SB 131: Renewable Energy Bill 2015

Bill Analysis:

SHORT TITLE

Renewable Energy Bill, 2015

OBJECTIVE OF THE BILL

The objective of the Bill is to provide for the utilization of renewable energy sources for electricity and heat generation in an efficient and sustainable manner (Clause 1)

NUMBER OF CLAUSES/PARTS

The Bill has 52 Clauses including citation and interpretation

APPLICATION

The Bill applies to:

• Regulation of the production and supply of wood fuel and bio-fuel;
• Public education of renewable energy production and consumption;
• Building of indigenous capacity in technology for renewable energy sources;
• Improved access to electricity through the use of renewable energy sources;
• Diversification of supplies to safeguard energy security;
• Promotion of the use of renewable energy;
• Provision of a framework to support the development and utilization of energy sources, and an enabling environment to attract investment in renewable energy sources.

IMPLICATIONS OF THE BILL

When this Bill becomes law -

1. Every person engaging in any commercial activity in the renewable energy industry shall not operate without a license granted under this Bill (Clause 8);
2. There shall be a feed-in-tariff scheme for the purpose of guaranteeing the sale of electricity generated from renewable energy sources (Clause 25);
3. Renewable Energy Fund (“the Fund”) shall be established (Clause 31) to provide financial resources for the promotion, development and utilization of renewable energy sources;
4. A public utility licensed under the NERC to transmit or distribute electricity shall comply with the relevant provisions of this Bill (when it becomes law) Clause 6

RELATED EXISTING LEGISLATIONS

1. Utilities Charges Commission Act, which provides for the regulation of tariff charges and prevent undue exploitation of consumers by scheduled utilities (which includes the electric and power authority).
2. Electric Power Sector Reform Act – The Act established the Nigerian Electricity Regulatory Commission (NERC) under Section 31 and provides that its functions include ensuring prices charged by licensee are fair to consumers and licensing and regulating persons engaged in generation, transmission, distribution and trading of electricity.
3. Finance (Management and Control) Act – The Act provides for the control and management of the public finances of the federation. The Renewable Energy Fund to be established under Clause 31 of this Bill is to be subject to the Finance (Management and Control) Act.
4. Energy Commission of Nigeria Act – The Act establishes the Energy Commission, which is tasked with the responsibility of making recommendations for the exploitation of new sources of energy and to lay down guidelines on the utilization of energy types

GENERAL PROVISIONS OF THE BILL

1.      Meaning of “Renewable Energy”: -

Clause 2 explains that any form of energy obtained from non-depleting sources, which includes wind, sun, water, bio-fuel, landfill, sewage, solid waste, industrial waste, geothermal energy, ocean waves and any other energy sources designated in writing by the Minister.  

2.      Responsibility of the Minister responsible for Energy: -

The Minister shall have the responsibility to formulate the Nigerian Renewable Energy Policy and provide policy direction for the achievement of the objectives of this Bill (when it becomes law)

3.      Responsibility of the Nigerian Electricity Regulatory Commission (NERC): -

Under the Bill, NERC shall: -

• Advise the Minister on renewable energy technologies;
• Create a platform for collaboration between government and the private sector and civil society for the promotion of renewable energy sources;
• Prepare in collaboration with relevant stakeholders, the educational curriculum on efficient use of renewable energy sources and evolve programs for its mainstreaming on educational curriculum of educational institutions;
• Recommend for exemption from customs, levies and other duties, equipment and machinery necessary for the development, production and utilization of renewable energy sources;
• Recommend financial incentives necessary for the development, production and utilization of renewable energy sources;
• Promote the local manufacture of components to facilitate the rapid growth of renewable energy sources;
• Promote plans for training and supporting local experts in the field of renewable energy;
• Promote technical benefits of bio-fuel to facilitate its utilization; and
• Implement the provisions of this Bill (when passed into law).

Clause 5 provides that NERC shall approve rates chargeable for wheeling of electricity from renewable energy sources, charges for grid connection, and rates chargeable for wheeling electricity from renewable sources.

