ELECTRIC POWER SECTOR REFORM ACT

ELECTRIC POWER SECTOR REFORM ACT ARRANGEMENT OF SECTIONS

PART I

Formation of Initial and Successor Companies and the transfer of assets and liabilities of the National Electric Power Authority

SECTION

1. Formation of the initial holding company No.1 of 1990.

2. Shareholding in the initial holding company.

3. Transfer of assets and liabilities of the Authority to the initial holding company.

4. Exemption from stamp duty.

5. Transfer of employees to the initial holding company and to the Commission, etc.

6. Directions to the Authority.

7. Licensing of the initial holding company.

8. Formation of successor companies.

9. Shareholdings in the successor companies.

10. Transfer of assets and liabilities of the initial holding company to the successor companies.

11. Conclusive evidence.

12. Release from liability or obligation.

13. Enforcement or continuation of any cause of action or proceedings.

14. Limitation of suit against a transferee.

15. A transfer shall not beddeeme to constitute a breach etc., of contract.

16. Provision of records etc., to a transferee.

17. Further order amending a transfer order.

18. Regulations.

19. Guarantee or surety.

20. Consideration for the transfer of assets to successor companies.

21. Transfer of employees to the designated successor companies and conditions of services of transferred employees.

22. Directions to the initial holding company.

23. Licensing of the successor companies.

24. Privatisation Act.

Part II

Development of a Competitive Electricity Market

25. pCeotmition during the pre‐privatisation stage.

26. Competition during the post‐privatisation stage.

27. Eligible customers.

28. Ministerial directives respecting competition transition charges.

29. Commission’s determinations respecting competition transition charges.

30. Public hearing respecting competition transition charges.

Part III

Establishment, functions and powers of the Nigerian Electricity Regulatory Commission

31. Establishment of the Commission.

32. Objects and functions of the Commission.

33. General policy directions.

34. Appointment of Commissioners.

35. Terms of office and conditions of service of Commissioners.

36. Conditions for appointment as Commissioner.

37. Vacation of office by Commissioner.

38. Dismissal or suspension of Commissioners.

39. Filling of vacancies in the Commission.

40. Chairman and Vice‐Chairman of the Commission.

41. Meetings and procedure of the Commission.

42. Remuneration and expenses of Commissioners.

43. Commissioners to disclose certain connections and interests.

44. No invalidity of decisions and acts of the Commission.

45. Proceedings of the Commission.

46. Decisions and orders of the Commission.

47. Commission to give notice to interested parties.

48. Commission to consult experts on technical questions.

49. Questions of law may be referred to the High Court.

50. Rehearing and Appeals.

51. Annual programmes and budgets of Commission.

52. Funds of the Commission.

53. Surplus funds of the Commission.

54. Financial year of the Commission.

55. Accounts of the Commission.

56. Audit of the Commission’s accounts.

57. Powers of auditors.

58. Execution of contracts and instruments by Commission.

59. Reports of Commission.

60. Staff of Commission.

61. Exemption from liability for Commission.

Part IV

Licences and Tariffs

62. Licensing requirement: fines and penalties.

63. General duties of licensees.

64. General licences.

65. Transmission licences.

66. System operation licence.

67. Distribution licences.

68. Trading licences.

69. Restrictions on licences.

70. An application for a licence.

71. Terms and conditions of licences.

72. Renewal of licences.

73. Amendment of licences.

74. Cancellation of licences.

75. Enforcement of licences.

76. Tariffs.

Part V

Acquisition of Land and Access Rights

77. Special provisions relating to generation, transmission and distribution companies.

78. Use of certain conduits for electricity purposes.

79. Notice of construction of railways, roads and telecommunication works and control of other works.

Part VI

Consumer Protection and Licensee Performance Standards

80. Consumer tparnodteacrtdiso.n s

81. Performance standards and codes.

Part VII

Competition and Market Power

82. Competition and market power.

Part VIII

The Power Consumer Assistance Fund

83. Establishment of the Power Consumer Assistance Fund.

84. Contribution rates for the Power Consumer Assistance Fund.

85. Contribution payments for the Power Consumer Assistance Fund.

86. Payments from the Power Consumer Assistance Fund.

87. Fine for non‐payment of money owed.

Part IX

Rural Electrification Fund

88. Establishment and purpose of the Rural Electrification Fund.

89. Contribution rates for rural electrification.

90. Contribution payments for rural electrification.

91. Establishment of criteria for geographical allocation of resources from the Rural Electrification Fund.

92. Fine for non‐payment for amount owed.

PART X

Offences

93. False declarations.

94. Offences.

PART XI

General

95. Inspectors.

96. Regulations.

97. Disclosure of confidential information and use of information acquired by inspectors, etc., for personal gain.

PART XII

Consequential and Transitional Provisions

98. Consequential and transitional provisions.

99. Repeal of L.F.N. 2004 Cap. E7 and L.F.N. 2004 Cap. N33.

PART XIII

Interpretation and Citation

100. Interpretation.

101. Citation.

ELECTRIC POWER SECTOR REFORM ACT

An Act to provide for the formation of companies to take over the functions, assets, liabilities and

staff ofttihoenaNl a Electric Power Authority, to develop competitive electricity markets, to establish

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; and to provide for matters connected with or incidental to the foregoing.

[ ]

[Commencement.] PART I

Formation of Initial and Successor Companies and the transfer of assets and liabilities of the National Electric Power Authority

1. Formation of the initial holding company No.1 of 1990

The National Council on Privatisation shall, not later than six months after the coming into force of this section of this Act, take such steps as are necessary under the Companies and Allied Matters Act to incorporate a company, limited by shares, which shall be the initial holding company for the assets

taineds liabili of the Authority.

2. Shareholding in the initial holding company

The shares of the initial holding company on its incorporation shall be held by the Ministry of Finance Incorporated and the Bureau of Public Enterprises in the name of and on behalf of the Federal Government of Nigeria.

