A Review of the Nigerian Energy Industry

Inadequate gas supply forces NERC to defer declaration of TEM

Sam Amadi, NERC13 February 2014, Abuja – The Nigerian Electricity Regulatory Commission (NERC) Wednesday made known its decision to defer the official commencement of the Transitional Electricity Market (TEM) until when all the expected Condition Precedents (CPs) have been satisfied in the Nigeria Electricity Supply Industry (NESI).

NERC stated this in Abuja, shortly after its monthly meeting with the Chief Executive Officers (CEOs) of the various successor generation and distribution companies of defunct Power Holding Company of Nigeria (PHCN) that the resolution to suspend the commencement of TEM was mutually agreed by it and all market players in the sector.

It explained that parts of the major reasons for deferring the commencement of TEM were the poor gas supply challenges in the sector as well as the somewhat delay in the full automation of the market processes expected to be deployed by the system and market operations departments of the Transmission Company of Nigeria (TCN) in the market.

The Chairman of NERC, Dr. Sam Amadi, made the disclosure while briefing journalists.
Speaking alongside the CEO of TCN, Mr. Mark Karst, CEO of Benin Distribution Company, Mrs. Funke Osibodu and that of Egbin Power Plant, Mike Uzoigwe; they all spoke for each of their subsectors.

Amadi also stated that the commission would brief the Minister of Power, Prof. Chinedu Nebo, on the new development, adding that all interim market rules would still remain valid, while demands for improved service delivery would still be made on market participants.
“Let me say that the CEOs agreed with NERC’s submission that it will not be realistic to declare TEM next month because of the fact that some of the market condition precedents are yet to be finally resolved.

“Particularly, the issue of losses that is being reviewed by the CEOs and their company and the issue of tariff review that is being projected. So we have agreed to go to the minister and tell him that NERC will review the interim rules and get back to the CEOs at the next meeting and we will amend the interim rules, but the TEM should not be declared until we have met the conditions,” Amadi said.
On reasons for the indefinite deferment, he said: “There are two categories of the condition precedents, one is market rule based condition precedents and as at today out of the 13 of them, only two are not fully achieved.

“On the full automation of system operation processes and market operation processes, we are about 80 to 90 per cent complete on most of those. SCADA system to have real time communication on gencos and discos and the TCN and we expect to have that complete by April.”
According to him, “the other is not a market-based rule and that is primarily the issue of gas. We want to make sure that the structural issue about that, commerciality and getting proper briefing from the gas supplier is a condition we want to achieve. So, that we don’t frame the tariff or regulatory framework on a particular gas supply and we later have wide divergent.

“We hope that by the time the new owners complete their studies in a matter of two three months, NERC could review tariff, not increase or decrease, but review. This is a market situation so we can’t give a date for the declaration of TEM,” he added.

He noted that the commission had not fixed any time frame for the declaration of TEM, adding that: “If by next month we feel that all the conditions precedents have been met, we will go to the minister and say declare, so we are no longer going to be giving anybody dates. “None declaration of TEM is not affecting the market performance, revenue, supply or improving capacity. What matters for TEM is that the full implementation of PPAs and vesting contracts will not come into place. Market remittance and all other reviews will move forward.”

On the uncertainties in gas supply to the power plants, Amadi said: “Recent increase in gas supply has led to increase in daily generation and the CEOs are committed to making some investments. On metering, CEOs have indicated the problems with tampering and theft of electricity. NERC is working with the Attorney-General of Federal (AGF) to discourage and punish severely any theft of electricity or tempering or bypass of meter to avoid revenue loss.

– Chineme Okafor, This Day

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