Transitional Stage of Electricity Market Starts

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Sam Amadi

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Wholesale buying and selling of power based on contractual agreements as stated in the order establishing Transitional Stage of Electricity Market has started in Nigeria on February 1 

By Anayo Ezugwu  |  Feb. 16, 2015 @ 01:00 GMT  |

THE Nigerian Electricity Regulatory Commission, NERC, has directed all the electricity market participants to comply with the guidelines on the Transitional Stage of the Electricity Market, TEM, which started on February 1.  The order for the TEM dated December 31, 2014. The take-off of TEM shows that 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 NERC, with the contract-based power market  a greater degree of business and investment certainty has been introduced into the country’s electricity market, with the welcome result of setting an even firmer basis for increasing the amount of electricity available to Nigerians in short order.

Sam Amadi, chairman, NERC, the TEM would ensure more discipline, corporate governance, guarantee recovery on investment as well as give certainty for a sustainable and growing electricity market that would serve the need of Nigerians. “Conditions precedent set out in the market rules and subsequently agreed to be necessary for effective TEM have been satisfactorily fulfilled. With effect from February 1, 2015, the amendments to the market rules and application and enforcement of the 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,” he said.

One of the implications of TEM is that the gas bottleneck which has constrained electricity supply would be reduced as gas will be supplied to electricity generation firms on a legally binding basis as regards delivery and payment. Besides, the failure of electricity distributions companies to pay for energy bought from generation firms and for deliveries on their privatisation performance obligations will now attract sanctions in line with the market rules and contractual obligations.

The order also directed all relevant market participants, service providers and the Nigerian Bulk Electricity Trading Plc, NBET, to comply with effect from February 1, 2015. 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, MYTO 2.1, that was approved on December 24, 2014, and became effective from January 1. The tariff Order ensures that market participants now have a cost reflective tariff.

The Tariff Order is one of the major conditions precedents for takeoff of 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.

Chinedu Nebo, minister of power, had on December 24, 2014, declared that TEM would commence trading from January 1, 2015. But the trading was stalled due to disagreement between gas suppliers, power generating companies and the Nigerian Bulk Electricity Trading Plc. Gas companies had insisted that until a letter of credit covering one year was provided by the GENCOS they were not going to sign-up to TEM. The rules for the market had provided for a letter of credit covering only three months.

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