Though the Commission (NERC) under the Electric Power Sector Reform Act, 2005 under Section 32 provides for the functions of the Commission in general, Clauses 4 and 5 of this Bill focuses on its responsibilities with regards to renewable energy

4.      Public Utilities Licensed Under NERC: -

A public utility licensed under the Nigerian Electricity Regulatory Commission (the Commission) Act to transmit or distribute electricity, shall comply with the relevant provisions of this Bill (when it becomes law), and in general facilitate the attainment of its objective.

5.     Collaboration with NERC (the Commission): -

Relevant institutions responsible for the development, promotion, management and utilization of renewable energy sources shall collaborate with the Commission in the exercise of its powers and performance of its functions (Clause 7).

Relevant institutions referred to under Clause 7 include Standards Organization of Nigeria, Ministry of Environment, Ministry of Agriculture, Nigerian National Petroleum Corporation and any other institution designated by the Minister by publication in Gazette

                                                                                LICENSING PROVISIONS

6.      Requirement for License: -

Clause 8 requires that any person engaging in a commercial activity in the renewable energy industry shall require a license.

The commercial activities in the renewable energy industry under Clause 8(2) shall include importation, exportation, re-exportation, production, shipment, transportation, manufacturing, assembling, maintenance, processing, refining, storage, distribution, installation, marketing and sale.

NERC may by legislative instrument limit or expand the scope of activities under Clause 8(2). A license may be granted to an individual/person or a corporate entity/body (Clause 9).

7.     Application for License: -

An application for a license shall be made to the Commission in the prescribed form accompanied with the prescribed fee and information required by the Commission (Clause 10). The procedure shall be that the Board shall acknowledge an application within 10 working days after receipt and inform the applicant of the decision in writing within 60days after the 10 (ten) days.

8.     Grant and Issuance of License (Clause 11) -

Where an applicant meets the conditions required by Bill (when it becomes law) for a license to engage in commercial activity in the renewable energy industry, the Board shall grant the application and issue a license to the applicant

9.      Rejection of application -

The Board may for compelling reasons founded on several factors, reject the application for a license. Such factors include – technical data, national security, public safety, food security, food security, health and environmental safety.

10.   Conditions of License: -

A license granted by the Commission is subject to conditions specified in the license having regard to the functions of the Commission and the nature of the license required (Clause 12)

A license granted under this Bill (when it becomes law) may include conditions requiring the licensee to provide the Commission with documents, accounts, returns, management plans, environmental impact assessments (EIA), etc., which the Board require for the purpose of performing its functions at the times as may be reasonably required.

11.   Non transferability of License

No license granted under this Bill (when it becomes law) is transferable except with the prior written approval of the Board.

12.   Duration and Renewal of License: -

Clause 14 provides that a license granted under this Bill (when it becomes law) is for the period specified on the license and may be renewed. An application for renewal shall be made to the Commission not later than 60 (sixty) days before the license expires.

The procedure for renewal shall be the same as that applicable to the granting of the original license. A licensee who fails to renew or whose renewal is rejected by the Board shall cease to provide the service to which the license relates.

13.    Power to modify License (Clause 15): -

The Board may modify a license granted under this Bill (when it becomes law) if the modification is in accordance with terms of the license or required for public interest.

To modify a license, the Board shall give the licensee and the general public at least 60 (sixty) working days’ notice. The notice shall state the following:

• that the Board proposes to make the modification
• the effect of the modification; and
• invitation for representation or objections regarding the modification for consideration

The Board shall consider the representations or objections that are made to it before the modification is made. Notice shall be given by publication, in the manner that the Board considers appropriate, for the purpose of bringing the matters to which the notice relates to the attention of persons likely to be affected by it.

Notice shall equally be given by sending a personal copy of the notice to the licensee for the purposes of bringing the matters to which the notice relates to the attention of persons likely to be affected by it.

The expense incurred as a result of the modification to a license shall be considered as part of the capital expenditure of the licensee.

14.   Suspension or Cancellation of License: -

Clause 16 (1) provides that where the Board is satisfied that a licensee is not complying with or has not complied with any of the conditions of the license, the Board may suspend or cancel it.

