• Wednesday, February 28, 2024
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CBN sets up fund for TEM to take off October


The long awaited Transitional Electricity Market (TEM) for Nigeria is set to fully commence next month, October, as the conditions precedent (CP) for its operational efficiency and sustainability have been fashioned out to near total completion.

To this effect, the Central Bank of Nigeria (CBN) has committed to providing money in order to set up a fund which is benchmarked against each stakeholder’s 100 percent invoice for operational costs in order to fully develop the capacity to offer improved services and also have enough time to recoup their investments from vending activities to consumers.

Sam Amadi, the chairman, Nigerian Electricity Regulatory Commission (NERC), stated this weekend during a capacity building workshop for energy correspondents at the commission’s headquarters in Abuja.

While declining to make the amount of money involved in the fund public, Amadi, however, said that the repayment tenure for the fund would be as long as 10 years and would benefit electricity generation companies (Gencos), as well as electricity distribution companies (Discos) and the Transmission Company of Nigeria (TCN), among other relevant stakeholders.

“At the declaration of TEM, the fund is expected to serve as an incentive to the relevant stakeholders operating in the power sector until the next major review of the MYTO when the incentive will be converted to a form of subsidy to directly benefit consumers,” Shettima Abdulkadir, a deputy general manager in the commission, also confirmed.

TEM represents an intermediate step towards an orderly electricity sector from an integrated whole utility to a fully competitive market structure with more differentiated players whose core component is to ensure orderliness in the transition of the monopolistic and inefficient electricity market to a private sector driven and competitive one.

Some of the conditions precedent (CP) which must be met during the interim period between the completion of the privatisation process and the start of TEM include the execution of the market participation agreements, market operations system regulations, market settlement system, and the procedures for registration and admission processes for market participants.

Also, any power generating station that fails to deliver on its electricity generation commitments to the national grid as contained in power purchase agreements (PPAs) signed with the Nigerian Bulk Electricity Trader (NBET) will be sanctioned, just as NBET would not be paid for power not supplied to the distribution companies that ultimately lose revenue for failing to supply improved electricity to households and businesses.