1. NERC LICENSING AND REGULATORY FRAMEWORK Dr. Steven Andzenge, MON Commissioner Legal, Licensing & Enforcement, NERC Abuja, 29 th November, 2011

2. OUTLINE The licensing and regulatory philosophy Requirement for licensing and the procedure – The procedure – The format – The fees – The duration, extension & renewal The licensing status of the Successor Companies Salient terms and conditions Conclusion 2

3. The licensing and regulatory philosophy Sector 32(1)(f) EPSRA requires NERC to ensure regulation is fair and balanced for licensees, consumers, investors, and other stakeholders 3

4. Statutory Requirement for Licensing – Section 62 makes it mandatory to licence except captive and less than 1MW – NERC is empowered to make regulations on application for licenses – The procedure is stipulated in Nigerian Electricity Regulatory Commission Application for Licenses (Generation, Transmission, System Operations, Distribution & Trading) Regulations, 2010. – This entails formal application in a prescribed format and payment of application fee – Requirement are corporate/legal requirements, technical and commercial requirements 4

5. Statutory Requirement for Licensing (Cont) -The law gives 6 month within which an application must be granted or refused -Application is evaluated within the 3 divisions in NERC -License is issued upon fulfillment of conditions and upon payment of all necessary license fees. 5

6. The PHCN Successor Companies PHCN was unbundled by Section 8 of the EPSR Act By Section 23(1) were granted interim licenses on July 1, 2006 after which they were granted full licenses on January 1, 2010 upon payment of license fees License is for 10 years duration can be extended and renewed giving total of 25 years. NERC has issued letters of comfort in respect of the privatization exercise. 6

7. Terms and Conditions -Terms and Conditions include: -Payment of operation fees: -Generation- 1.5% of Tariff Charge/kWh -Distribution- 1.5 of licensee’s charges/kWh net the cost of generation and transmission -Transmission- 1.5% of Tariff Charge/kWh -Compliance with reporting obligations requirements as contained in the Nigerian Electricity Regulatory Commission Reporting Compliance Regulations 2009 -Supplementary activities must be with NERC’s approval. This is to ensure that supplementary activities do not materially compromise the financial integrity of the licensee -Assignment/transfer of licensed business must be with the consent of the Commission. 7

8. Terms and Conditions -Disposal of relevant assets must be with the consent of the Commission. -Change in control must be with prior approval of the Commission. -30 days notice required for changes in ownership exceeding 5% -Any increase in issued share capital -Enforcement -Commission has powers to enforce and impose sanctions -Power to suspend and revoke licenses 8

9. Discos Required to: – Comply with Distribution Code – Comply with Commission’s tariff and charges – Develop and maintain a distribution system – Customer metering – Promote efficient energy use through sensitization of consumer. Have a dedicated compliance/regulatory department committed to compliance issues. Maintain good regulatory standing. 9

10. Transmission Obligation to offer connection to all Compliance with transmission standards Ensure operations are in a accordance with the Act and conditions of the Commission’s licenses. Comply with Codes and Rules 10

11. Other Regulatory Steps of the Commission Regulation are being developed in the following areas: – Independent Electricity Distribution Network; – Acquisition of land and access right for power projects in Nigeria; and – Independent Electricity Transmission Network. – Embedded Generation Development of an enforcement frame work. Development of dispute resolution mechanism for operators and consumers. Details of all regulations by the Commission on our website www.nercng.org www.nercng.org 11

12. Conclusion The Licensing Philosophy requires NERC to ensure regulation is fair and balanced for licensees, consumers, investors, and other stakeholders. The Commission is committed to a well regulated NESI 12

13. Dr. Steven Andzenge, MON Commissioner, Legal, Licensing and Enforcement Nigerian Electricity Regulatory Commission E-mail: sandzenge@nercng.org THANK YOU Website: www.nercng.orgwww.nercng.org 13