Electricity Act and Non-Compliance by Utility Companies

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Legal Informer: Electricity Act and Non-Compliance by Utility Companies

Electricity utility companies are companies in the electricity power industry that deal in electricity generation and distribution of electricity for sale generally in a regulated market.

On 24 August 2023, the Nigerian Electricity Regulatory Commission (NERC) through its Commissioner for Legal, Licencing and Compliance at the first Compliance Peer Review Session stated that the non-compliance of the utility companies with the Orders and Acts of the NERC exposes utility companies to penalties of not less than Twenty Million Naira daily. The Electricity Act 2023 provides that the NERC have the power to regulate persons engaged in the generation, transmission, system operation, distribution, supply, and trading of electricity amongst other powers.

In addition to the above, the Electricity Act introduces a range of significant revisions aimed at enhancing the electricity sector. One of the primary focal points of this legislation involves transitioning from a cost￾centric regulatory methodology to one centred around performance.
This alteration creates incentives for electricity generation and distribution enterprises to elevate their service standards, curtail losses, and optimize their overall operational efficiency. By harmonizing profits with performance, this novel approach stimulates utilities to channel investments into infrastructure, culminating in heightened levels of customer contentment.
Within the new legal framework, proficient licensees are allowed to recuperate the entire spectrum of costs linked to their business activities. This guarantees equitable remuneration for adeptly managed corporations and imparts economically logical cues to consumers concerning the expenses tied to their energy consumption. Furthermore, this approach aspires to eradicate any unjust differentiations among diverse consumer segments, nurturing a more impartial energy
market. During a specific timeframe stipulated by the Nigerian Electricity Regulatory Commission, there exists a strategy to gradually phase out or notably diminish cross-subsidies, further advancing a well-rounded and sustainable energy landscape.

Moreover, the act underscores the significance of precise metering. By the directives established by NERC, no licensee is permitted to furnish electricity services beyond the NERC-set expiration date without the appropriate installation of a fitting meter. This measure guarantees transparency, responsibility, and equitable billing procedures, benefiting utility enterprises and consumers.
The 2023 Electricity Act introduces a comprehensive structure that tackles diverse facets of the electricity sector. From incentivizing performancebased regulation to fostering the integration of renewable energy and ensuring accurate metering, the act strives to establish a more efficient,
open, and consumer-centric electricity market in Nigeria.

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