Small power investors get NERC’s nod to produce, distribute electricity to consumers

The Nigerian Electricity Regulatory Commission (NERC) has given the nod to small power investors to participate in the mini grid sector of the Nigerian electricity market for increased access to electricity in unserved and underserved parts of Nigeria.

The Mini Grid regulation released recently by NERC seeks to simplify the process for private sector participation in integrated electricity generation and distribution supply systems under 1MW either in isolation from the distribution companies (DISCOs) or interconnected to DISCO’s existing networks.

The development means that private sector participants in the integrated power generation and supply systems can now build mini grid projects across the country and reach their consumers either in isolation of the DISCOs or interconnected to the DISCOs distribution networks.

By this, the sector would have been further liberalized and the monopoly of the DISCOs in their respective operative areas cut short, according to power analysts.

The mini grid regulation specifically provided for an isolated mini grid with distributed power larger than 100kW and up to 1MW of generation capacity to require a permit from NERC, subject to conditions, which include the “written consent of the distribution licensee that the intended area to be developed is within the distribution licensee’s 5-year expansion plan, and the submission of an executed agreement between the community and the mini grid developer.

For those with distributed power of up to 100kW, a permit is optional, as the grid developer may only choose to register as a mini grid developer with NERC.

However, registration as a mini grid permit holder with NERC will accord the developer the right to compensation where a distribution licensee (a DISCO) extends its network to the mini grid developer’s coverage area.

On the other hand, developers seeking to provide an interconnected mini grid will be required to execute a tripartite contract with the host community and the distribution licensee, a DISCO, operating in the host community.

The mini grid operator will also pay the distribution licensee a network usage charge to be agreed between the mini grid operator, and the distribution licensee. The tripartite contract and network usage charge will be approved by NERC.
On retail tariff and other charges, a mini grid permit holder must comply with the applicable MYTO methodology to be approved by NERC, subject to technical and non-technical losses to a maximum of 10%.

For mini grid Operators, the retail tariffs may be determined by using the applicable MYTO methodology; or by agreement between the Mini Grid Operator and the Community (being represented by a minimum number of customers utilizing 60% of the electricity output of the Community).

Where the mini grid operator determines the retail tariff by agreement, the mini grid operator is required to submit a copy of the executed agreement to NERC for its records.

The Mini Grid Regulation includes standardized template contracts, forms and guidelines as annexures. The template contracts may be adopted and amended as required, as this is expected to promote uniformity of contracts and agreements in the sector.

The Nigerian Energy Support Programme put together the Mini Grid Regulation with funding from the European Union and the German Government. Detail Commercial Solicitors serving as legal advisers to the draft.