Policy Allows Customers Buy Power Directly From GENCOs

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Policy Allows Customers Buy Power Directly From GENCOs

With the new Policy set by NERC eligible customers can now buy power directly from electricity generating companies GENCOs.

The policy which was approved by the Nigerian Electricity Regulatory Commission, NERC, and presented to Babatunde Fashola, Minister of Power, Works, and Housing, is expected to enable large power users, LPU, have options to get electricity from operators other than the electricity distribution companies, DISCOs. With the rollout of the policy, each of the four categories of eligible customers in the electricity market now has an option: either to contract supply directly from the GENCOs or to demand robust supply regime from their DISCOs.

The new policy, however, did not specify actions to take if a DISCO fails to provide robust electricity supply. These customers can exit from a DISCO after a three-month notice to it, and also reconnect following the same procedure.

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The DISCOs through the Association of Nigerian Electricity Distributors, ANED, said the sector was not ripe for the declaration. Sunday Oduntan, a spokesman for ANED, said the electricity market is not competitive at this stage to trigger the declaration. Reacting, NERC said the commission expects that since some customers will cut out from the DISCOs, they should have more power to give to the existing customers to raise their revenue.

In the regulation, there is a provision for what is described as tariff rebalancing. In a situation where the impact of the exit of some eligible customers significantly impacts on the recovery of approved revenues by the DISCOs, NERC may consider tariff rebalancing and that, “the impact of the rebalancing may require a slight revision of tariffs for some classes of customers.

The Competition Transition Charge, CTC, which is backed by Section 28 of the Electric Power Sector Reform, EPSR Act 2005. The CTC, according to the regulation, will be an additional 20 percent of the tariff being paid by the eligible customer. However, the Association of Power Generating Companies, APGC, is in support of the new policy. The group, which represents the GENCOs, said the declaration will ensure that issues of over 2,000 megawatts, MW, stranded electricity generation and poor market liquidity will be resolved as the DISCOs are not remitting enough to the market to boost further sector investments.

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