Electricity Distribution

How to Obtain Power License in Nigeria

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How to Obtain Power License in Nigeria

Since the time when Power Sector has been privatized, it is now mandatory for any company that want go into Power distribution business in Nigeria to get his company licensed. Power sector is a component of electricity sector of the economy and it has a great significant to the well-being of the citizens of the country. Power is the foundation of any industrial economy, majority of human activities are based on power.

Therefore, if you want to generate, transmit and distribute power for public in return for a payment in Nigeria, you must apply for a licence. That is, if your company is planning to go into power generation, the company must obtain the approved requisite and license from the Nigerian Electricity Regulatory Commission (NERC).

Notwithstanding, Section 62 of the Electric Power Section Reform Act of 2005 provides that any person intending to engage in the business of electricity generation, transmission, system operation, distribution or trading shall be required to obtain an operator’s license from the Nigeria Electricity Regulatory Commission.

NERC (National Electrical Regulation Commission) are the body regulating the activities of Nigerian Electricity Supply Industry (NESI) in Nigeria and this is stipulated by the Electrical Power Sector Reform Act (EPSRA) 2005, and EPSRA is the main statutory legislation guiding the activities of Electrical Power sector regulation in Nigeria.

Power generation licence gives the holder of the licence the authority to construct, own, operate and maintain a generation station for the purpose of generating and supplying electricity. However, the holder of this licence can either be an independent producer of power or Power Holding Company of Nigeria (PHCN) successor generating company.

Meanwhile, if you want to undertake a power generation that pass 1 megawatt, you must make a written application to the NERC for a Generation Licence by completing and submitting an application form alongside the company documents and a particular amount of money that will be told you by the NERC and this fee is non-refundable.

Basically, in Nigeria, the power generation licence fees to be paid by an applicant to the NERC in accordance with the megawatts of electricity you want to be generating are as follows:

  • Generation of power above 1 – 10 megawatts(MW) attracts the application fee of N50,000.00 and a licence fee of $2,500.00
  • For generation above 10-100 megawatts attracts the application fee of N100,000.00 and Licence fee of $25,000.00
  • For generation above 101-250 MW attracts the application fee of N200,000.00 and Licence fee of $50,000.00
  • For generation above 251-500 MW attracts the application fee of N300,000.00 and Licence fee of $75,000.00
  • For generation above 501-1000 MW attracts the application fee of N400,000.00 and Licence fee of $100,000.00
  • Above 1000MW, the application fee is N1,000,000.00 and a Licence fee of $200,000.00

Furthermore, the fees will be paid thought bank draft or cheque drawn in favour of the NERC, and the fees will be received by the commission and this will be acknowledge by the issuance of the commission’s official receipt.

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Therefore, the steps for the pre-application for Power licence are as follows:-

  • The Intending Company must be registered in Nigeria, and must have a Certificate of Incorporation from the Corporate Affairs Commission and Memorandum and Article of
  • Your company must possess a tax clearance certificate evidencing payment of immediate 3 years before the application.
  • Your company is to produce an audited report on the financial statements and accounts for the immediate 3 years before the application.
  • Your company is expected to have conducted Environmental Impact Assessment (EIA) in respect of the proposed area of operation or where the proposed generation capacity is less than 10 megawatts and obtained its certificate.
  • Also, your company needs maintenance of adequate insurance policy on the generation station, equipment and facilities.
  • Your company must obtain the work permit and expatriate quota from the Nigerian Immigration Service where expatriates will be employed.
  • It is also required to produce an assessment report of how discharge of electricity will be
  • Where your company is an independent power producer, it is expected to have in place an off-take agreement with a power purchaser.
  • Where your company is an Independent Power Producer (IPP), and it proposes to supply power to the grid (a network of conductors for distribution of electric power), it would involve negotiating a Power Purchase Agreement (PPA) with a Nigerian Bulk Electricity Trading (NBET) PLC.

After, you must have ensure that all the above mentioned documents and necessities are adhere too and made available, then you will now follow the following procedure to obtain the Power Generation Licence, this is when you will now approach NERC for their license to operate. However, after NERC has reviewed the documents you provided, they may request that you as an applicant to make available more documents which will help them in making decision on your application.

So, once you have submitted the application with the prescribed application fee and this has been acknowledged by NERC, within the space of 30days of the acknowledgement, they will require that the notice should be published in 2 newspapers. These newspaper must be circulated in the proposed area of operation and a national circulated paper in Nigeria. Therefore, any petition raised from an interested public in relation to the application of your company, must be made within 21 days after the newspaper was published.

However, before NERC consider whether to approve your application or not to approve it, the will first of all consider your suitability in relation to the documents you provide and any objections raised by interested public. More so, NERC are to make the decision whether to grant you the licence or refuse to grant you the licence not later than 6 months from the date of acknowledgement of the application.

Furthermore, if NERC refuse your application, you will be given an opportunity within 21 days to make a representation to the commission and if need be, you will provide further documents that will assist them in reconsidering your application by the commission. Therefore, where the final decision taken by the commission is to refuse your application, then you can make an appeal to NERC for the review of your application.

Nevertheless, where NERC approves your application, you will be required to pay the requisite licensing fee, which will depends on the amount of megawatts you want to be generating. After the payment has been made, you will be issued with a licence to operate for a specific term of 10 years with specific terms and conditions you are to comply with.

Meanwhile, your licence can be renewed after the completion of the licence approved year. And you must apply for licence renewal at least 9 months before the expiration of the licence. And this will also attract a prescribed fees from you and will be in line with the procedure for grant of the licence.

Finally, you need to know that there are Four Major types of Power License, which are:-

  • Generation Licence:- This licence gives the holder the authority to generate power for personal use or public use (for business purposes)
  • Transmission License: – This licence gives the holder the authority to transmit electricity to the public.
  • Distribution Licence:- This license gives the holder the authority to distribute electricity from grid supply points to the point of delivery to consumers or eligible customers.
  • Trading Licence:- This licence gives the holder the authority to engage in the purchase and resale of electrical power and ancillary services from independent power producers and from the successor generation companies.

   For more clarification, we have three license categorized under Generation License and they are:-

  • On-Grid Electricity Generation Licence:-Is a type of licence that allows a holder to generate electricity and connect to the national grid for dispatch. The most distinguishing feature of grid connected licence is that the holder will enter into connection agreement with the Transmission Company of Nigeria (TCN) for connection, evacuation, and wheeling of the power to the nationalgrid. The licensee also enters long term power purchase agreement with the Nigerian Bulk Electricity Trading Plc (NBET).
  • Offf-Grid Electricity Generation Licence:- This is a licence that allows its holder to generate and sell power to a single buyer. In this case, the licensee can only generate and directly connect to the off-taker with who the licensee has a power purchase agreement.
  • Embedded Electriticy Generation Licence:- This licence allows the holder to generates power and evacuates through either the existing distribution facilities of a distribution licensee or through an independent distribution licensee. Company with this type of licence engages and negotiates relevant power purchase agreements with an electricity distribution licensee (DISCO) or an independent distribution company. This implies that, they does not require power purchase agreement with NBET or have any connection agreement with TCN.

About the Writer

Olusipe Abiodun Yinka is an Audit Associate in Bulls Capital Limited. He has a National Diploma in Accounting from Abraham Adesanya Polytechnic, Ijebu-Igbo, Ogun State; as well as a Degree in Accounting from Alex Ekwueme Federal University, Ebonyi State. He is a creative writer and a Trendsetter. Apart from writing, Olusipe is also an entertainer.

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