A license which is not utilized within one year after the date of its grant, may be cancelled by the Board after notice of not less than 30 (thirty) days has been served on the license (Clause 16(5))

15.   Method of Suspending or Cancellation of License: -

In order to suspend or cancel a license, the Board shall –

• issue a written notice to the Licensee, specifying the cause of the dissatisfaction of the Board,
• specify directions for the rectification of the breach, and
• state the action proposed to be taken by the Board in the event of non-compliance with the notice.

However, the Board will not suspend or cancel a license without given the licensee an opportunity to be heard, and where appropriate, give a period that the Board considers reasonable for the compliance with the directions of the Board. According to Clause 16(4), the Board shall consider the extent to which a person is likely to sustain loss or damage as a result of the suspension or cancellation of the license in determining whether it is necessary to suspend or cancel the license.

16.   Complaint to the Minister

A person aggrieved by the refusal of the Commission to grant or renew the license or by a modification, suspension or cancellation of a license, may lodge a complaint with the Minister who shall within 30 days after receipt of the complaint make a decision on it.

17.    Special Requirements Relating to Licenses

For activities like production, transportation, storage, marketing and installation and maintenance, the following shall apply: -

• Production and Supply License: Where a licensee is granted license to produce and supply a renewable product by the Board, the licensee shall manufacture, and assemble that product; install, generate and supply electrical energy; or produce bio-fuel or wood fuel in accordance with the directives of the Commission (Clause 20)
• Bulk Storage License: When granted a license to store renewable energy products in commercial quantities, the licensee shall install a facility for the storage of the renewable products. The suitability of the facility and what constitutes commercial quantities shall be determined by the Commission (Clause 21)
• Marketing License: Where an applicant is granted a license to market renewable energy product, he shall obtain approval from the Commission to export each consignment of wood fuel and bio-fuel (Clause 22)
• Installation and Maintenance Licenses: Where the Board grants license to an applicant to provide for the installation and maintenance services for s renewable energy product, the licensee shall obtain approval from the Commission for the export of each consignment of wood fuel or bio-fuel.
• Bulk Transportation License: Where a license is issued to transport renewable energy products, the licensee shall transport bio-fuel products or wood fuel and use a registered vehicle to transport the bio fuel or wood fuel products in accordance with directives of the Commission. The vehicle should be registered with the Commission for the transportation of bio fuel or word fuel.

18.    Feed-in-tariff Scheme and Rates:

Feed-in-tariff scheme consists of the renewable energy purchase obligation, the feed-in-tariff rate, and a connection to transmission and distribution systems (Clause 25). The Commission shall prepare and provide utilities with guidelines on the level of rates that may be charged by the public utility for electricity generated from renewable energy sources.

The Commission shall take into account the following:

• technology being used in the renewable energy industry
• location of the generation facility
• operating norms for specific technology under consideration
• associated costs with construction, commission, operation and maintenance of the plant
• reasonable rate of return, and
• balance between the interest of the consumer and the investor, in preparing the guidelines

19.   Approval of feed-in-tariff:

According to Clause 28, a public utility shall not demand a feed-in-tariff rate for electricity generated from renewable energy sources unless the feed-in-tariff rate chargeable has been approved by the Commission. A public utility shall not demand or receive directly or indirectly a feed-in-tariff rate approved by the Public Utilities regulatory Commission in relation to electricity generated from renewable energy sources.

20.    Publication of feed-in-tariff:

Feed-in-tariff rates approved by the Commission for electricity generated from renewable energy sources shall be published by the Commission in the Gazette and the media (Clause 29)

21.    Renewable Energy Purchase Obligation:

The Commission shall specify the percentage level of electricity to be purchased by the electricity distribution utility in consultation with the Energy Commission. The Commission shall take into account the technology being used to generate electricity from renewable energy sources; assurances of the financial integrity of public utilities; and net effect of the cost of renewable energy on the end user tariff, in specifying the percentage level of electricity (Clause 26).

22.    Connection to Transmission and Distribution Systems:

An operator of a transmission or distribution system shall connect a generator of electricity from a renewable energy source within the coverage area of the transmission or distribution system where a generator of electricity from renewable energy sources so requests (Clause 30).

