*As Transition Electricity Market finally kicks into gear
05 February 2015, Sweetcrude, Abuja – The Nigerian electricity supply industry has attained the much-awaited transitional stage electricity market, whereby wholesale buying and selling of power are based on contractual and regulatory rules.
According to the Nigerian Electricity Regulatory Commission, NERC, the contract-based power market is sequel to its directive to all electricity market participants on the commencement of the transitional market.
In a statement from the Commission, which was made available to journalists on Wednesday, the Chairman, NERC, Dr. Sam Amadi, noted that attaining this stage of the market “will ensure more discipline, corporate governance, guarantee returns on investment as well as give certainty of a sustainable and growing electricity market that will serve the needs of Nigerians.”
The commission further stated that with this development, a greater degree of business and investment certainty had been introduced into the country’s electricity market, adding that this would set an even firmer basis for increasing the quantum of electricity available to Nigerians in the short term.
NERC, in its order to the market participants, said the conditions precedent set out in the market rules and subsequently agreed to be necessary for an effective TEM had been satisfactorily fulfilled.
“With effect from February 1, 2015, the amendments to the market rules and application and enforcement of the said market rules shall be in full force. With the effectiveness of the market rules, as amended, the transitional stage electricity market shall commence with effect from the same date,” it stated.
The order, which was dated December 31, 2014, further directed all relevant market participants, service providers and the Nigerian Bulk Electricity Trading Plc to comply with the rules from February 1, 2015.
The commission said, “From that date, the market will now be governed with the strict application of the terms and conditions of the Multi Year Tariff Order 2.1 that was approved on December 24, 2014 and became effective January 1, 2015. This tariff order ensures that market participants now have a cost reflective tariff.
“The tariff order is one of the major conditions precedent for the take-off of the TEM. Some other conditions include the constitution of a Dispute Resolution Panel and Initial Stakeholder Advisory Panel, approval of the Grid Code and the Market Rules and their implementation, among others.”
One of the implications of the TEM is that the gas bottleneck, which has constrained electricity supply, will be reduced as gas will be supplied to electricity generation firms on legally binding basis as regards delivery and payment.
Besides, the failure of the electricity distribution companies to pay for the energy bought from the generation firms and for deliveries on their privatisation performance obligations will now attract sanctions in line with the market rules and contractual obligations.