for her support and encouragement. Thanks to Kenechukwu Agwu, Esq., organisers of this event and entire team of LearnNigerianLaws.com. Above all, thank you all for listening this Monday morning. 

 

THANK YOU.

 

 

 

UNDERSTANDING POWER SECTOR REFORM-OPPORTUNITIES FOR LAWYERS

A LECTURE DELIVERED AT THE 2ND PUBLIC LECTURE OF NBA YOUNG LAWYERS FORUM, ABUJA- BWARI. (CAPITAL BAR) 

DATE: 24th SEPTEMBER 2016

TIME: 10:00AM 

VENUE: NBA Abuja-Bwari Branch Secretariat, Customary Court Complex, After Sokale Junction, along Bwari-Dutse Road, Abuja.

BY 

Chudi Nelson Ojukwu -Partner L C & N (Legal Practitioners) www.LCandN.com 

Office Address

1 Durban Street,

off Ademola Adetokunbo Wuse 2, Abuja.

P: +234 803766 5878

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