Costs incurred in upgrading the transmission or distribution system shall be shared equally between the operator of the transmission and the generator of electricity from renewable energy sources

23.    Establishment of the Renewable Energy Fund (“the Fund”):

Clause 31 establishes the Renewable Energy Fund, which shall provide financial resources for the promotion, development and distribution of renewable energy sources. The fund shall be applied to the relevant activities that the Board of the Commission may determine including:

• the promotion of grid interactive renewable electricity by means of financial incentives, feed-in-tariffs and capital subsidies
• the development of infrastructure for renewable energy
• the provision of production based subsidies for renewable generation
• equity participation in renewable energy projects, etc. (Clause 32(2)(a))

24.    Sources of the Fund

The fund shall be financed by moneys appropriated by the National Assembly, donations, grants, gifts received for renewable energy activities, money generated from the provision of services for renewable energy activities, moneys lodged in the fund established under the Rural Electrification Agency, for the promotion of projects for the development and utilization of renewable energy resources, and other moneys approved by the Minister responsible for Finance (Clause 33).

25.    Bank Account of the Fund

According to Clause 34, the Fund shall operate a separate bank account (separate from any account that relates to energy resources), opened by the Commission with the approval of the Accountant-General of the Federation. Any money collected for the fund shall be paid into the bank account on the next working day after the collection of that money.

26.   Management of the Fund

The Board of the Fund shall be responsible for the management of the Fund. The board shall pursue policies to achieve the object of the fund and collect moneys lawfully due to the Fund, through procedures determined by the Minister. Other duties of the Board to the Fund are to ensure accountability, disburse moneys from the fund, receive and examine reports, and perform any function that this Bill (when it becomes law) shall assign.

27.   Internally Generated Funds

The preparation and submission of estimates and the reporting and accounting of estimates are subject to the Finance (Management and Control) Act. The fund is authorized to retain moneys realized in the performance of it functions.

According to Clause 36(3), notwithstanding the provision of any legislation, internally generated funds:

• shall not be used for the payment of salaries, benefits or allowances, except where the allowances directly relate to the provision of services that will increase revenue;
• can only be utilized when the activities on which the expenditure will be incurred have been programmed and approved in the expenditure budget of the fund.

28.   Tax Exemption and Administrative Expenses of the Fund:

The Fund is tax exempt and its administrative expenses related to the management of the Fund shall be charged on the Fund

29.    Accounts and Audit:

The Board shall keep accounts and records in the form determined and approved by the Auditor-General. The Board shall submit the account of the Fund to the Auditor General within 3 months after the end of the financial year, and the Auditor-General shall audit the accounts and forward a copy of the audit report to the Minister not later than 3 months after receipt of the accounts.

30.   Annual Reports:

The Board shall within one month after the receipt of the audit report submit an annual report to the Minister, which covers the activities and operations of the Fund. The Minister shall within one month of receipt of the annual report, submit the report to the National Assembly along with any statement considered necessary.

31.   Permit to Produce Bio-fuel from Feedstock

A licensee that has been granted a license to produce bio-fuel shall obtain the relevant permit from the Ministry of Agriculture (Clause 41).

32.    Designation and Pricing of Bio-fuel

The Minister shall on the commencement of this Bill (when it becomes law) designate bio-fuel as a petroleum product in accordance with the National Petroleum Authority Act, 2005, which does not exist.

The Bill further provides under Clause 42(2) that the Petroleum Product Pricing Regulatory Agency (PPPRA) shall be responsible for the pricing of bio-fuel in accordance with the prescribed petroleum pricing formula provided for under the PPPRA Act.

33.   Sale of Bio-Fuel Blend

The Bill defines “Bio-fuel Blend” under Clause 43(1), as the combination of a proportion of bio-fuel and petroleum based fuel. The Bill further provides that the National Petroleum Authority shall determine in consultation with the Energy Commission, the proportion of bio-fuel in bio-fuel blend offered for sale to consumers at the point of sale.

Any person selling bio-fuel shall at the point of sale, display conspicuously the amount of bio-fuel contained in the bio-fuel blend.

