How to Get an Electricity Distribution Company (DISCO) License in Nigeria

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One of the most necessary utilities in modern civilization is undoubtedly electric power. Virtually every industry is powered by this energy source as a primary raw material – from manufacturing to transportation and logistics to communications, healthcare, education, even recreation, hospitality and socializing as well as food preservation.

This power source has also been a great source of socio-economic and political debate as government after government in Nigeria has failed to see to satisfaction the ever-increasing abnormal demand for this power source, even with privatization almost total of the electric power sector.

This article being the first part of a series of articles discussing the various business licenses available in Nigeria will focus on a unique type of business in the electric power sector – The Power Distribution Company or DISCO. The main topics will be:-

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– What a DISCO actually does.

– The regulatory framework governing DISCOs in Nigeria.

– License requirements for DISCOs in Nigeria.

– The existence of other alternative power distribution licenses in Nigeria.

– Post-licensing regulations for DISCOs in Nigeria.

What exactly do DISCO do?

DISCOs are Nigerian companies licensed to retail electricity generated and transmitted by grid-connected (?) power generation companies to consumers.

What is the Regulatory Frame governing DISCO in Nigeria?

DISCOs in Nigeria are mainly regulated by:-

– The Nigerian Electricity Regulatory Commission (NERC, a creation of the Nigerian Electricity Sector Reform Act) and through its various regulations, among them the NERC Licensing Regulations 2010

– The Federal Ministry of Energy.

– The Nigerian Bulk Electricity Company PLC (NBET), a company responsible for regulating the Nigerian electricity sector through purchases from generation companies (documented as Power Purchase Agreements) for resale to DISCO through acquisition contracts.

NERC is the supreme regulator of DISCOs in Nigeria and regulates DISCO licenses through the NERC License Application Regulations.

How are DISCO Licence apps started?

DISCO license applications should be made in writing (through legal counsel) to the Chairman of NERC.

These applications must also be signed by the authorized representative of the applicant and submitted in 3 hard copies accompanied by an electronic version in MS Office format on a CD-ROM.

Upon receipt of an application, NERC (or “the Commission”) sends, after acknowledging the date of receipt, an acknowledgment to the applicant indicating the date of the acknowledgment request. Additional information on the file may be requested from the applicant from the commission within 1 month of receipt of the file.

How long Is this take for a DISCO application at lapse after a applicant is asked at send further away obligatory information?

The DISCO license application will lapse if the applicant does not provide all additional information required from the commission within 60 days from the date the commission communicated the application.

Box expired apps be reactivated?

No, they cannot be reactivated. Outdated applications can only be resubmitted as a new application after payment of the prescribed processing fee.

What are the main terms for a DISCO Licence?

The main requirements for an electric power DISCO license are:-

– A completed application file.

– A certificate of incorporation and MEMART (Memorandum & Articles of Association) of the applicant company.

– A title deed registered on the site, or an agreement of sale or deed of assignment, or proof of submission of a title deed to a competent land processing agency.

– A tax receipt certificate from the candidate company for the last 3 years.

– A 10-year business plan (consult your attorney on the contents of a business plan required under NERC regulations).

– A power purchase agreement (PPA) in place with an approved electricity production company (GENCO) or a resale agreement with an electricity transmission license holder.

– A retail agreement with end users for the supply of energy.

– A Memorandum of Understanding (MOU) or Letter of Intent from an Engineering Procurement Contractor (EPC), if applicable.

– A funding agreement or letter to fund the project from a financial institution.

– A detailed electricity demand forecast in the supply area.

– The location of the project.

– Line voltage level (33kv, 11kv, 415v, 230v)

– Connection points.

– Post type (wood, concrete, steel).

– Installation method (overhead, underground).

– A detailed design of the project which will include: –

a). a site map;

b). a one-line diagram;

vs). control rooms;

D). substations.

– Line length.

– Distribution EIA (Environmental Impact Study).

– Transformer type and data (with attached nameplate data of all applicant transformers).

– A connection agreement with the Transmission Company of Nigeria (TCN).

– Declared impact of the connection of the distribution system to the TCN networks.

