The Nigeria Electricity Regulatory Commission (NERC) has asked the Nigeria Bulk Electricity Trading (NBET) company to forthwith desist from entering new contracts for the purchase and sale of electricity in the Nigerian Electricity Supply Industry (NESI).
This is according to an Order signed by NERC Chairman, Mr. Sanusi Garba, and Mr. Dafe Akpeneye, the Commissioner for Legal, Licensing, and Compliance, on Sunday in Abuja. The order stated that since 2022, up to 10 firms have been licensed and have expressed interest in trading electricity bilaterally with DisCos and eligible customers.
The order stated that NBET must immediately stop entering into new contracts for the purchase and resale of electricity and ancillary services within the Nigerian Electricity Supply Industry (NESI).
In the new order on the Transition, NERC announced that Electricity Distribution Companies (DisCos) are now permitted to purchase electricity directly from generation companies (GenCos) without NBET acting as an intermediary.
According to the commission, any contract executed by NBET in violation of this order will not be approved and will be considered an infraction subject to regulatory sanction.
It 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 subject to regulatory sanction.”
“NBET shall, in the interim, continue to administer the fully effective contracts with the 5 (five) GenCos listed in Table 1 based on the minimum “take or pay” capacities contained in their respective PPAs or the average available capacity of the plants in 2023 as provided in Table 1 (“NBET Firm Capacity”). The capacity from the 5 plants shall be vested to DisCos based on the guaranteed share of capacity contained in their respective vesting contracts.”
Objectives of the new order
According to the NERC, the objectives of the new initiative are as follows;
- Encourage direct energy contracts between generators or traders and distribution companies to reduce the Federal Government’s financial risks.
- Create a more competitive market by changing NBET’s role from being the sole bulk electricity trader.
- Allow all hydro and thermal generators with “take-and-pay” contracts to reduce their capacities by trading directly with distribution companies.
- Shift the bulk energy trading contracts in the NESI to “take-or-pay” agreements to increase certainty and discipline among market participants.
What you should know
The Electricity Power Sector Reform Act (EPSRA) established NBET to buy and sell electricity in bulk from power producers, intending to temporarily address the sector’s financial issues.
On August 23, 2011, the NERC licensed NBET as a bulk trader. The license was issued for a tenure of 10 years, with the possibility of renewal as determined by the Commission.
