Some States that have already taken advantage of this new provisions of the Electricity Act by enacting their respective electricity laws include Enugu, Ondo, Ekiti, Imo and Oyo States. Lagos State, with one of the largest electricity markets in the country and one of the major States that spearheaded the recognition of State electricity market in the Electricity Act, has now also enacted its own electricity law towards establishing a Lagos State electricity market.
It may be relevant to note that, prior to the enactment of the Electricity Act, Lagos State had already taken steps to set up an independent electricity market for Lagos State by issuing the Lagos State Electricity Policy in October 2021 (the “Electricity Policy”). This has now culminated in the enactment of the Lagos State Electricity Law (the “Law”) signed on December 3, 2024, by Governor, Babajide Sanwo-Olu[3]. The fundamental objective of the Law is to provide a comprehensive legal and regulatory framework for the generation, transmission, and distribution of electricity within Lagos State.
Key Provisions of the Law
Establishment of Regulatory and Administrative Bodies
One of the main requirements in the Electricity Act for a State electricity market is the establishment of a regulatory authority. The Law meets this requirement by establishing the Lagos State Electricity Regulatory Commission (the “Commission”)[4] which is responsible for ensuring a physically safe, technically secure, commercially viable and economically efficient electric market, amongst other things in Lagos State. The Commission is required to work collaboratively with other government agencies, including the Ministry, which initiates and coordinates sectoral policies for the overall development of the electricity sector in the state. The Law also creates the Lagos Independent Service Operation (the “Lagos ISO”) to manage electricity operations and licensing[5], and introduces the Lagos State Electrification Agency (the “Agency”) to replace the Lagos State Electricity Board[6]. Under the Ministry’s supervision, the Agency is required to manage electricity installations, public lighting, and off-grid solutions across the State while promoting environmentally friendly energy access and expanding services to underserved areas[7]. The Law further establishes the Host Community Development Trust Fund[8] to foster community involvement and development in electricity projects.
Policy and Strategic Planning The Law provides for the development and publication of the first edition of the Lagos Integrated Electricity Policy and Strategic Implementation Plan within six (6) months of the commencement of the Law to guide the overall development of the Lagos Electricity Market. This plan, to be prepared by the Ministry in consultation with the Commission and relevant stakeholders,[9] should ensure the orderly establishment and growth of the Lagos Electricity Market to meet future electricity demand in Lagos State. When published, this plan would provide further insights into the implementation of the Law and the direction of the Commission in developing the Lagos State electricity market.
Licensing/Pre-Existing Licenses
The Law stipulates that entities carrying out regulated electricity activities must obtain the necessary licenses from the Commission. A fundamental issue however is regarding pre-existing licenses and permits issued by the Federal electricity regulator (Nigerian Electricity Regulatory Commission (“NERC”)) in respect of electricity activities in Lagos State and how the Law would address transition issues. It is therefore relevant that the Law recognises this and makes provisions for these pre-existing licenses. According to the Law, pre-existing licenses will generally remain in effect for the remainder of their validity and be deemed to have been issued by the Commission.[1]
That notwithstanding, the Law provides for the powers of the Commission to:
- require a pre-existing licensee to make necessary registration with the Commission;
- if it deems it necessary in the public interest to do so, issue an interim licence to a pre-existing licensee for a specified period in connection with any transitional arrangements; or
- if requested by a pre-existing licensee, grant a new licence, permit, authorisation, approval, consent, direction, permission or certificate on terms and conditions consistent with the provisions of the Law and any applicable regulation.
NERC regulations that applied to those pre-existing licenses will also continue to apply as if the regulations had been made by the Commission and the Commission may enforce those regulations.
Transfers
As with most regulatory requirements of major sectors of the Nigerian economy, the transfer of licenses or undertaking without the prior written approval of the Commission is void. This provision extends to all forms of disposals and creation of security including assignment, novation, replacement of licence or undertaking, or any part of it, whether directly or indirectly and whether by way of asset sale, sale of shares, merger, mortgage, charge, pledge, lease, franchise, exchange or otherwise[2].
Promotion of Off-Grid Solutions
To address electricity access gaps, the Law introduces measures, strategies, incentives, schemes and programmes for the deployment of off-grid solutions. These off-grid solutions are aimed towards generating and storing electricity independently of the national power grid. The Ministry is tasked with coordinating the initiative and fostering collaboration with the Federal Government and other entities[3]. The Law identifies potential cost-effective off-grid solutions suitable for each area, with a description of the incentives to be provided. It also provides for a framework for monitoring and evaluating the implementation of the strategy deployed for the promotion of off-grid solutions, which includes annual reviews, audits, and reporting of relevant measures. The provisions aim to ensure that all residents of Lagos State, regardless of their location, have access to reliable and sustainable electricity.
Tariff Regulation
The Law mandates that tariffs within the Lagos State Electricity market be fair, competitive, and reflective of macroeconomic realities. The Commission must adhere to approved tariff methodologies, which are periodically reviewed to reflect changes in the market. There is also the scope for the Commission to approve negotiated transactions between licensees and specific consumer groups, ensuring that these agreements comply with the overall tariff methodology.[4]
Adoption of Renewable Energy and Modern Technologies
The Law emphasizes the adoption of modern, clean technologies and renewable energy sources. It mandates the development of a Renewable Energy, Energy Efficiency, and Demand Side Management (DSM) Strategy and Action Plan[5]. This reflects a commitment to reducing environmentally damaging emissions[6] ensuring reliability, continuity and system stability for end users.