3. Transfer of assets and liabilities of the Authority to the initial holding company

(1) The National Council on Privatisation, shall by written notice in a Gazette fix the date, (in this Act known as the “initial transfer date”), on which the assets and liabilities of the Authority as specified

cintisounbse (2) of this section shall be transferred to the initial holding company.

(2) The assets and liabilities vested in the Authority as at the initial transfer date and appearing on the audited balance sheets of the Authority, shall vest in the initial holding company.

(3) The vesting of assets and liabilities under subsection (2) of this section shall be provisional until final orders are issued by the National Council on Privatisation under this section.

(4) Within eight months from the initial transfer date, the National Council on Privatisation shall,

on the finalisation of the opening balance sheet ofeth initial holding company, issue final order either

confirming or specifying the transfer of assets and liabilities under subsection (2) and this Part applies with necessary modifications to the final order.

(5) The transfer of a liability or obligation under this section releases the Authority from the liability or obligation.

(6) All bonds, hypothecations, securities, deeds, contracts, instruments, documents and working arrangements that subsisted immediately before the initial transfer date and to which the Authority was a party shall, on and after that date, be as fully effective and enforceable against or in favour of the initial holding company as if, instead of the Authority, the initial holding company had been named therein.

(7) Any cause of action or proceeding which existed or was pending by or against the Authority immediately before the initial transfer date shall be enforced or continued, as the case may be, on and

after thattdea by or against the initial holding company in the same way that it might have been

enforced or continued by or against the Authority had this Act not been passed.

(8) No action or other proceeding shall be commenced against the initial holding company in respect of any employee, asset, liability, right or obligation that has been transferred to the initial holding company if, had there been no transfer, the time for commencing the action or other proceeding would have expired.

(9) A transfer under subsection (2) of this section shall not be deemed to‐

(i) constitute a breach, termination, repudiation or frustration of any contract, including a contract of employment or insurance;

(ii) constitute a breach of any Act, regulation or by‐law; or

(iii) constitute any event of default or force majeure;

(iv) give rise to a breach, termination, repudiation or frustration of any licence, permit or other right;

(v) give rise to any right to terminate or repudiate a contract, licence, permit or other right; and

(vi) give rise to any estoppels.

(10) Subsection (9) of this section does not apply to the contracts as may be prescribed by the regulations.

(11) Subject to subsection (10) of this section nothing in this Act and nothing done as a result of a transfer under subsection (2) of this section shall create any new cause of action in favour of‐

(a) a holder of a debt instrument that was issued by the Authority before the initial transfer date;

(b) a party to a contract with the Authority that was entered into before the initial transfer date.

(12) Any guarantee or suretyship which was given or made by the FederalvGeornment of Nigeria or any other person in respect of any debt or obligation of the Authority, and which was effective immediately before the initial transfer of the principal debt or obligation, shall remain fully effective against the guarantor or surety on and after the initial transfer date in relation to the repayment of the debt or the performance of the obligation, as the case may be, by the initial holding company to which the principal debt or obligation was transferred.

4. Exemption from stamp duty

Stamp duty shall not be chargeable under the Stamp Duties Act in respect of any transfer made or transaction entered into pursuant to this Part on which, except for the exemption granted under this section, stamp duty would have been payable and in particular, and without derogation from the foregoing, no stamp duty shall be chargeable‐

[L.F.N. 2004 Cap. S8.]

(a) during the incorporation ofttihale ini holding company and the successor companies or any

subsequent increase to their authorised share capital, prior to the transfer of a majority interest to one or more private investors;

(b) in respect of any security issued in compliance with a transfer order issued under section 10 (7);

(c) where any convertible securities were issued in compliance with a transfer order issued under section 10 (7), in respect of the exercise of the conversion rights attached to any such security; or

(d) in respect of any other transfer of rights and assets pursuant to this Part.

5. Transferloyeemsp to the initial holding company and to the Commission, etc.

(1) With effect from the initial transfer date, every person employed by the Authority immediately before that date shall be transferred to the service of either the Commission or the initial holding company, on terms not less favourable than those enjoyed by him immediately prior to his transfer.

(2) The service rendered by an employee transferred pursuant to subsection (1) of this section to the Authority shall be deemed to be service with the initial holding company for the purpose of determining employment‐related‐entitlements as specified in relevant laws of employment in Nigeria.

(3) Until such time as conditions of service are drawn un by the initial holding company or the Commission, as the case may be‐

(a) the terms and conditions of service applicable to employees of the Authority shall continue to apply to every person transferred to the initial holding company or to the Commission as if every such person were still in the service of the Authority; and

(b) the initial holding company shall continue to contribute towards a pension scheme to which the Authority was contributing in respect of persons in the employ of the Authority, prior to the initial transfer date.

6. Directions to the Authority

(1) The National Council on Privatisation may give the Board of Directors of the Authority directions in writing in order to ensure the proper transfer of the assets and liabilities of the Authority to nthiteiail holding company, and the Board of Directors shall, without delay, comply with every such direction.

(2) Without derogation from subsection (1) of this section, directions given under that subsection may provide for‐

(a) the cessation of all or any of the functions of the Authority;

(b) the termination of any contract entered into between the Authority and any person, provided that no such direction shall authorise the Authority to commit an unlawful breach of any such contract; and

(c) the production of any report and the provision of any information concerning the conduct of the Authority or the Board of Directors of the Authority or anything done by or on behalf of the Authority or the Board of Directors of the Authority.

7. Licensing of the initial holding company

On the initial transfer date, the Commission shall issue an interim licence, to the initial holding company which shall be valid for a period not exceeding eighteen months.

