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Operating Licences in the Nigerian Power Sector

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Operating Licences in the Nigerian Power Sector

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With the advent of the Renewable Energy in the 21st century and the privatisation of the Nigerian Power Sector, there have been new policies, reforms in the Sector. The Sector has witnessed a steady growth in the past decade and an increased rate in investment.

Before commencing business in the power sector, a prospective investor must first apply to the Nigerian Electrical Regulatory Commission ("the Commission") for a license. Failure to obtain a license before conducting business in the power Sector is an offence.

Regulatory Framework.

The Electrical Power Sector Reform Act ("EPSR Act") was enacted in 2005 to regulate the power Sector in Nigeria. The EPSR Act established the Commission which is responsible for granting licenses for the generation, transmission, distribution, system operation, trading and the supply of electricity. The Commission has also published regulations to ensure the smooth and seamless processing of Licenses for electricity business in Nigeria.

Types of Licenses

There are 5 (Five) types of license under the EPSR Act. These licenses are for different purposes and Applicant must specifically apply for the license that covers the business sought to be undertaken. These licenses are:

  1. Generation License: This is of 3 (Three) types namely:
    1. On-Grid Electricity License: This license allows a holder to generate electricity and connect to the national grid for distribution.
    2. Embedded Generation: This permits the licensee to generate power and evacuate same through a licensed distribution facility.
    3. Off-Grid Electricity Generation License: This authorises a licensee to generate and sell power to a single buyer. The licensee is not connected to the national grid.
  2. Transmission License: The license authorises grid construction, operation and maintenance of a transmission system within Nigeria or a neighbouring jurisdiction by a licensee.
  3. System Operation License: A system operation License authorises the licensee to carry on system operation and operations incidental thereto as specified by the EPSR Act.
  4. Distribution License: This authorises a licensee to distribute generated electricity from grid supply points directly to consumers.
  5. Trading License. This license permits the licensee to engage in the purchase, sale and trading of electricity.

Procedure for the Application of a License

Before applying for a license, a prospective Applicant should ensure that it has conducted a review of the industry and market conditions, the requirements and documents stipulated by the Regulations to ascertain whether it can meet up with the license terms, conditions and statutory obligations.

  1. An Application is made to the Commission in the prescribed form containing all required and material information. This Application shall be signed by the authorized representative of the Applicant and submitted at the Commission by sending same through a courier service or by submitting it at the Commission's head office.
  2. The Application is accompanied with a list of general documents which includes the Certificate of Incorporation, Memorandum & Articles of Association of the Applicant or the Deed of Partnership and Deed of Trust of the Applicant, a 10(Ten) Year Business Plan, Tax Clearance Certificate, Environment Impact Assessment, Evidence of Ownership of Land on which the business will operate, Off-take Agreement or Arrangement etc. There are also specific documents required which are tailored specially for each type of License being applied for.
  3. The Applicant shall pay a non-refundable processing fee as stipulated by the License & Operating Fees Regulation 2010; this Application fee varies depending on the type of License sought.
  4. Upon the receipt of the Application by the Commission, it shall send a written acknowledgement to the Applicant.
  5. The Application is reviewed by the Commission and if additional information is required, the Applicant is notified within 30 (Thirty) days. The Applicant is to supply the additional information within 60 (Sixty) days of the notification or the Application will be deemed to have been lapsed.
  6. The Commission reviews the Application and if it finds the Application complete, it shall pass a resolution to that effect and notify the Applicant of its decision.
  7. The Applicant is to publish the Application in at least two daily newspapers within 30 (Thirty) days of the Commission's acknowledgment. This publication shall call for objections and representations to the license. Copies of the publication are also forwarded to the Commission.

Assessment of the Application by the Commission

Any person who has an objection to the grant of the license shall submit a petition in the prescribed form to the Commission. This must be done within 21 (Twenty-one) days of the publication of the Application. In the event of an objection, the Applicant is notified for it to submit a reply to the objection.

The Commission fixes a date for hearing of the Application and the objection, it also notifies all parties. Upon consideration of the Application and objection if any, the Commission may grant or refuse the Application. The duration for considering the Application is 60 (Sixty) days from the date of the acknowledgement of the Application. If the Application is approved, the Commission shall notify the Applicant of the approval upon such terms and conditions prescribed by it including the License fees to be paid before the grant of the License. If it refuses the Application, It shall notify the Applicant of its decision together with the reasons for the refusal of the Application.

An Applicant whose Application was refused can make representations to the Commission challenging the refusal within 21 (Twenty-one) days. Upon receipt of the representation, the Commission shall consider it. If it has any merit, the refusal may be rescinded and the Application will be granted. If however it is unsuccessful, the Applicant is notified of same together with the reasons for the further refusal.

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