…Pushes for bilateral deal amongst operators
…20 GenCos affected
…Consumers pay N4… for electricity in Q1
THE Nigerian Electricity Regulatory Commission, NERC, has barred the Nigeria Bulk Electricity Trading Plc from entering into new contracts for the bulk purchase and trading of electricity in the country.
The Commission in an order, signed by its Chairman, Engr Sanusi Garba and Commissioner for Legal, Licencing and Compliance, Dafe Akpeneye, gave about 20 power generation companies, GenCos, 60 days to enter into bilateral agreements with electricity distribution companies, DisCos, for the supply of electricity.
NBET was incorporated on 29 July 2010 by the Federal Government to act as a credible and creditworthy off-taker and to be provided with credit support and/or capitalisation by the Federal Government thus enabling the company guarantee payments to GenCos while facilitating bankable project financed independent power projects.
The initial 10 years licence issued to NBET expired in August 2021 and was renewed for another three years. It has bulk purchase contracts with the GenCos and vesting contracts with the DisCos.
NERC in the order directed NBET to continue in the interim to administer fully effective contract with only five GenCos, namely, Azura Power, Omotosho Power, Olorunsogo Power, Agip Oil, and Shell Petroleum Development Company.
The Commission stated: “NBET shall forthwith cease to enter into new contracts for the purchase and resale of electricity and ancillary services in NESI. 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 subiect to regulatory sanction.
“NBET shall, in the interim, continue to administer the fully effective contracts with the five GenCos based on the minimum “take or pay” capacities contained in their respective PPAs (power purchase agreements) or the average available capacity of the plants in 2023. The capacity from the five plants shall be vested to DisCos based on the guaranteed share of capacity contained in their respective vesting contracts”.
NERC added that “all other power plants with “take and pay” PPAs or interim energy sales agreements with NBET are hereby granted 60 days from the commencement date of this Order to negotiate and contract with DisCos on bilateral agreement basis the capacity currently with NBET (Contracted Capacity)”.
The Commission said its review of the performance of the five GenCos performance in Q1/2024 “indicates an average plant availability factor of 23.25%”.
It added that in view of the significant difference between contracted capacity with NBET and historical available generation, the contract capacity for the five GenCos shall be 1,357MW.
The five GenCos, according to NERC, “shall no later than 30 September 2024 notify NBET of the capacities that have been traded bilaterally with DisCos and/or eligible customers”.
The Commission explained that the order is seeking to “steer the electricity market towards bilateral contracting for energy and capacity between generation and/or trading licensees with distribution licensees thus limiting the fiscal exposure of the Federal Government to market risks.
“Foster a more competitive market structure as envisioned by the EA by repositioning NBET from its current role as the sole bulk electricity trader in NESI.
“Provide an equal opportunity for all hydro GenCos and thermal GenCos with existing “take-and-pay” contracts with NBET to reduce their contracted capacities by trading directly with DisCos on a bilateral basis.
“Transition the contractual framework for bulk energy trading in the NESI to “take-or-pay” contracts thereby fostering increased certainty and market discipline among market participants”.
Consumers pay N291.62 billion for electricity in Q1
Meanwhile, the Commission in its first quarter 2024 report said DisCos collected a total of N291.62 billion in the first three months of the year.
“The total revenue collected by all DisCos in 2024/Ql was N291.62 billion out of the N368.65 billion that was billed to customers. This translates to a collecion efficiency of 79.11%. In comparison, the total revenue collected by all DisCos in 2023/Q4 was N294.95 billion out of the N399.69 billion billed to customers which
translated to a 73.79% collection efficiency. The 79.11% collection efficiency recorded in 2024/Ql is +5.32pp higher than the efficiency recorded in 2023/Q4 (73.79%).
The report stated that Ikeja and Eko DisCos recorded the highest collection efficiencies of 103.61% and 86.24% respectively, conversely, Yola DisCo recorded the lowest collection efficiency of 43.03%.
“A comparison of DisCos performance in 2023/Q4 and 2024/Q1 showed that ten DisCos recorded improvements in collection efficiency in 2024/Ql when compared to 2023/Q4 with Jos DisCo recording thehighest increase of +13.99pp. Only lbadan DisCo recorded a decine (-0.70pp) in collection efficiency during the period”, it added.