8. Formation of successor companies

The National Council on Privatisation shall, not later than eight months after the formation of the initial holding company under section 1 of this Act, take such steps as are necessary under the Companies and Allied Matters Act to incorporate such number of additional companies, limited by shares, as the National Council on Privatisation may deem appropriate, which shall be the successor companies for assuming the assets and liabilities of the initial holding company including, but not limited to, companies with functions relating to the generation, transmission, trading, distribution and bulk supply and resale of electricity.

9. Shareholdings in the successor companies

All the respective shares of each of the successor companies from the dates of their incorporation shall be held jointly in the name of the Ministry of Finance Incorporated and the Bureau of Public Enterprises for and on behalf of the Federal Government of Nigeria.

10. Transfer of assets and liabilities of the initial holding company to the successor companies

(1) The National Council on Privatisation shall, not later than one year from the initial transfer date, by an order, require the initial holding company to transfer employees, assets, liabilities, rights and obligations of the initial holding company to a successor company, as specified in the order.

(2) A transfer order shall be binding on the initial holding company, the transferee and all other persons.

(3) Subsection (2) of this section applies despite any general or special Act or any rule of law, including an Act or rule of law that requires notice or registration of transfers.

(4) A transfer order shall not require the consent of the initial holding company or the successor company, provided that consent of the transferee shall be required if the transferee is a person other than a successor company incorporated by the National Council on Privatisation under section 8.

(5) Antsrafer order may specify and describe, employees, assets, liabilities, rights or obligations to be transferred‐

(a) by reference to specify employees, assets, liabilities, rights or obligations;

(b) by reference to any class of employees, assets, liabilities, rights or obligations; or

(c) partly in accordance with subsection (5) (a) ofctthioisnse subsection (5) (b) of this section.

and partly in accordance with

(6) With effect from the date specified in the relevant transfer order, all bonds, hypothecations, securities, deeds, contracts, instruments, documents and working arrangements that subsisted immediately before the subsequent transfer date and to which the initial holding company was a party shall, on and after that date, be as fully effective and enforceable against or in favour of the designated successor company as if, instead of the initial holding company, the designated successor company had been named therein.

(7) A transfer order may‐

(a) require theningitial holdi company or the transferee to pay for anything transferred by

or pursuant to the order and may specify to whom the payment shall be made;

(b) fix the amount of the payment; specify a method for determining the amount of the payment; or provide that the amount of the payment be determined by the National Council on Privatisation or a person designated by the National Council on Privatisation;

(c) require that the payment be made in cash, by set off, through the issuance of securities or in any other form specified by the order;

(d) fix the value of anything transferred by or pursuant to the order;

(e) specify a method consistent with international accounting practices for determining the value of anything transferred by or pursuant to the order;

(f) provide that the value of anything transferred by or pursuant to the order be determined by the National Council on Privatisation or a person designated by the National Council on Privatisation in a manner consistent with international accounting practices; provided that the value specified in the transfer order ought to have been calculated in accordance with international accounting practices;

(g) specify the date that a transfer takes effect and any interest in property that is transferred by the order vests in the transferee on that date;

(h) provide that a transfer shall not take effect until payment has been made for anything transferred by or pursuant to the order;

(i) provide that a transfer shall be deemed to have taken effect on a date earlier than the date the transfer order is made, but the effective date shall not be earlier than the day on which the relevant successor company was formed;

(j) provide that transfers specified in the order and other transactions associated with the transfers shall be deemed to have occurred in a sequence and at times specified in the order;

) (k

require the initial holding company or a transferee‐

(i) to enter into any written agreement or execute any instrument specified in the order; and

(ii) to register in accordance with the order any agreement or instrument entered into or executed under subsection (7) (k) (i);

(l) providettha any liability or obligation that is transferred by the order may be

enforced against the initial holding company, the transferee, or both of them; and that any right that is transferred by the order may be enforced by the initial holding company, the transferee, or both of them; or

(m) impose conditions on the exercise of powers by the transferee that are related to employees, assets, liabilities, rights or obligations transferred by the transfer order, including a condition that the powers be exercised only with the approval of the Commission.

(8) A transfer order may containopnrsovisi dealing with other matters not specifically referred

to in this Part that the National Council on Privatisation considers necessary or advisable in connection with a transfer.

11. Conclusive evidence

(1) A statement, in a registered document to which a successor company is a party, that land

described in thendtocume was transferred to the person from the initial holding company by or

pursuant to a transfer order, and any other statement in the document relating to the transfer order, shall be deemed to be conclusive evidence of the facts stated.

(2) Nothing in subsection (1) of this section creates, for any person, an interest in land that the initial holding company did not have.

12. Release from liability or obligation

Subject to section 10 (7) (I), the transfer of a liability or obligation under this Part releases the initial holding company from the liability or obligation.

13. Enforcement or continuation of any cause of action or proceedings

Subject to section 10 (7) (I), any cause of action or proceeding which existed or was pending by or against the initial holding company immediately before the subsequent transfer date shall be enforced or continued, as the case may be, on or after the subsequent transfer date by or against the designated successor company in the same way that it might have been enforced or continued by or against the initial holding company.

14. Limitation of suit against a transferee

An action or other proceeding shall not be commenced against a transferee in respect of any employee, asset, liability, right or obligation that had been transferred tontshfeerterae if, had there been no transfer, the time for commencing the action or other proceeding would have expired.

15. A transfer shall not be deemed to constitute a breach etc., of contract

(1) A transfer by or pursuant to a transfer order shall not be deemed to‐

(a) constitute a breach, termination, repudiation or frustration of any contract, including a contract of employment or insurance;

(b) constitute a breach of any Act, regulation or by‐law;

(c) constitute any event of default or force majeure;

(d) give rise to a breach, termination, repudiation or frustration of any licence, permit or other right;

(e) give rise to any right to terminate or repudiate a contract, licence, permit or other right; or

(f) give rise to any estoppels.

(2) Subsection (1) of this section does not apply to such contracts as may be prescribed by the regulations.

