Nigeria’s new Mini Grid Regulation

An overview of the Nigerian Electricity Regulatory Commission’s “NERC” Mini Grid Regulations initiative.

This was published by Edward Ekiyor & Co., Nigeria, who have agreed to Simmons & Simmons making it available on elexica.

In response to the loss of energy that results when Nigeria’s private Distribution Companies “Discos” fail to receive energy transmitted by the Government owned Transmission Company, the Nigerian Electricity Regulatory Commission “NERC” has come up with Mini Grid Regulations providing for private individuals to register as Mini Grid Developers or Operators to distribute energy generated by the Mini Grid directly to Community Consumers.

The Regulation defines a Mini-Grid as any isolated or interconnected Mini-Grid with its own generation capacity of between 0kw and 1MW that supplies electricity to more than one customer within or outside a Distribution Network. The Mini Grid Developer/Operator either enters into agreements with the proposed consuming Community alone or tripartite contracts that involve the Disco, since Discos have licenses that give them rights over electricity distribution spanning mapped out geographical areas.

Upon an application, the Mini Grid Developer may be granted a Mini Grid Permit that subjects him to mandatory obligations. He may however decide to operate as a registered Mini Grid Operator and restrict his energy generation to a cap of 100kw. The interested Mini Grid Developer/Operator can enter into initial exclusivity agreements with the Community consumers in his interested geographical area and the Discos to enable him conduct feasibility studies and decide on the Mini Grid project. This preliminary exclusivity agreement and subsequent definitive agreements are subject to NERC’s approval.

An issue that may arise in the Mini Grid project is getting remedy for breach of agreements by the consuming Community. The Regulation provides that the Community will be liable to damages to the Mini Grid Developer/Operator; enforcing this liability may be a challenge for the Mini Grid Developer. Another issue lies in the Discos' right over the area spanning the Mini Grid’s coverage, especially in instances where the Mini Grid agrees solely and directly with the consuming Community. The Disco may decide to implement its expansion plan into the Mini Grid designated area. Although the Regulation provides for the Disco to compensate the Mini Grid Developer, the determination of damages suffered may result in a dispute that may disrupt the Mini Grid Developer’s business forecasts.

We must commend the NERC’s practical approach in permitting capable Generating Companies operate grids, albeit Mini Grids, despite the seemingly “iron cast” policy that transmission will remain in Government’s hands. As usual, application of regulations will reveal unforeseen gaps like the issues mentioned above. The Mini Grid Regulation’s success will lie in NERC continuing its practical regulatory approach.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.