Legal Experts Say New Power Law To Boost Investment In Lagos’ Power Sector

Gov. Akinwunmi Ambode

Energy law experts have said the Lagos State Electric Power Sector Reform Law will encourage more investment in embedded power generation in the state.

Last month, Governor Akinwunmi Ambode assented to the law, with the state’s Commissioner for Energy and Mineral Resources, Mr. Olawale Oluwo, saying the law would allow the government to intervene in major areas of the power value chain to the overall benefit of the people.

The Lagos State Government last year launched an initiative primarily targeted at generating and delivering up to 3,000 megawatts incremental off-grid power from private sector-sponsored projects within a period of six years.

The Lagos State Embedded Power Programme was approved by the Nigerian Electricity Regulatory Commission less than two months after its launch.

Noting that Lagos is the first state in Nigeria to enact a power sector reform-specific legislation, experts at Templars, a law firm, said, “The legislation refines the existing institutional framework for the administration of electric power in the state, penalises power theft and other infractions, and makes available state government intervention and support in key areas of the power value chain.

“It is expected that the law would see refreshed investment appetite in the state’s power sector, and further bolster the state’s objective of creating sustainable electricity within the state with the multiplier effect of generally attracting investment opportunities to its burgeoning economy.”

The experts, however, noted that it remained to be seen how the likely increase in power supply would be mopped up by the distribution companies.

They added, “The enactment of the law, in no small measure, demonstrates the leadership of Lagos State in the development of investor-friendly and groundbreaking policies aimed at attracting investment. We anticipate that other states will follow suit.

“We also expect that investors would quickly take advantage of the opportunities presented by the law because the law provides a lucrative avenue for power sector investors to improve their footprints in the Nigerian space, diversify their portfolio away from the uncertainties and inadequacies of the national grid and tap into the potential goldmine that the embedded power generation market has to offer.”

Experts at Aluko & Oyebode, a full-service law firm, said in a note that Lagos appeared to be wooing investors to invest in providing new generation capacity to improve electricity generation and distribution within the state, with the introduction of the embedded power scheme under the law.

They said, “This is evident with the provision of financial indemnities and the assurance of special cost-reflective tariffs (which stakeholders have long been calling for) for projects under the embedded power scheme.

“This will likely attract existing generation companies to invest in providing electricity in the state as well as provide opportunities for new players to invest in providing embedded generation or supply feedstock to embedded generation providers.”

Also commenting on the law, experts at AO2 Law said the introduction of guarantees and indemnities into the law would encourage investment in the scheme.

They said, “To stimulate investment in the scheme, the Lagos State Ministry of Energy and Mineral Resources is empowered to provide guarantees and indemnities to the embedded power providers and feedstock suppliers. Such guarantees and indemnities shall be issued through the Lagos State Ministry of Finance and the Debt Management Office subject to the approval of the governor.

“While the law does not stipulate the type of guarantee to be provided, it is expected that the Lagos Ministry of Finance would release guidelines and requirements for the provision of guarantees and indemnities, which would contain the type of guarantees to be provided.”

-Nigeria Electricity Hub

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