(3) Subject to subsection (2) of this section, nothing in this Act and nothing done by or pursuant to a transfer order creates any new cause of action in favour of‐

(a) a holder of a debt instrument that was issued by the initial holding company (or deemed to have been issued by it) before the date of its transfer as specified in the relevant transfer order;

(b) a party to a contract with the initial holding company (or deemed to have been issued by it under section 4 (5) that was entered into before the date of its transfer as specified in the relevant transfer order.

16. Provision of records etc., to a transferee

The initial holding company shall provide a transferee with all records or copies of records, that are in its custody or control and that relate to an officer, employee, asset, liability, right orboligation that is transferred by or pursuant to a transfer order, including personal information.

17. Further order amending a transfer order

The National Council on Privatisation may, at any time within one year after making a transfer

order, make a further order amending the transfer order in any way thateth National Council on

Privatisation considers necessary or advisable, including such order or orders as may be necessary to rectify the transfer of any of the employees, assets, liabilities, rights and obligations pursuant to a verification or an audit of employees, assets and liabilities of the initial holding company as at the date of the relevant transfer order, and this Part applies with necessary modifications to the amendment.

18. Regulations

(1) The National Council on Privatisation may make regulations‐

(a) supplementing the provisions of this Part and governing the transfer of, employees, assets, liabilities, rights, and obligations under this Part;

(b) prescribing contracts or classes of contracts to which section 15 (1) does not apply, subject to such conditions or restrictions as may be prescribed by the regulations.

(2) A regulation made under this section may be general or particular in its application.

19. Guarantee or surety

Any guarantee or suretyship which was given or made (or is deemed to be given or made under section 3 (12) by the Federal Government of Nigeria or any other person in respect of any debt or obligation of the initial holding company, and which was effective immediately before the subsequent transfer of the principal debt or obligation, shall remain fully effective against the guarantor or surety on or after the subsequent transfer date in relation to the repayment of the debt or the performance of the obligation, as the case may be, by the designated successor company to which thenpcriipal debt or obligation was transferred.

20. Consideration for the transfer of assets to successor companies

The consideration for the transfer of assets of the initial holding company to a designated successor company shall be as set out in a transfer order issued under section 10 (7).

21. Transfer ofleomyepes to the designated successor companies and conditions of services of

(1) Every person employed by the initial holding company immediately before the date specified in the relevant transfer order pursuant to which he is transferred shall be transferred to the service of a designated successor company, on terms not less favourable than those enjoyed by him immediately prior to the transfer.

(2) The service rendered by an employee transferred pursuant to a transfer order shall be the service with the designated successor company for the purpose of determining employment‐related‐

entitlements as specified by relevant laws ofmemenptloy in Nigeria.

(3) Until such time as conditions of service are drawn up by the designated successor company‐

(a) the terms and conditions of service applicable to employees of the initial holding company shall continue to apply to every person transferred to the designated successor company as rifyeve company; and such person were still in the service of the initial holding

(b) an employee may be permitted to continue to contribute towards a pension he was contributing to when he was in the employ of the initial holding company; and

(c) the designated successor companynsuheall conti to contribute towards a pension

scheme to which the initial holding company was contributing in respect of employees in the employ of the initial holding company, prior to the date of transfer.

22. Directions to the initial holding company

(1) The National Council on Privatisation may give the Board of Directors of the initial holding company directions in writing in order to ensure the proper transfer of the assets and liabilities of the initial holding company to the designed successor companies or other transferees, and the Board of Directors shall, without delay, comply with every such direction.

(2) Without derogation from subsection (1), directions given under that subsection may provide

for‐

(a) the cessation of any or all functions of the initial holding company and its voluntary liquidation;

(b) the termination oftarancytcon entered into between the initial holding company and any

person, provided that no such direction shall authorise the initial holding company to commit an unlawful breach of any such contract; and

(c) the production of any report and the provision of any information concerning the conduct of the initial holding company or the Board of Directors of the initial holding company or anything done by or on behalf of the initial holding company of the Board of Directors of the initial holding company.

23. Licensing of the successor companies

(1) On the transfer date specified ineth relevant transfer order, the Commission shall issue an

appropriate interim licence, to each successor company, which shall be valid for a period not exceeding one year.

(2) A successor company that has received an interim licence under subsection (1) shall, within six months thereafter, apply to the Commission forcaenrecgeular li Part IV of this Act.

24. Privatisation Act

(1) The National Council on Privatisation may, at any time and by such means as it deems appropriate, begin the process of privatisation of the successor companies that are holders of generation licences, distribution licences or a transmission licence, in accordance with the provisions of the Public Enterprises (Privatisation and Commercialisation) Act, No. 28 of 1999.

[L.F.N. 2004 Cap. P38.]

(2) Until such time the Minister has made a declaration in accordance with subsection (3) of this section, the Commission shall prepare, each year, a report for the Minister as to the potential for competition in the Nigerian electricity supply industry and these reports shall present the Commission’s analysis and recommendations as to whether the Nigerian electricity supply industry has developed to the point where a more competitive market ought to be established under section 26, having regard to‐

(a) the degree of privatisation that has occurred;

(b) the existence of a sufficiently large number of potentially competitive entities, so as to avoid the likelihood of an abusive market power; and

(c) the existence of other preconditions, including the necessary metering and information technology infrastructures, required for the operation of a more competitive electricity market.

(3) The Minister shall present to the President and the National Council on Privatisation and National Assembly, each report submitted by the Commission under subsection (2) of this section and when the Minister, in consultation with the President and the National Council on Privatisation is satisfied that the electricity market in Nigeria has developed to the point where a more competitive market ought stotabbelisehed pursuant to section 26 of this Act, having regard to the criteria described in subsections (a), (b), and (c) of subsection (2) of this section, and the Minister shall issue a declaration that a more competitive electricity market is to be initiated.