34.   Sustainability of Wood Fuel Production:

Clause 44 provides that the Commission (NERC) shall consult relevant institution to develop programmes to sustain wood fuel production. The name of the ‘relevant institution’ is not mentioned within the Bill

35.   Duty of Renewable Energy Producers

A person licensed to produce renewable energy shall maintain the equipment and property used, comply with technical standards and guidelines established by the Commission, and comply with the terms of the respective environmental impact assessment permit (Clause 45)

36.   Integration of Renewable Energy Projects into Power System

The Commission shall take into account the particular nature of the electricity generated from renewable energy sources to ensure that renewable energy projects are integrated into the power system in developing regulations and guidelines for the provision of electricity (Clause 46)

37.   Offences and Penalties

A person who commits an offence under this Bill (when it becomes law) is liable on summary conviction to a fine of not more than 250 penalty units or to a term of imprisonment of not more than 2 years or to both or first offence, or a fine of more than 500 penalty units or a term of imprisonment of not more than 4 years or both for a subsequent offence (Clause 47)

38.   Modification of Existing Enactments

The provisions of the National Electricity Regulatory Commission Act or any other relevant enactment shall have effect subject to the modifications necessary to give effect to this Bill (when it becomes law), and to the extent that the provisions of the Bill (when passed into law) shall prevail.

39.   Guideline and Codes of Practice

The Board may issue guideline for the development and utilization of renewable energy sources; connection of electricity generated from renewable energy sources to transmission or distribution systems; and technical standards for the use of renewable energy sources.

The Board may publish guidelines in the Gazette or in another print media determined by the Board. However, when the Board amends or revokes a guideline, it shall publish the amendment or revocation in the Gazette or any other print media to be determined by the Board

However, no person shall incur a civil or criminal liability for the contravention of any issued guideline.

40.   Sanctions by the Board

The Board may impose sanctions for deliberate refusal to comply with guidelines. Such sanctions include:

• fine not exceeding 1000 penalty units
• suspension/revocation of license
• any other administrative sanction determined by the Board

The Board may issue a code of practice for the purpose of giving effect to the provisions of this Bill (when passed into law)

41.   Regulations

The Minister responsible for Energy may, on the recommendation of the Board, make regulations by legislative instrument (Clause 50)

CONCLUDING NOTES

The Bill seeks to provide for the utilization, sustainability and adequate supply of renewable energy for electricity and heat generation. There are other legislations on electricity and energy generation in Nigeria. Some of these legislations include Energy Commission of Nigeria Act, Petroleum Act, NNPC Act, etc. The Renewable Energy Bill, when passed into law would be another energy related legislation.

Some of the provisions of the Bill may require a corresponding amendment to existing legislations. For instance, Clause 42(2) provides that the PPPRA shall be responsible for the pricing of bio-fuel in accordance with prescribed petroleum pricing formula provided under the Act. This function is not contained in the PPPRA Act, although the Petroleum Products Pricing Regulatory Agency (Est.) Act provides under Section 7(l) that its functions include any other function assigned by the National Assembly.

Another legislation is the Electric Power Sector Reform Act, which established NERC. It is arguable that no amendments will be required for the legislations setting up the agencies listed under this Bill as Clause 48 provides that conflicting provisions of any legislation shall be inconsistent to that extent, if the Bill becomes law. The Bill provides that the provisions of the Bill (when it becomes law) shall prevail if there happens to be any inconsistency with any other legislation.

 The provision under Clause 42(1) is ambiguous. The Clause references the National Petroleum Authority Act, 2005 which does not exist as part of the Laws of the Federation of Nigeria. The Bill may have been referring to the Petroleum Act 2004 or the NNPC Act but it is not clear which law it is referring to.

The Bill provides for need for several licenses under Clauses 20 – 24. The requirement shall make operations difficult and complicated if every task or process of shall require a license. To produce renewable energy, store, market or even to maintain equipment or operation facility requires a separate license each under the Bill. In effect, complicating business in the renewable energy sector. These Clauses of the Bill need to be reviewed before passage to enable operators engage in different components and carry on business in this sector easily.

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