On the 6th day of June, 2023, President Bola Ahmed Tinubu, GCFR, enacted the Electricity Act, 2023. This legislation no doubt aligns with the current administration’s goals to expedite Nigeria’s energy transition and streamline the regulation of the Nigerian Electricity Supply Industry (NESI) for improved functionality and better power service delivery.
THE NIGERIAN ELECTRICITY REGULATORY COMMISSION (NERC)
The Nigerian Electricity Regulatory Commission (NERC) (hereinafter referred to as the NERC) holds significant powers and duties outlined in the aforementioned Electricity Act of 2023. Its principal roles include regulating the electricity sector, setting and enforcing technical and service standards, issuing licenses to operators, promoting fair competition and ensuring consumer protection. The NERC also oversee tariff regulation, monitor market participants’ compliance, resolve disputes with the primary aim of fostering a stable and efficient electricity market in Nigeria.
In a purported exercise of it’s powers, the NERC recently announced the removal of the directors in Kaduna Electricity Distribution Plc (KAEDC) over its inability to pay the debt owed to the Nigerian Bulk Electricity Trading Plc (NBET). The NERC stated that the order takes effect from the 1st of January, 2024 and remains in force until amended or revoked by subsequent orders issued by the commission and further appointed an administrator to be responsible for the management of the day-to-day affairs of the company.
In determining the legality or otherwise of NERC’s action, recourse must be had to the provisions of the Electricity Act, 2023, particularly the provisions of section 75. Section 75(1) reads thus;
“The Commission shall, on its own initiative or upon a complaint from any consumer, eligible customers, customer associations, a shareholder in a licensee company or a licensee, inquire into the conduct or affairs of any licensee in carrying out it’s obligations under it’s license and provisions of this Act”
Section 75(2) went further to state that “where upon an inquiry is made under sub section 1, the Commission determines that the license is in a grave situation as regards matters listed in subsection 3, the commission shall exercise one or more of the following powers as may be necessary for maintaining continuity in the provisions of electricity service –
- issue an interim order for the dismissal and removal of the board of directors of such a licensed company and appointment of directors and special directors to manage the affairs of the undertaking until such a time as may be specified in the order notwithstanding anything contained in any written law and the memorandum and articles of association of the company.”
In addition, section 75(3) (c) in determining when the powers listed in section 75(2) are to be exercised reads thus;
“The Commission shall invoke it’s powers in failing licensees if it determines after an inquiry made under subsection (1) that the licensee –
(c) has been plagued by such a protracted management crisis that it has become detrimental to the shareholders, consumers and the overall operations of the undertaking.”
Flowing from the above, it is apparent that NERC is vested with the power to dismiss the directors of any licensed company and in light of the allegations of debt surrounding KAEDC, it could be said that the power of dismissal was exercised in due compliance with the provisions of section 75(3)(c).
It is worthy of note that the advent of section 75 of the Electricity Act, 2023 renders moot the landmark decision of the Federal High Court in 2020, in the case of (IBEDC) & 7 Ors. v Nigerian Electricity Regulatory Commission (NERC) Suit No. FHC/ABJ/CS/665/2018. Wherein the Honourable Court held thatthe appointment and removal of directors must be in accordance with the provisions of Companies and Allied Matters Act and Electric Power Sector Reform Act (EPSRA).
Specifically, the Court held that there is nothing in EPSRA (being NERC’s enabling law) which permits NERC to make the removal orders.
Consequently, the Court nullified Regulation 18 for being inconsistent with EPSRA. In addition, the Court held that NERC cannot be an umpire in its own case, and any allegations of fraud must be investigated, not by NERC, but by the police and tried by a competent court.
In conclusion, upon a perusal of the Electricity Act, 2023, the dismissal of the directors and appointment of an administrator is within the powers of the NERC. However, the aggrieved directors may file an appeal to the Federal High Court within Thirty (30) days subject to the rules of the Federal High Court. Section 51(4) of the Act also gives the Federal High Court the power to affirm, modify or vary the decision of the Commission. Although it must be said that pursuant to Section 51(5) of the Act, every aggrieved person must exhaust all the internal dispute settlement mechanisms before initiating a court action.