A Review of the Nigerian Energy Industry

NERC abolishes controversial penalty against Discos that take excess power

Dr. Sam Amadi, NERC.
Dr. Sam Amadi, NERC.

Oscarline Onwuemenyi

02 September 2015, Sweetcrude, Abuja – The Nigerian Electricity Regulatory Commission, NERC, has announced the end of a controversial regulation, which penalises electricity distribution companies, Discos, for taking electricity in excess of their daily allocation from the national grid.

NERC’s Chairman, Dr. Sam Amadi disclosed the commission’s decision to abolish the ‘imbalance penalty’ in Abuja.
Amadi urged electricity Discos to feel free to access and take electricity beyond their daily percentage for onward distribution to their customers.

“We had several meetings and removed the imbalance mechanism. What that means is that those who cried for the imbalance, we now say if you take more than was allocated, you don’t pay a penalty,” he said.

The imbalance penalty had overtime remained controversial in the sector and often received harsh criticisms from Discos, who are mostly impacted.

According to records obtained by our correspondent, the Abuja Electricity Distribution Company (AEDC), for instance, had paid total penalties of N8 billion to the Market Operator (MO) for imbalance electricity it took from the national grid from November 2013 when the government handed over electricity assets to private investors.

The Disco, which has the capacity to distribute up to 1000MW to customers in its franchise distribution network that covers parts of Niger, Kogi, Abuja and Nasarawa is allowed just about 11.5 per cent of whatever amount of energy that is generated daily into the national grid.

Before the abolition, it paid for excess power that it took from the grid.

But, according to Amadi, “The other thing is that if the Discos’ network is weak and they don’t invest in it, the networks will be poor and it takes investment financing to make them strong enough.”

“With the regulatory intervention, we have reduced the opportunities for us going down. Our strategy is to keep increasing the network and providing commercial incentive for them to go all out to take all the power they can take.

“With the removal of penalty they have no commercial reason not to take more power. We are now focusing on ensuring that the grid is strong enough to take this power,” he added.

Under the Multi Year Tariff Order (MYTO), Abuja Disco gets 11.5, Benin-9, Eko-11, Enugu-9, Ibadan-13, Ikeja-15, Jos-5.5,
Kaduna-8, Kano-8, Port Harcourt-6.5 and Yola-3.5 per cents of whatever is generated into the national grid daily for distribution in their respective networks. The new development gifts them the opportunity to take more power as they are able to distribute from the national grid.

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