Finally, NERC Grants Power Gencos Right to Sell Electricity Directly to Consumers

Gencos laud declaration, says electricity customers would be ‘kings’ again

Effective May 15, 2017, electricity generating companies (Gencos) in Nigeria would now be free to generate and sell electricity directly to end-users across the country, with very minimal interferences from the 11 electricity distribution companies (Discos), the Nigerian Electricity Regulatory Commission (NERC) has declared.

Tagged as the ‘eligible customers’ regime, the declaration, NERC said in a statement yesterday, was signed off by
the Minister of Power, Works and Housing, Mr. Babatunde Fashola.

The statement announcing this was signed by NERC’s head of public affairs, Dr. Usman Arabi. It said its declaration was legally backed by the provisions of Section 27 of the Electric Power Sector Reform Act 2005 (EPSRA), adding that it represented a major policy directive which now grants electricity consumers under this category the right to buy power directly from Gencos almost unhindered.

NERC stated that under the regime, Fashola signed off four categories of eligible customers to become operative in the Nigerian Electricity Supply Industry (NESI).

The first category of eligible customers, it noted, comprises of a group of end-users registered with the NERC and whose consumption is not less than two megawatts (MW) and connected to a metered 11kV or 33kV delivery point on the distribution network. This group would however be subjected to a distribution use of system agreement for the delivery of electrical energy.

The second category of eligible customers are those connected to a metered 132kV or 330kV delivery point on the transmission network under a transmission use of system agreement for connection and delivery of energy.

The third category of customers under the declaration consists of those with consumption in excess of two megawatts on monthly basis and connected directly to a metered 33kV delivery point on the transmission network under a transmission use of system agreement. It added that eligible customers in this category must have entered into a bilateral agreement with the distribution licensee licensed to operate in the location, for the construction, installation and operation of a distribution system for connection to the 33kV delivery point.

The fourth category, according to regulatory agency are eligible customers whose minimum consumption is more than two megawatts over a period of one month and directly connected to the metering facility of a generation company, and has entered into a bilateral agreement for the construction and operation of a distribution line with the distribution licensee licensed to operate in the location.

Justifying the decision of the government to accent to its request for a declaration of an eligible consumers regime in the NESI, NERC said: “The declaration which permits electricity customers to buy power directly from the generation companies is in line with the provisions of Section 27 of the Electric Power Sector Reform Act 2005 whereby eligible customers are permitted to buy power from a licensee other than electricity distribution companies.”

It added that: “In exercising the power conferred on him by the said Act, the Honourable Minister of Power Works and Housing, directed the Nigerian Electricity Regulatory Commission (the Commission) to permit four categories of customers to buy power directly from a licensee other than electricity distribution companies.”

It explained that the government and the commission expect that the new policy would bring into play new and stranded power generation capacities which may be contracted between generation companies and eligible customers.

“The declaration further provides that at least 20 per cent of the generation capacity added by the existing or prospective generation licensee to supply eligible customer must be above the requirement of the eligible customer and is supplied under a contract with a distribution or trading licensee at a price not exceeding the average wholesale price being charged electricity distribution companies by the Nigerian Bulk Electricity Trader Ltd. 

“The conditions for the declaration of eligible customer are subject to review by the Nigerian Electricity Regulatory Commission from time to time,” it added.

While reacting to the new policy, the Association of Power Generation Companies (APGC) which represents the interests of Gencos who are part of the direct beneficiaries of the regime, stated that it was a welcome development, one they had consistently pushed for to be implemented.

APGC’s Executive Secretary, Dr. Joy Ogaji, told THISDAY over a phone conversation that the declaration would create good efficiency in the country’s electricity market, and also place electricity customers first on the priority lists of operators going forward.

“This is a welcome development. We have consistently asked the government to do this, and we are solidly in support of it. We however hope that the government will be firm in its implementation of the new regime,” said Ogaji.

She further explained: “The benefits of this if you must now are that it will introduce competition on the demand end of the market; complete the liberalisation process in the NESI; introduce efficiency on the parts of the Gencos because it would mean that anyone that’s not efficient would be losing out.”

“This will no doubt create an appropriate customers’ service regime which in other words means that customers will now become kings again; as well as introduce new forms of trading in the market like electricity retailers.

“There would also be reductions in the technical losses from bulk high voltage and this will ultimately lead to national economic development because bulk electricity users who make up 30 per cent of the consumer base would be free to deal directly with Gencos and get steady supplies to power their operations,” she added.