The Nigerian Electricity Regulatory Commission has proposed that an eligible customers will be supplied power only from new generation from power companies and Distribution Companies (DisCos) will get at least 20 percent of new generation at a tariff that is no more than the average wholesale price in the industry.
Further rules proposed in the consultation paper on eligible customers for the Nigerian Electricity Supply Industry, published on NERC’s website on June 19, are that adequate metering with remote reading capability will be provided as well as tariff rebalanceing to assuage revenue loss for DisCos.
In addition, a competitive transmission and distribution charge will be exacted from the eligible customers for their use of Transmission Company of Nigeria power lines and DisCos network facilities.
The document circulated to stakeholders for their input says “the direct purchase of electric power from generation licensees by consumers is underpinned by opening up third party access to transmission and distribution infrastructure and this is expected to be a precursor towards introducing full retail competition into the Nigerian electricity market.”
Babatunde Fashola, minister of power, works and housing had on May 19 invoked the declaration of Eligible Customer in accordance with the provisions of Part II Section 27 of the Electric Power Sector Reform Act 2005 (the Act). This paved the way for customers who consume up to 2MW buy power directly from the GenCos.
The reactions of the DisCos have been tensed. Sources tell BusinessDay that a law suit is in the works due to anticipated loss of revenue.
“Discos obviously could lose a good number of their large customers, and revenues from these customers. Most of the customers affected by the declaration are Maximum Demand customers; this category of customers generate more than 60% of Discos’ revenues,” says Odion Omonfoman, energy consultant and the CEO of New Hampshire Capital Ltd.
The rule being proposed by NERC would assuage some of these concerns. “In a situation where the impact of the exit of some eligible customers significantly impacts on the recovery of approved revenues, there may be a need for the Commission to consider tariff rebalancing and the restoration of the conditions for upholding the performance obligation of licensees under their respective Performance Contracts. The impact of the rebalancing may require a slight revision of tariffs for some classes of customers,” said the document.
Experts have expressed concern over how the assets of the DisCos would be used to facilitate power distribution to eligible customers but the new regulation is proposing market based rules to deal with the matter.
“The Multi Year Tariff Order as issued by the Commission currently provides for a Transmission Use of System (TUoS) and Distribution Use of System (DUoS) charge. Where the Commission commits to a negotiated approach for third party access to networks, it shall be non-discriminatory and all discussion based on the premise of good faith,” said the document.
On metering, NERC proposes that “that appropriate metering with remote reading capability be provided for the measurement of reactive power, peak demand the profiling of real load.”
NERC has also proposed a phased approach to the introduction of all declared classes of eligible customers as a precursor to the eventual introduction of retail competition and the licensing of traders in NESI. It will occur immediately following the rules have been and at the completion of the 21 days given for stakeholders to give their input. The second phase will commence in 9 months following a successful take-off of the first phase.
The commission is inviting comments from stakeholders on appropriateness of the threshold and the implementation timelines; appropriate process for exit, notification and switching rules and minimum stay period before exit and re-entry can be approved.
Other issues are factors that may be considered in the determination of stranded costs, exit fees and standby charges. In determination of consumption threshold for eligibility criteria, the appropriateness of single load site or an aggregation of multiple load sites; provider of last resort, in the event of third party failure be addressed; proportion of new generation capacity that may be contracted by eligible customer and other criteria that may be applied in the determination of competition transition charges.
ISAAC ANYAOGU