PART II

Development of a Competitive Electricity Market

25. Competition during the pre‐privatisation stage

Immediately following the issuance of interim licences to the successor companies in accordance with section 23, and prior to the declaration by the Minister, under section 24 (3), that a more competitive market is to be initiated‐

(a) the trading licensee holding a bulk purchase and resale licence under section 67 (2), or an interim licence for this purpose, and to which the function of bulk procurement and bulk sale of power and ancillary services has been transferred pursuant to Part I of this Act, shall engage in the purchase and resale of electrical power and ancillary services from independent power producers and from the successor generation companies, in accordance with its licence;

(b) the successor company that has been issued both a transmission licence and a system operation

licence pursuant to section 65 (2), or an interim licenceefsoer th purposes, shall engage in the

transmission of electricity and in system operation, including the procurement of ancillary services, in accordance with its licence;

(c) successor generation companies shall, in accordance with their licences, sell electrical power to the trading licensee described in subsection (a), distribution companies and eligible customers, pursuant to the terms of any contracts formed with such distribution companies and eligible customers;

(d) successor generation companies shall, in accordance with ctheenicrelsi , sell ancillary services to the trading licensee described in subsection (a) or the successor company identified in subsection (b), pursuant to contracts that allow for the novation of the rights and obligations of the successor company identified in subsection (b) to an independent system operator in event of a transfer of the obligation of system operation by the successor company to an independent system operator under section 26 (7);

(e) independent power producers shall, in accordance with their licences, sell electrical power to either‐

(i) the trading licensee described in subsection (a) pursuant to contracts that allow for the novation of the rights and obligations of the trading licensee described in subsection (a) to one more other licensees, as specified in the contract, following the declaration of a substantially privatised market under section 24; or

(ii) distribution companies and eligible customers, pursuant to the terms of any contracts formed with such distribution companies and eligible customers;

(f) independent power producers shall, in accordance with their licences, sell ancillary services to either‐

(i) the trading licensee described in subsection (a), pursuant to contracts that allow for the

novation of the rights and obligations ofntghe tradi licensee described in subsection (a)

to one or more other licensees, as specified in the contract, following the declaration of a substantially privati sed market under section 24; or

(ii) the successor company identified in subsection (b), pursuant to contracts that allow for

the novation of gthhetsri and obligations of the successor company identified in

subsection (b) to an independent system operator in the event of a transfer of the obligation of system operation by the successor company to an independent system operator under section 26 (7).

26. Competition during the post‐privatisation stage

(1) Immediately following the declaration by the Minister, under section 24 (3), that more competitive market is to be initiated‐

(a) the trading licensee described in section 25 (a) shall not enter into any further contracts for the purchase of electrical power or ancillary services and it shall, in accordance with its licence, begin the process of novating its existing rights and obligations to purchase electrical power and ancillary services to other licensees;

(b) successor generation companies shall, in accordance with their licences, sell electrical power to distribution companies and eligible customers, under the terms of any contracts existing prior to the declaration by the Minister, pursuant to section 24 (3), or under the terms of any cntesw contra customers; with distribution companies and eligible

(c) successor generation companies shall, in accordance with their licenses, sell ancillary services either to‐

(i) the successor company identified in section 25 (b), under the terms of the contracts entered into prior to the declaration by the Minister, under section 24 (3), until such contracts are novated to an independent system operator, or under the terms of any new contracts with such successor company; provided that such contract should allow for novation to the independent system operator in the same manner as specified in section 25 (d); or

(ii) the independent system operator, once it has been established under section 25 (d);

(d) independent power producers shall, in accordance with their licences, sell electrical power ‐

(i) to the trading licensee described in section 25 (a), under the terms of the contracts formed with that trading licensee prior to a declaration by the Minister, under section 24 (3), until such contracts are novated to distribution companies or eligible customers; and, following such novations;

(ii) to distribution companies and eligible customers under the terms of any contracts formed with such distribution companies and eligible customers;

(e) independent power producers shall, in accordance with their licences, sell ancillary services‐

(i) to the trading licensee described in section 25 (a), under the terms of the contracts formed with that trading licensee prior to the declaration by the Minister under section 24 (3), until such contracts are novated to distribution companies or eligible customers; and, following such novations;

(ii) to the successor company identified in section 25 (b), under the terms of the contracts entered into prior to the declaration by the Minister under section 24

(3), until such contracts are novated to an independent system operator, or under the terms of any new contracts with such successor company; provided that such contracts should allow for novation to the independent system operator in the same manner as specified in section 25 (d); or

(iii) nthdeepi endent system operator, once it has been established under subsection (7) of this section;

(f) the successor company identified in subsection (1) (b) of this section shall, in accordance with its licence, purchase ancillary services pursuant to the terms of the contracts for

ancillary services that it hasdentere into with successor generating companies and with

the trading licensee described in subsection (1) (a) of this section and with independent power producers prior to the declaration under section 24 and it may also purchase

ancillary services under the terms of contracts novated to it under section 25)(,d) (i until

all such contracts are novated to an independent system operator established pursuant to subsection (7) of this section;

(g) distribution licensees shall purchase electrical power in accordance with their obligations to purchase under subsection (1) (b) and (d) of this section and pursuant to

thoseoonbsligati that have been novated to them under subsection (1) (a) of this

section, and may also purchase other supplies of power from generation licensees and trading licensees, all in accordance with the terms of their respective distribution licences; and

(h) eligible customers shall purchase power in accordance bwlighattihoenisr o to

purchase under subsection (1) (b) and (d) of this section and pursuant to those obligations that have been novated to them under subsection (1) (a) of this section, and may also purchase other supplies and powers from generation licensees or from trading licensees.

