The NERC-BEDC Saga

The BEDC Case 

You must have heard that, sometime last week. Benin Electricity Distribution Company (BEDC) sued the Nigerian Electricity Regulatory Commission (NERC) to court. BEDC filed a suit at the Federal High Court (Suit No: FHC/ABJ/CS/36/2021) asking the Court to grant “An order of perpetual injunction restraining the Commission from granting Asaba Distribution Limited (ADL) an Independent Electricity Distribution Network (IEDN) license to operate within the BEDC electricity distribution area”. 

Off Boundaries and Licenses…

Prior to the privatisation of the power sector, the Federal Government, after due consultations with stakeholders and industry experts, decided to sell the Distribution Companies (DisCos) based on existing delineations and franchise operation areas. For example, Abuja DisCo franchise operating areas prior to privatisation covered four states namely FCT, Kogi, Niger, and Nasarawa states. After privatisation, AEDC became the sole Licensee allowed to operate within the existing franchise area.  

Similarly, following the completion of the privatisation process, BEDC became the sole Licensee permitted to operate within the franchise area covering Edo, Delta, Ondo, and Ekiti states.  

On what grounds is BEDC suing NERC? 

Benin DisCo, in its Suit, cited the Independent Electricity Distribution Network (IEDN) Regulation 2012. Regulation No. 8 (1) states that the NERC may issue an IEDN license to an applicant where: 

1. There is no existing distribution system within the geographical area to be served by the proposed independent distribution system; 
2. Where the infrastructure of an existing distribution licensee is unable to meet the demand of customers in the area 

NERC’s Defence…

NERC has responded to the actions of BEDC saying it is “premature and has been instituted in bad faith against the overall public interest”. NERC has cited S. 71(6) EPSRA in its defence. The section provides that:  

“Unless expressly indicated in the license, the grant of a license shall not hinder or restrict the grant of a license to another person for a like purpose and, in the absence of such an express indication, the licensee, shall not claim any exclusivity, provided that the Commission may allow a licensed activity to be exclusive for all or part of the period of the license, for a specific purpose; for a geographical area, or for some combination of the foregoing.”

 What’s Next for both parties? 

According to the provisions of the Electric Power Sector Reform Act (EPSRA), which supersedes all other regulations in the sector, NERC is empowered by the S. 71 (6) EPSRA to issue out licenses to new market entrants. The exception is where it is expressly written that an existing licensee has exclusive rights to a specific area. BEDC on the other hand cites the provisions of the IEDN Regulation No. 8 which prohibits the issuance of a license to a new market entrant within the boundaries of an existing Licensee.  

From the legal point of view, ALL regulations in the sector are superseded by the provisions of the EPSRA 2005. This means that the provisions of S. 71 (6) EPSRA 2005 overrides the IEDN Regulation No. 8. Unless BEDC can prove to the court that its License expressly states that it has exclusive rights to operate within its franchise area, it cannot fault the plans of the NERC to issue out a new license. 

On the other hand, while the provisions of IEDN Regulation No. 8 states the conditions that may permit the issuance of a license to a new market entrant, it also allows the NERC to issue a license where the DisCo is unable to meet the demand of consumers. It is arguable that BEDC has not met the provisions of this exception.  

Just as other industry watchers, we await the final decision of the court.