Electricity firms panic over new market rules

Chairman, Nigerian Electricity Regulatory Commission, NERC, Dr. Sam Amadi

There is a fresh wave of tension among electricity distribution companies following the commencement of the Transitional Stage Electricity Market on February 1 by the Nigerian Electricity Regulatory Commission and the threat by the commission to punish errant operators in the electricity industry.

In this regime, the failure of electricity distributions companies to pay for energy bought from generation firms and for deliveries on their privatisation performance obligations will now attract sanctions in line with the market rules and contractual obligations.

ADVERTISEMENT

Our correspondent gathered from market sources as well as a top source in NERC that liquidity constraints was still a major concern for most Discos, as the prevalence of the situation would result in them (Discos) breaching contracts entered into with other stakeholders, even in the new market era.

The order, which was dated December 31, 2014, had directed all relevant market participants, service providers and the Nigerian Bulk Electricity Trading Plc to comply with effect from February 1, 2015.

From that date, the market would be governed with the strict application of the terms and conditions of the Multi Year Tariff Order 2.1 (MYTO 2.1) that was approved on December 24, 2014 and became effective from January 1, 2015.

The tariff order, according to NERC, ensures that market participants now have a cost reflective tariff.

One of the implications of TEM, the regulator explained, was that the gas bottleneck which had constrained electricity supply would be reduced as gas would be supplied to electricity generation firms on a legally-binding basis as regards delivery and payment.

Recently, the Central Bank of Nigeria, in a bid to resolve the liquidity challenges in the power sector, released N18.26bn as loan to only five power firms.