(2) The Minster shall recommend to the President for approval of market rules, to be developed by the system operator‐

(a) for the operation of the national grid by the system operator; and

(b) for the establishment and governance of markets related to electricity and ancillary

(3) In respect of markets for electricity and ancillary services, the market rules may include provisions‐

(a) governing the making and publication of market rules;

(b) settlement of payments among different participants;

(c) authorising and governing the making of orders by the system operator, including orders‐

(i) imposing financial penalties on market participants;

(ii) authorising a person to participate in the markets; or

(iii) terminating, suspending or restricting a person’s rights to participate in the markets; and

(d) concerning the administration and enforcement of the market rules, including provisions for market rule amendments, dispute resolutions, penalties and market surveillance.

(4) A market rule may be general or particular in its application.

(5) The system operator shall publish the market rules in accordance with the publication

provisions within theemt ark rules and shall make the market rules available for public inspection during

normal business hours at the offices of the system operator.

(6) Amendments to the market rules shall be developed by the system operator in accordance with the amendment provisions in the market rules; provided that all amendments shall be approved by the Commission before they come into force and provided that the system operator shall, in accordance with the market rules, publish any proposed amendment to the market rules at least 22 days before the proposed amendment comes into force.

(7) At any time following the declaration of a substantially privati sed market under section 24, the successor company identified in section 25 (b) may transfer the function of system operation to an independent system operator on such terms and conditions as the Commission may direct and on such

transfer, the independent system operator shall be subject eto th same powers and duties as have been

imposed on the transferring successor company under this Act in relation the system operation.

27. Eligible customers

The Minister may issue a directive to the Commission specifying the class or classes of end‐use customers that, from time to time, shall constitute eligible customers under this Act.

28. Ministerial directives respecting competition transition charges

If the Minister determines, following consultation with the President, that a directive given under section 27 will result in decreasing electricity prices to such an extent that a trading licensee or a distribution licensee would have inadequate revenue to enable payment for its committed expenditures or is unable to earn permitted rates of return on its assets, despite its efficient management, the

Minister may issue further directives to the Commission on the collection of a competition transition charges from consumers and eligible customers, the distribution of the funds collected to the trading licensee described in section 25 (a) and to distribution licensees, and the duration of the competition transition charge.

29. Commission’s determinations respecting competition transition charges

The Commission shall establish the amount of the competition transition charge and the arrangements for the collection and distribution of the competition transition charge, all in accordance with the Minister’s directive or directives issued under section 28.

30. Public hearing respecting competition transition charges

Prior to the making of the determinations set out in section 29, the Commission shall hold a public hearing to obtain the view of any interested parties.

PART III

Establishment, functions and powers of the Nigerian Electricity Regulatory Commission

31. Establishment of the Commission

(1) There is hereby established a commissionotwo nbe kn as the Nigerian Electricity Regulatory

Commission, which shall be a body corporate with perpetual succession which can sue or be sued in its corporate name and subject to this Act, perform all acts that bodies corporate may by law perform.

(2) The headquarters of the Commission shall be at Abuja.

32. Objects and functions of the Commission

(1) Subject to this Act, the Commission shall have the following principal objects‐

(a) to create, promote, and preserve efficient industry and market structures, and to ensure the optimal utilisation of resources for the provision of electricity services;

(b) to maximise access to electricity services, by promoting and facilitating consumer connections to distribution systems in both rural and urban areas;

(c) to ensure that an adequate supply of electricity is available to consumers;

(d) to ensure that the prices charged by licensees are fair to consumers and fairceiesnutf to allow the licensees to finance their activities and to allow for reasonable earnings for efficient operation;

(e) to ensure the safety, security, reliability, and quality of service in the production and delivery of electricity to consumers;

(f) to ensure that regulation is fair and balanced for licensees, consumers, investors, and other stakeholders; and

(g) activities. to present quarterly reports to the President and National Assembly on its activities.

(2) For the furtherance of the objects referred to in subsection (1) of this section, the Commission shall perform the following functions‐

(a) promote competition and private sector participation, when and where feasible;

(b) establish or, as the case may be, approve appropriate operating codes and safety, security, reliability, and quality standards;

(c) establish appropriate consumer rights and obligations regarding the provision and use of electric services;

(d) license and regulate persons engaged in the generation, transmission, system operation, distribution, and trading of electricity;

(e) approve amendments to the market rules;

(f) monitor the operation of the electricity market; and

(g) undertake such other activities which are necessary or convenient for the better carrying out of or giving effect to the objects of the Commission.

3) In the discharge of its functions, the Commission shall consult, from time to time, and to the extent the Commission considers appropriate, such persons or groups of persons who mayor are likely to be effected by the decisions or orders of the Commission including, but not limited to licensees, consumers, potential investors, and other interested parties.

33. General policy directions

The Minister may issue generaltpioonliscy direc to the Commission on matters concerning

electricity, including directions on overall system planning and co‐ordination, which the Commission shall take into consideration in discharging its functions under section 32 (2): provided that such directions are not in conflict with this Act or the Constitution of the Federal Republic of Nigeria.

34. Appointment of Commissioners

(1) Subject to subsections (2) and (3) of this section, the Commission shall consist of seven full time Commissioners appointed by the President subject to confirmation by the Senate.

(2) In selecting potential nominees, the President shall ensure that individuals are chosen, from both the public and private sectors, forptehreiiernecxe or professional qualifications in the following fields or areas of competence‐

(a) generation, transmission, system operation, distribution or marketing of electricity; and

(b) law, accountancy, economics, finance or administration.

(3) The seven Commissioners shall be appointed to reflect one Commissioner per geo‐political zone and a chairman from any zone.

35. Terms of office and conditions of service of Commissioners

(1) Subject to this Part, a Commissioner shall hold office for a period of five years; provided that, to ensure continuity in the Commission, the period of appointment of the first seven Commissioners shall be as follows‐

(a) the Chairman shall be appointed for five years;

(b) the Vice‐Chairman and other Commissioners shall be appointed for four years.

