The Nigerian Electricity Regulatory Commission, (“NERC”) regulates activities in the Nigerian Electricity Supply Industry (“NESI”) as stipulated by the Electric Power Sector Reform Act (“EPSRA”) 2005. Section 62 of the EPSRA establishes the broad basis for the issuance of licenses by NERC to operators in the NESI, whilst section 63 emphasizes the powers of NERC to make regulations, codes, etc., regarding the rights and obligations of a licensee.

Amongst the categories of licenses issued by NERC is a generation license which enables the holder to construct, own, operate and maintain a generation station for purposes of generation and supply of electricity. A generation licensee may be a PHCN successor generating company as specified under section 8 of the EPSRA, or an Independent Power Producer (“IPP”).

The NERC Application for Licenses (Generation, Transmission, System Operations, Distribution & Trading) Regulations 2010 (the “Regulation”) details the manner and form in which applications for licenses are made; the relevant procedure, information and documentation required to support the various kinds of license applications; the process for modification, amendment, renewal, and extension of the term of a license; the process required for the suspension, withdrawal and cancellation of a license; and the form of the proposed business plan for the project etc. which an IPP intending to set up business in Nigeria would need to comply with.

Procedure for Application:

A company wishing to operate an electricity generation undertaking exceeding 1 megawatt (MW) in aggregate at a site will need to apply in writing for a generation license from NERC by completing and submitting an application form in the required format with accompanying documents and a non-refundable processing fee as applicable.

Eligibility Criteria/Pre NERC Application Steps:

Such a company must be registered in Nigeria and must possess tax clearance certificate for immediate past three (3) years before the application. The company is also expected to have conducted an audit of its Financial Statements and Accounts for immediate past three (3) years. Where the company is a newly incorporated Special Purpose Vehicle, exemptions would need to be sought in respect of the above. The company is also expected to have conducted an Environmental Impact Assessment (“EIA”) in respect of the proposed area of operation or where the proposed generation capacity is less than 10MW, an assessment of how effluents and discharges will be managed. It is also expected that the IPP would have in place, an Off-take Agreement or arrangement with a power purchaser. Where the IPP proposes to supply power to the grid, this would involve negotiating a Power Purchase Agreement (“PPA”) with the Nigerian Bulk Electricity Trading Plc. (“NBET”). In addition to documents evidencing the above requirements, NERC, as well as NBET, will require certain information in dealing with an IPP.

These include:

Document indicating ownership or long term lease of the project site such as registered Title Deed to Site, Sale Agreement, Deed of Assignment/Gift, or evidence of submission of a title deed to a relevant land processing agency (as applicable); Since the IPP would have identified the type of generation to be embarked upon, i.e., gas fired plant, coal or hydro plant, the company would be required to provide the requisite fuel supply and transportation agreement and or requisite approval from the Ministry of Water Resources; The company would also be required to obtain Transmission Company of Nigeria (“TCN”)’s confirmation that the proposed generated power would be evacuated from the connection point. A transmission, Use of System Agreement (“TUOS”) would also need to be entered into with TCN; Also, at this stage, the company is expected to have initiated discussions with both technical and financial partners for the project and would be required to produce evidence of their commitment to the project such as a Memorandum of Understanding (“MOU”) or Letter of Intent; In addition to the above, NBET will require the company to have initiated a tender process for Its Engineering, Procurement & Construction (“EPC”) contract and provide an MOU to this effect as well as a long term Service Agreement and the Operation & Maintenance (“O&M”) Agreement. At this stage, NBET will provide the Form of PPA to the company for review prior to negotiation of terms. Once both parties agree to the PPA terms and the tariffs, and agreements relating to stage 5 above have been finalized, the PPA will be executed.

Eligibility Criteria/NERC Application Steps

Once an intending generation company has put the pre-NERC application steps in motion, i.e., the company has engaged all the requisite partners and obtained all the required documentation, the next step is to approach NERC for its license to operate by obtaining and completing the application for generation license form. NERC will require certain documents, in considering the application. In certain instances, where inadequate information has been provided, NERC after reviewing the accompanying documents to an application may request the applicant to furnish further documents that will aid it in making its decision.

Documents required by NERC in addition to those earlier mentioned include:

Detailed Curriculum Vitae of managerial and technical staff of the power plant Location mapSingle line diagram of the plant power plant designSite plan drawings (10) year business plan timelines for plant commissioning and the date when different capacities of the plant will come into operation, relative to the date of issuance of a licence.

In addition to these, depending on the type of generation plant, specific information would need to be provided particularly those relating to the plant type. For instance, an Open Cycle Gas Turbine Plant would require specific information such as the gas turbine type, minimum and maximum turbine capacity, efficiency, fuel quality specification, amongst others.

Once the application has been submitted with the requisite application fee and acknowledged by NERC, within thirty (30) days of the acknowledgment, NERC requires the applicant to cause a notice of the application to be published in two newspapers: one circulating in the area in which the company intends to operate and the other with national circulation. Any pet it ion from the interested public must be made within twentwenty-one) days of the publications. In assessing an application, NERC will amongst others consider the suitability of the applicant, whether the documents provided are in order and any object ions received from the public. NERC is required to reach a decision on whether or not to grant the licence not later than six (6) months from the date of the acknowledgment of the application. The decision shall be communicated in writing to the applicant and where NERC intends to refuse an application, it is also required to not if the applicant in writing stating its reasons for the proposed refusal. NERC shall allow the applicant twenty one (21) days within which to make representation and if necessary provide further documentation to aid it in re-considering the application. NERC’s final decision shall be notified to the applicant after the expiration of the twenty one days (21) days representation window. Where the final decision is a refusal of the application, an applicant may still make an appeal to NERC for a review of its application. Where NERC approves the application, the applicant shall be required to pay the requisite licensing fee after which it shall be issued with a licence to operate for a specified term which shall contain specific terms and conditions required to be complied with by the license.

SOURCE : https://brandspurng.com/simple-guide-to-obtaining-a-power-generation-licence-in-nigeria-fmpwh/

Informative