A Review of the Nigerian Energy Industry

NESI: NERC negotiates early exit from interim rules

nerc127 May 2014, Abuja – The Nigerian Electricity Regulatory Commission (NERC) has said it is pursuing an early end to the interim rules established for the management of trading activities within Nigeria’s Electricity Supply Industry (NESI) before the declaration of the Transitional Electricity Market (TEM).

NERC stated that an early exit of the electricity market from the interim rules will as a matter of fact sustain the new operational curve of the electricity market from being eroded with inconsistencies, hence, its decision to seek a declaration of TEM by the ministry of power latest by September 2014.

Chairman of NERC, Dr. Sam Amadi explained in a recent interview in Abuja that the commission has worked measures to ensure that a good number of operators in the power sector are ready and willing to move into TEM within its yet to be determined period.

Amadi however added that  NERC plans to ensure that the electricity market moves into TEM strong enough to confront possible extant challenges that could threaten its efficiency.

“TEM is a big elephant in the room, some people don’t want it now, others want it now and if TEM comes now, some will lose while some will gain but the NERC’s approach to TEM is not driven by rhetoric or politics, it simply means that we have to unlock the market and contracts and if there are shortfalls, people have to carry their can,” Amadi said.

He further explained: “But the danger is that if we bring TEM when we are not ready, the shortage will be huge and it might really take a framework for those who are going to carry those risks to be legally able to carry them or penalised and this might undermine the market but we believe that with the work we have done and the success of the interim rules, TEM should come soon, we are going to strongly lean towards early exit from the interim rules arrangement into TEM.”

“Take or leave it, we are thinking sometimes in August or September, we should move into TEM but the real thing we want to get to before TEM is Discos’ computation of loss statistics, we have given deadline to distribution companies and licensees to finish their losses studies and then we will review the tariff. We are learning towards an early declaration of TEM.

We will be emphatic on this; we will take a static date for the declaration of TEM because we don’t want it to exceed September but like I said earlier, we don’t to enter TEM disfigured or like a cripple, we want to enter TEM strong and every day, we are getting stronger, the market is getting stronger and when we enter TEM, some of the shortcomings we will meet, the market will be stronger to take them,” he noted.

As expected, NERC’s interim rules for the sector,  which came into effect on May 1, 2013 govern trading arrangements during the interim period when Power Purchase Agreements (PPAs) and vesting contract between the privatised generation and distribution companies and Nigerian Bulk Electricity Trading Company (NBET) Plc will not be effective.

The rule will also manage the probable revenue shortfall in the industry by determining the revenue allowable to participants and service providers during the period, establish the payment arrangements and flow of funds from distribution companies through the Market Operator to all beneficiaries, as well as establish the sources of funds required to ameliorate the probable shortfall in revenues collected by the distribution companies during the interim period.

It also stated that distribution companies shall make certain monthly baseline revenue remittances to the Market Operator. For example, Abuja, Benin, Eko, Enugu, Ibadan and Ikeja electricity distribution companies are mandated to make baseline remittances as a percentage of the Market Operator’s invoice in the order 65.13, 53.12, 98.24, 55.93, 74.03 and 90.66 per cents respectively.

On the commission’s initiation of an open book process to transparently determine the monthly liquidity status of operators in the sector, Amadi said: “The open book process is for all operators, they bring their ledgers and we determine the actual benchmark of their monthly receipts. We have started it with Benin distribution company, we have drawn out timetables for the Discos and our people are already on ground to do this.”



– This Day

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