(2) A Commissioner shall not continue in office after the expiry of his term.

(3) Subject to section 36, a Commissioner shall hold office on such terms and conditions as the President may fix in relation to Commissioners generally.

(4) A Commissioner whose term of office has expired is eligible for reappointment for another term and no more.

(5) All appointments or reappointments of Commissioners shall be made before expiry of their term of office incacordance with section 34 of this Act.

36. Conditions for appointment as Commissioner

(1) A person shall not be appointed as a Commissioner who‐

(a) is neither a citizen of Nigeria nor permanently resident in Nigeria; or

(b) has a financial interest in any business connected, either directly or indirectly, with generation, transmission, system operation, distribution or trading of electricity in Nigeria, or is engaged in any activity (whether for remuneration or otherwise)

connected with any such service or system, or is a relative of a person who has such an interest or is engaged in such an activity, unless the President is satisfied that the interest or activity is in effect passive and will not interfere with the person’s impartial discharge of histdieus as a Commissioner, or unless the financial interest is terminated prior to the appointment taking effect; or

(c) has, in terms of a law in force in any country‐

(i) been adjudged or otherwise declared insolvent or bankrupt and has not been rehabilitated or discharged; or

(ii) made an assignment to, or arrangement or composition with, his creditors which has not been rescinded or set aside; or

(d) has, in terms of a law in force in any country‐

(i) been adjudged, by a court of competent jurisdiction, to be of unsound mind;

(ii) been banned from practicing his profession; or

(iii) been convicted of an offence and sentenced to a term of imprisonment imposed with or without the option of a fine, whether or not any portion has been suspended, and has not received a free pardon.

(2) A person who holds the office of Commissioner, and for a period of two years after he ceases to be a Commissioner for any reason whatsoever, shall not acquire, hold or maintain, directly or indirectly, any interest, office, employment or consultancy arrangements, either for remuneration or otherwise, connected with the generation, transmission, system operation, distribution or trading of electricity in Nigeria or any activity connected with any such service or system and if such person acquires any such interest involuntarily or by way of succession or testamentary disposition, he shall divest himself from such interest within a period of three months of such interest being acquired.

37. Vacation of office by Commissioner

A Commissioner shall vacate his office and his office shall become vacant‐

(a) three months after the date upon which he gives notice in writing to the President of his intention to resign;

(b) on the date he is convicted‐

(i) in Nigeria, in respect of an offence; or

(ii) outside Nigeria, in respect of an offence involving financial impropriety or any conduct which, if committed in Nigeria, would constitute an offence; or

(c) if he becomes disqualified under sections 36 (1) (a), (b), (c) or (d), to hold office as a Commissioner; or

(d) if he is required under section 38 to vacate his office; or

(e) when he attains the age of 70 years, whichever is earlier.

38. Dismissal or suspension of Commissioners

(1) The President shall require a Commissioner to vacate his office if the Commissioner‐

(a) has, subject to section 36 (2), been found to have conducted himself in a manner that renders him unsuitable as a Commissioner, including a contravention of section 43 or section 57 (2); or

(b) has failed to comply with any term or condition of his office fixed by the President under section 35 (3); or

(c) is mentally or physically incapable of efficiently carry out his functions as a Commissioner; or

(d) the Commissioner is convicted of an offence in respect of which a sentence of imprisonment without the option of a fine has been imposed, whether in Nigeria or outside.

(2) A Commissioner shall not be removed unless the request pispsourted by a simple majority vote of the Senate.

39. Filling of vacancies in the Commission

Subject to section 40 (6), on the death of, or vacation of office by, a Commissioner, the President shall nominate a candidate to fill that vacancy, and submit that nomination to the Senate, within one month, in accordance with section 34.

40. Chairman and Vice‐Chairman of the Commission

(1) The President shall designate one of the Commissioners as Chairman who shall be the Chief Executive and Accounting Officer of the Commission and another Commissioner as Vice‐Chairman.

(2) A Commissioner whose term of office has expired is eligible for reappointment for another term and no more.

(3) The Vice‐Chairman shall retain his position as Vice‐Chairman until his term of office as a Commissioner is expired.

(4) The Vice‐Chairman shall perform the Chairman’s functions whenever the Chairman is for any reason unable to perform them.

(5) The Chairman or Vice‐Chairman may at any time resign his office as such by one month’s notice in writing to the President.

(6) Whenever the office of Chairman or Vice‐Chairman falls vacant, or on the death of the Chairman or Vice‐Chairman, the President shall, within three weeks, select another Commissioner to fill the vacancy under section 39.

41. Meetingsdan procedure of the Commission

(1) The Commission shall meet for the dispatch of business as often as is necessary or expedient and, subject to this section, may adjourn, close and otherwise regulate its meetings and procedure as it thinks fit.

(2) The Chairman or, in his absence, the Vice‐Chairman shall preside at all meetings of the Commission.

(3) All decisions of the Commission shall be on the basis of majority of the members present and

voting.

(4) The quorum for the meeting of the Commission shall be four and subject to section 43, at all meetings of the Commission each Commissioner present shall have one vote on each question before the Commission and, in the event of an equality of votes, the Chairman shall have a casting vote.

(5) For a meeting of the Commission to review any previous decision or order taken by the Commission, the quorum shallsbe no les or order was made. than the Commissioners present when the decision was taken

(6) Without derogation from subsection (1) of this section, the Commission may conduct its business by means of written resolutions signed by all the Commissioners; provided that, if any Commissioner requires that a matter be placed before all the Commissioners for discussion, this subsection shall not apply to such matter.

