By ABAH ADAH, Abuja
The Nigerian Electricity Regulatory Commission, NERC, has directed the Nigerian Bulk Electricity Trading PLC, NBET, to stop entering into new contracts for the purchase and resale of electricity and ancillary services in NESI.
NERC, in an Order dated July 25, 2024 signed by the its Chairman, Engr. Sanusi Garba, and Commissioner, Legal, Licensing and Compliance, Dafe Akpeneye warned that any contract executed by NBET in violation of this Order shall not be approved by the Commission and shall be treated as an infraction that is subject to regulatory sanction.
With this latest order tagged:ORDER NO: NERC/2024/058, the Order on the Transition to Bilateral Trading in the Nigerian Electricity Supply Industry (“NESI”), billed to take effect 25 July, 2024, NBET may well be on its way out of the market when done with some residual responsibilities accorded it by the order in the meantime, except there is a policy redirection eventually.
This means NERC is to issue license to as many successful bidders that would be involved in the business of buying and selling of electricity in bulk from the power generators, which, according to the Commission, it has already began to do.
The Commission however directed NBET to continue in the meantime to trade energy with the five generation companies, GenCos, who has fully effective contract.
It said, “NBET shall, in the interim, continue to administer the fully effective contracts with 5 Generation Companies: Azura Power West Africa Ltd, Omotosho Power PLC, Olorunsogo Power PLC, Nigerian Agip Oil Company Ltd, and Shell Petroleum Development Company of Nigeria Ltd, based on the minimum “take or pay” capacities contained in their respective Power Purchase Agreements (PPAs).
NERC said, the capacity from the 5 plants shall be vested to Distribution Companies, DisCos, based on the guaranteed share of capacity contained in their respective vesting contracts.
The Electricity Power Sector Reform Act, EPSRA, created NBET to buy and sell electricity in bulk from power producers. NBET was meant to help with the sector’s financial problems temporarily.
NBET was licensed as a bulk trader by the Commission on August 23, 2011. The licence issued to NBET had a tenure of 10 years and subject to renewal as may be determined by the Commission.
Following stakeholder engagements on NBET’s continued role in NESI, the Commission renewed the initial 10-year licence issued to NBET upon expiration in August 2021 for a term of 3 years, but noted that the continued role of the NBET in the market had been a disincentive for the transition to bilateral contracting between DisCos and GenCos thus exposing the federal government to the risk of revenue shortfalls beyond tariff support.
As part of transitioning to medium-term and long-term electricity markets, the EA’2923 empowers NERC to stop NBET from entering new contracts for buying and selling of bulk electricity; it has acted this, asking NBET to transfer its current contracts to new buyers as the Act specified.
The Commission revealed that it had, since 2022, issued trading licences to 10 private companies that have indicated interest in trading electricity bilaterally with DisCos and eligible customers.
It also revealed it received requests for regulatory approval from some of the aspirational DisCos for the purchase of electricity from parties other than NBET, i.e. directly from the GenCos or through other trading licensees.
On the supply side, the Commission said it received notifications from several GenCos signalling their intention to exercise the partial or full exit rights contained in their PPAs with NBET with a view to contracting for the supply of electricity directly to DisCos, other bulk traders and eligible customers, in furtherance of the provisions of the Act.
NERC noted that the improved turnover from such bilateral arrangement tentatively allowed prior to this order in electricity trading and the huge interest the direct transaction model has generated so far indicate that there is significant potential in the wholesale trade of electricity outside the NBET single buyer pool.