NERC LICENSING AND REGULATORY FRAMEWORK

Dr. Steven Andzenge, MONCommissioner

Legal, Licensing & Enforcement, NERC

Abuja, 29th November, 2011

OUTLINE

• The licensing and regulatory philosophy• Requirement for licensing and the procedure – The procedure– The format– The fees– The duration, extension & renewal

• The licensing status of the Successor Companies• Salient terms and conditions• Conclusion

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The licensing and regulatory philosophy

• Sector 32(1)(f) EPSRA requires NERC to ensure regulation is fair and balanced for licensees, consumers, investors, and other stakeholders

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Statutory Requirement for Licensing

– Section 62 makes it mandatory to licence except captive and less than 1MW

– NERC is empowered to make regulations on application for licenses

– The procedure is stipulated in Nigerian Electricity Regulatory Commission Application for Licenses (Generation, Transmission, System Operations, Distribution & Trading) Regulations, 2010.

– This entails formal application in a prescribed format and payment of application fee

– Requirement are corporate/legal requirements, technical and commercial requirements

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Statutory Requirement for Licensing (Cont)

- The law gives 6 month within which an application must be granted or refused

- Application is evaluated within the 3 divisions in NERC

- License is issued upon fulfillment of conditions and upon payment of all necessary license fees.

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The PHCN Successor Companies

• PHCN was unbundled by Section 8 of the EPSR Act• By Section 23(1) were granted interim licenses on

July 1, 2006 after which they were granted full licenses on January 1, 2010 upon payment of license fees

• License is for 10 years duration can be extended and renewed giving total of 25 years.

• NERC has issued letters of comfort in respect of the privatization exercise.

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Terms and Conditions- Terms and Conditions include:

- Payment of operation fees:- Generation- 1.5% of Tariff Charge/kWh- Distribution- 1.5 of licensee’s charges/kWh net the cost of generation

and transmission- Transmission- 1.5% of Tariff Charge/kWh

- Compliance with reporting obligations requirements as contained in the Nigerian Electricity Regulatory Commission Reporting Compliance Regulations 2009

- Supplementary activities must be with NERC’s approval. This is to ensure that supplementary activities do not materially compromise the financial integrity of the licensee

- Assignment/transfer of licensed business must be with the consent of the Commission.

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Terms and Conditions- Disposal of relevant assets must be with the consent of

the Commission.- Change in control must be with prior approval of the

Commission.- 30 days notice required for changes in ownership exceeding 5%- Any increase in issued share capital

- Enforcement- Commission has powers to enforce and impose

sanctions- Power to suspend and revoke licenses

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Discos

• Required to:– Comply with Distribution Code– Comply with Commission’s tariff and charges– Develop and maintain a distribution system– Customer metering– Promote efficient energy use through sensitization of

consumer.

• Have a dedicated compliance/regulatory department committed to compliance issues.

• Maintain good regulatory standing.

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Transmission

• Obligation to offer connection to all• Compliance with transmission standards• Ensure operations are in a accordance with

the Act and conditions of the Commission’s licenses.

• Comply with Codes and Rules

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Other Regulatory Steps of the Commission

Regulation are being developed in the following areas:– Independent Electricity Distribution Network;– Acquisition of land and access right for power projects in

Nigeria; and– Independent Electricity Transmission Network.– Embedded Generation

• Development of an enforcement frame work.• Development of dispute resolution mechanism for operators

and consumers.• Details of all regulations by the Commission on our website

www.nercng.org

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Conclusion

• The Licensing Philosophy requires NERC to ensure regulation is fair and balanced for licensees, consumers, investors, and other stakeholders.

• The Commission is committed to a well regulated NESI

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Dr. Steven Andzenge, MONCommissioner, Legal, Licensing

and EnforcementNigerian Electricity Regulatory

CommissionE-mail: sandzenge@nercng.org

THANK YOU

Website: www.nercng.org 13