The Nigerian Electricity Regulatory Commission (NERC) said in the Multi-Year Tariff Order 2024 that the Distribution Companies (DisCos) can now procure electricity directly from GenCos through bilateral contracts.
Documents released by NERC showed that the tariff review applications of the 11 power distributions in the country included plans to exit NBET’s vesting contract regime.
The commission said the new order recognises a revision to the DisCos’ partially contracted capacity (PCC) to ensure a minimum energy offtake with effect from 1st January 2024. The minimum energy offtake requirement for the 11 DisCos this year is 4,063MW/h minimum.
The 11 DisCos comprised AEDC with 611MW/h, IE; 603MW/h, EKEDC; 513MW/h, IBEDC; 478MW/h, EEDP; 386MW/h, BEDC; 325 and PHED with 283MW/h.
Others are KEDCO; 268MW/h, KAEDC; 258MW/h, JED; 225MW/h and YEDC with 113MW/h expected to distribute the total of the 4,063MW/h within the year.
The DisCos are required “to secure adequate bilateral contracts to facilitate a seamless exit from NBET’s vesting contract regime”, it said.
NERC said that through bilateral contracts, the DisCos are required to mitigate their “exposure to volumetric energy risks”, adding that they would have no recourse to claim revenue shortfall arising from generation shortfalls effective January 2024.
It said the DisCos are also required to continually procure additional energy volumes to serve their customers and ensure steady migration of customers to higher service bands on account of improved level of supply.
Under the service-based tariff arrangement introduced in 2020, customers are categorised into maximum-demand and non-maximum-demand customers, with different bands (A to E) depending on the level of supply.
Total power generation in the country stood at 4,365.2 megawatts (MW) as of 6:00 am on Thursday, according to Business Day, while the generation capacity was 7,652.6MW, according to data from the Nigerian Electricity System Operator.
Nigeria’s DisCos have been given the green light by the regulator to buy electricity directly from producers of the commodity after over 10 years of relying on an intermediary called the bulk trader.
The DisCos and the generation companies (GenCos) unbundled from the defunct Power Holding Company of Nigeria were privatised in 2013 and handed over to the core investors on Nov. 1 of that year, while the Transmission Company of Nigeria (TCN) has remained under government ownership.
The government-owned Nigerian Bulk Electricity Trading Plc (NBET) buys electricity in bulk from generation companies through power purchase agreements and sells it through vesting contracts to the DisCos, which then supplies it to the consumers. It began trading with the commencement of the transactional electricity market in 2015.