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Although the Federal Government of Nigeria has recently privatised some of its interest in generation and distribution companies, companies interested in power production and supply can still participate in the sector - subject to passing the NERC’s Fit And Proper Tests as contained in its guidelines- by utilizing the Embedded Generation and the IEDN Regulations passed by the Nigerian Electrical Regulatory Commission (NERC).

Embedded Generation 
The power generated by an Embedded Generator must be evacuated through distribution networks of one of the distribution companies or an Independent Electricity Distribution Networks (IEDN). The Embedded Generator can directly agree electricity supply prices with its end users subject to the necessary charges to be paid to the distribution network for use of its network and the NERC tariff guidelines. An Embedded Generator can subsequently apply to be connected directly to the national grid and have its license amended to reflect this change. An applicant Embedded Generator must comply with the NERC Application for Licences Regulations and Licence and Operating Fees Regulations.

Independent Electricity Distribution Networks ‘IEDN’ 
An IEDN is a distribution network not directly connected to the national grid and may exist as an isolated off-grid network servicing rural or urban areas; or may be embedded within an existing distribution network. The NERC will grant license to an IEDN to operate in geographical areas where no distribution network operates or where an existing distribution network operates below the capacity needed in the area. The NERC may require an IEDN to obtain a generator and where an IEDN is embedded within an existing distribution network, the generator will be an embedded generator for that distribution network. An IEDN may also obtain licenses to provide other power supply activities like power generating, system operator, subject to market rules

Conclusion
(a) The gate is still open to investors interested in the Nigerian power sector. The NERC has passed Regulations to encourage varied levels of participation in the sector and is geared to ensure competition eventually rules the market, as revealed by existing regulations. For example the requirement that all distribution networks provide open, non-discriminate access to its network - subject to its capacity - and restrictions on one company providing multiple power supply services will mitigate against monopoly and arbitrage.

Tonbofa Ashimi

Edward Ekiyor and Co. is a Nigerian law firm that has developed expertise in the Energy and Natural Resources Sectors, Finance, Corporate and Commercial matters and in resolving disputes.

 

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