42. Remuneration and expenses of Commissioners

(1) Commissioners shall be paid from the funds of the Commission‐

(a) such remuneration, if any, as the Commission may from time to time determine, having regard to the recommendations of the National Salaries, Incomes and Wages Commission; and

(b) such allowances, if any, as the Commission, may from time to time determine, having regard to the recommendations of the National Salaries, Incomes and Wages Commission, to meet any reasonable expenses incurred by such Commissioners in connection with the business of the Commission.

(2) While making recommendations, the National Salaries, Incomes and Wages Commission shall have due regard to the following principles‐

(a) the specialised nature of work to be performed by the Commission;

(b) the need to ensure the financial self‐sufficiency of the Commissioners;

(c) the salaries paid in the private sector to individuals with equivalent responsibilities, expertise and skills; and

(d) the nature of the expenses incurred by the Commissioners, including national and international travel expenses.

43. Commissioners to disclose certain connections and interests

(1) If a Commissioner‐

(a) acquires or holds a direct or indirect pecuniary interest in any matter that is under consideration by the Commission;

(b) owns any property or has a right in property or a direct or indirect pecuniary interest in a company or association of persons which results in the Commissioner’s private interests coming or appearing to come into conflict with his functions as a Commissioner;

(c) knows or has reason to believe that a relative ofotmhemCissioner ‐

(i) has acquired or holds a direct or indirect pecuniary interest in any matter that is under consideration by the Commission; or

(ii) owns any property or has a right in property or a direct or indirect pecuniary interest in a company or association of persons which results in the Commissioner’s private interests coming or appearing to come into conflict with his functions as a Commissioner; or

(d) if for any reason the private interests of a Commissioner come into conflict with his functions as a Commissioner, the Commissioner shall forthwith disclose the fact to the Commission.

(2) A Commissioner referred to in subsection (1) of this section shall take no part in the consideration or discussion of, or vote on, any question before the Commission which relates to any contract, right, immovable property or interest referred to in that subsection.

(3) A Commissioner shall, prior to accepting his appointment to the Commission, make a declaration of assets in accordance with paragraph 11 of the Fifth Schedule to the Constitution of the

Federal Republicao,f Nigeri 1999 and shall terminate all other engagements for gain, including

appointment to any office in the Public Service.

(4) A Commissioner who contravenes subsection (1), (2) or (3) of this section commits an offence and is liable on conviction to a fine not exceeding fifty thousand naira or imprisonment for a period not exceeding three months or to both such fine and imprisonment.

44. No invalidity of decisions and acts of the Commission

(1) No decision or act of the Commission or act done under the direction of the Commission shall be invalid on the ground that there existed‐

(a) a vacancy or vacancies among the Commissioners; or

(b) some defect in the constitution of the Commission at the time the decision was taken or act was done or authorised.

(2) If a Commissioner referred to in section 43 takes part in the consideration of a matter in which his private interests are in conflict with his functions as Commissioner, the other Commissioners may subsequently ratify any such decision or action.

45. Proceedings of the Commission

(1) The Commission shall be entitled to conduct its proceedings, consultations and hearings at its headquarters or at any other place in Nigeria.

(2) The Commission shall make regulations for the discharge of its functions and for the conduct of its proceedings, consultations and hearings, including procedures for the participation of licensees, consumers, eligible customers and other persons.

46. Decisions and orders of the Commission

(1) The Chairman shall ensure that all Commission decisions and orders‐

(a) contain the basis for the decision or order;

(b) are properly recorded in writing; and

(c) are accessible to the public at reasonable times and places.

(2) The Commission shall issue written reasons in respect of any decisions or orders affecting the

existing rights of any person, eif th affected person requests such written reasons.

(3) The Commission may issue written reasons in respect of any other decision or order as the Commission deems necessary.

(4) Every recommendation, declaration, decision or order of the Commission, if purporting to be signed by a person describing himself as the Chairman of the Commission, or by a person describing himself as the Vice‐Chairman acting in the capacity of the Chairman, shall, unless the contrary is shown, be deemed to be made by the Commission and to have been so signed and may be proved by the production of a copy thereof purporting to have been so signed.

(5) The Commission may make interim orders pending the final disposition of a matter before it.

47. Commission to give notice to interested parties

(1) The Commission may hold a hearing of any matter, which under this Act or any other enactment is required or permitted to conduct or on which it is required or permitted to take any action and the Commission shall hold public hearing on matters which the Commission determine to be of significant interest to the general public.

(2) Where the Commission is required to, or otherwise decides to, holdnagh, eari all persons

having an interest in such matter shall, as far as reasonably practicable, be notified of the questions at issue and given opportunities of making representations if they so wish.

48. Commission to consult experts on technical questions

When any matter arises which entails the consideration of any professional or technical question, the Commission may consult such persons as may be qualified to advise thereon.

49. Questions of law may be referred to the High Court

(1) If any question of law arises from an order or decision of the Commission, the Commission may, on its own initiative or at the request of any person directly affected by such order, reserve that question for the decision of the High Court.

(2) Where a question has been reserved under subsection (1) of this section, the Commission shall state the question in the form of a special case and file it with the Registrar of the High Court.

50. Rehearing and Appeals

(1) Subject to this section, any person who is aggrieved by‐

(a) a decision of the Commission not to issue a licence;

(b) any term or condition of a licence issued to him, or a refusal by the Commission to specify a term or condition in a licence;

(c) a refusal by the Commission to renew a licence;

(d) any amendment of a licence or a refusal by the Commission to amend a licence;

(e) the cancellation of a licence;

(f) the grant or refusal by the Commission to grant any approval or authority in terms

(g) the outcome of any arbitration or mediation by the Commission of a dispute between licensees;

(h) a decision of the Commission with respect of prices or tariffs;

(i) any other decision of the Commission,

may apply to the Commission for review of the decision, order or refusal.

(2) The Commission may, reconsider, vary or rescind its decisions before issuing a final decision, in accordance with such procedures as the Commission may establish; provided that such review or reconsideration shall be completed within sixty days of the date it is requested.

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