Consumer Protection and Standards
The Law emphasizes the protection of electricity consumers in Lagos State by setting out comprehensive standards, practices, and procedures.[7] It establishes special services for disadvantaged consumers to ensure equitable access to electricity. The Law defines standards and procedures for resolving consumer complaints efficiently and effectively and also outlines the processes for applying for and withdrawing electricity services.
Regarding billing, the Law sets standards for consumer charging, billing, collection, and credit practices to ensure transparency and fairness. It also provides guidelines for the disconnection of electricity supply for non-payment and the procedures for reconnection. It ensures that consumers who do not receive the contracted electricity services are compensated.
Consumers also have forums where they can express their views and raise concerns, with procedures for addressing these issues. The Law further mandates the protection of consumer data and ensures secure access to consumption data, billing history, and other relevant information.
Wide Coverage of Offences and Penalties
The Law established the Power Enforcement Unit (under the supervision of the Agency (“PEU”))[8] to be responsible for addressing electricity theft, handling whistleblower reports, and collaborating with the Ministry of Justice to prosecute offenses under the Law[9]. The PEU is also empowered to make arrests while performing its duties.
The Law provides a wide range of prohibited activities, including those relating to providing electricity services without a license; contravention of license terms; unauthorised use of licenses; electricity theft; theft of and damage to electricity infrastructure[10]; hindering, obstructing, interfering and impersonation of employee or agent of a licensee[11]; illegal use of electricity[12]; and so on.
The Law specifies various penalties for different electrical offenses. For example, any individual found guilty of electricity theft is liable, upon conviction, to: (i) a fine of at least five (5) times the value of the electricity used, misused, or stolen, or a custodial or non-custodial sentence for a maximum term of three (3) years, or both the fine and the custodial or non-custodial sentence; (ii) in the case of a continuing offense, a daily fine of no less than twenty thousand Naira (N20,000.00); and (iii) for a corporate entity, a fine of at least seven (7) times the value of the electricity used, misused, or stolen, along with a daily fine of no less than fifty thousand Naira (N50,000.00) for a continuing offense.
Transfer of Regulatory Powers from NERC to the Commission and other Regulators Established under the Law
While the Electricity Act recognises the powers of the States to establish their independent electricity markets, the mere enactment of a State Law does not automatically grant States the power to commence the operation of an electricity market. There are procedures stated in the Electricity Act that must first be followed for the transfer of regulatory powers from NERC to the State electricity regulatory bodies created under State Law – i.e., the Commission, in relation to Lagos State.
Following the enactment of a State Law, the State is required to notify NERC of the existence of the law and formally request the transfer of regulatory authority over electricity operations in that State from NERC to the State regulator. In addition, the State is required to send a formal notification to the relevant successor electricity distribution licensee in that State (“State DisCo”), copying the National Council on Privatisation through the Bureau of Public Enterprise, requesting the State DisCo to take the necessary steps set out in the Electricity Act.
On its part, NERC must prepare and deliver an order to the State regulator, outlining a plan and timeline for the transition of regulatory responsibilities within 45 days of receiving the State’s notification. This transition must be completed within six (6) months from the date the State notifies NERC.
By separate orders[13] (the “Orders”) and in compliance with the procedure stated above, we note that NERC has initiated the process of transferring the regulatory oversight of the electricity market in Lagos State from NERC to the Commission. The Orders confirmed that Lagos State has complied with the conditions precedent to the operation of its independent electricity market.
Pursuant to the Orders, NERC directed the existing distribution companies operating in Lagos State (i.e., Eko Electricity Distribution Plc and Ikeja Electric Plc), to incorporate a subsidiary each under the Companies and Allied Matters Act 2020 that will assume the responsibilities for intrastate supply and distribution of electricity within Lagos State. The incorporation of the subsidiary company is expected to be completed within 60 days from the effective date of the Order.
Conclusion
The Lagos State Electricity Law 2024 sets a forward-looking agenda for electricity governance in Lagos State by establishing a clear regulatory framework for electricity market in the State and one that creates opportunities for local players to participate in one of the largest electricity markets in Nigeria. As the implementation of the Law goes into full swing, one can hope that the assumption by Lagos State of control over its electricity market will potentially result in increased efficiency, better service delivery, and overall improved power supply to consumers.
NOTE:
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Authors: Adeleke Alao, Director, and Ariteshoma Etete, Junior Associate, CLG Nigeria.
Section 178 (1) Lagos State Electricity Law
Section 62 (1) Lagos State Electricity Law
Section 119 Lagos State Electricity Law
Section104; 107 Lagos State Electricity Law
Section 116 Lagos State Electricity Law
Section 114 (c) Lagos State Electricity Law
Section 113 Lagos State Electricity Law.
Section 160 Lagos State Electricity Law
Section 160 (2) Lagos State Electricity Law
Sections 165 to 167 Lagos State Electricity Law
Section 168 Lagos State Electricity Law
Section 169 Lagos State Electricity Law
Orders No.: NERC/2024/1 13; and NERC/2024/110[1] Section 2(2), Electricity Act.
Section 221(2) Electricity Act.
https://thenationonlineng.net/lagos-electricity-law/amp/
Section 4 Lagos State Electricity Law
Section 96 Lagos State Electricity Law
Section 121 Lagos State Electricity Law
Section 122 Lagos State Electricity Law
Section 45 (1) Lagos State Electricity Law
Section 231(2), Electricity Act.
