The Federal Government has directed that certain customers can now buy electricity directly from Generation Companies (GenCos).The Minister of Power, Works and Housing, Babatunde Fashola declared the Customers Eligibility in a statement issued by the Nigerian Electricity Regulatory Commission (NERC) on Friday.
In a step that might have an enormous impact on the power sector value chain. The Minister of Power, Works and Housing, Babatunde Fashola declared that certain Customers will now be Eligible to buy electricity directly from Generation Companies (GenCos)in a statement issued by the Nigerian Electricity Regulatory Commission (NERC) on Friday. This is in line with Section 27 of the Electric Power Sector Reform Act (ESRA) 2005 permits such customers to buy power from a licensee other than the 11 electricity Distribution Companies (DisCos).
However, many believed that the Federal Government will not complicate the value chain by allowing this, but in a shocking twist, the minister of power has gone record to announce that the power sector will, in fact, be moving in that direction the move.
Obviously, the Distribution companies are not particularly thrilled by this move and the Association of Nigerian Electricity Distributors (ANED) have opposed the move saying the electricity market was immature and not competitive to declare eligible customers.ANED’s spokesman,
Mr Sunday Oduntan recently said, “Our understanding is that Eligible Customers may only be declared by the Minister when a competitive market exists in the Nigerian Electricity Supply Industry (NESI).”
ANED insisted that such competitive market, “currently, does not exist,” adding that Section 28 of the EPSRA states that DisCos “must be compensated for any reduction in their ability to “earn permitted rates of return on their assets” or any inadequacy in their revenues.”
Fashola declared four categories that can buy power from GenCos by signing a Distribution Use of System (DUOS) to use the DisCos networks or through the Transmission Use of System (TUoS) if they are larger industries connected to the facilities of the Transmission Company of Nigeria (TCN) directly.
“The new policy directive is expected to bring into play new and stranded generation capacities which may be contracted between GenCos and the customers,” the statement by NERC Head, Public Affairs, Dr Usman Abba-Arabi said.
It clarified that 20 per cent of the generation capacity available for eligible customers must be above customers’ requirement, supplied under a contract with a DisCo “at a price not exceeding the average wholesale price being charged DisCos by the Nigerian Bulk Electricity Trading Plc (NBET).