– The projected peak load to be connected.

– Maximum network capacity (MW, MVAR).

– A measurement and technical evaluation slip (BEME) for the project.

– Details of protective equipment to be used.

– The candidate company’s Health & Safety policy.

Are the any further away not involved in securing a DISCO Licence after a application has has been submitted?

Yes there is. Upon being deemed complete, NERC will pass a resolution that the application has been duly made and will notify the applicant in writing within 30 days of the resolution.

The commission will then require the applicant to publish a statutory public notice at their expense in 2 daily newspapers, one of which must be a local newspaper in circulation in the applicant’s intended business area.

The purpose of these postings (lasting 21 days) is to receive any objections to the granting of the license after review.

How long Is this take for these objections at be understood?

NERC objection hearings typically last 30 days.

How long Is this take for a DISCO Licence application at be treaty?

A DISCO license application, from the date of acknowledgment of receipt of the application, must be processed within a period not exceeding 6 months and notification of the NERC’s decision must be communicated to the applicant accompanied by the reasons for its decision in case of refusal. of the candidacy. The applicant may appeal NERC’s decision if the license application is denied within 21 days of receipt of NERC’s rejection of the license application.

How long do DISCO licenses last?

DISCO licenses are valid for 10 years.

Box a DISCO Licence be canceled and if yes, on What land?

Yes, a DISCO license can be canceled for the following reasons:-

– Obtaining a license by fraud or misrepresentation or non-disclosure of a material fact.

– Deliberate or unreasonable violation of the NERC regulations governing DISCOs or the broader regulatory framework governing DISCOs.

– Insolvency/bankruptcy of a licensed DISCO.

– Inability of the operator to carry out its functions due to a fragile financial situation.

– Failure to comply with the terms and conditions of a license.

Box a DISCO Licence too be suspended?

Yes, it may be suspended by NERC upon complaint or information from a consumer, eligible customer, customer association, or other licensees leading to an investigation generally based on:-

– A failure to comply with the terms and conditions of a license.

– Public interest.

– The safety of public health or that of any person.

– Inability of the authorized DISCO to perform or perform the duties imposed by the terms and conditions of the DISCO license, the Electric Power Sector Reform Act, NERC Regulations and Market Rules of the electricity sector, among others.

It should however be noted that a DISCO license suspension period cannot exceed 6 months.

Box a DISCO Licence be amended Where his mandate extended?

Yes, a DISCO license may be amended by NERC on its own initiative or following a complaint from a customer or other licensee for the following reasons:-

– Public interest.

– Inability of DISCO to meet the requirements set by NERC in the terms and conditions of the license.

– Significant changes in the situation of the licensee

– A lack of compliance with the Regulatory Framework of the Electrical Energy sector.

The term of a DISCO license may also be extended during its first 5 years upon request by a DISCO license holder.

East this possible at secured a Off-grid Electric Power Distribution Licence in Nigeria?

Yes it is. This is called an Independent Electric Power Distribution Network (IEDN) license which can be either:-

– An off-grid rural electricity distribution network.

– An off-grid urban electricity distribution network.

– An integrated off-grid electricity distribution network.

You will need to consult your attorney to guide you further on the regulatory requirements for this type of electric power business license if you are interested in venturing into this area of ​​the power business.

How a lot Is the NERC charge as his Licence costs?

NERC charges for DISCO licensing the following financial implications:-

Connected to network Power Distribution Licence costs.

– A processing fee of 1 million naira.

– A license fee of $75,000.00 (seventy-five thousand US dollars).

– A license renewal/term extension fee of N500,000.

– An annual operating fee of 1.5% of the license holder’s charges per Kwh net of production and transmission costs.

Off-grid Distribution Licence costs:-

– Processing Fee – 100,000.00 Naira

– License Fee – $20,000.00 (twenty thousand US dollars)

– Term Renewal/Extension Fee – 50,000.00 Naira

– Annual Operating Charges – 1.5% of licensee’s charge per kWh net of generation and transmission cost.

Conclusion :- It is suggested that you consult your lawyer to get a better understanding of this type of license from the electric power sector in the future.

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