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What suspension of eligible customer transactions means for Nigeria’s power sector

What suspension of eligible customer transactions means for Nigeria’s power sector

The decision of the Transmission Company of Nigeria (TCN) to suspend the eligible customers’ operations has generated mixed reaction from different stakeholders in Nigeria’s power sector.

Following recommendations from the Nigeria Electricity Regulatory Commission (NERC), TCN suspended the eligible customer transactions, a policy that allows the generation companies (GenCos) to sell power directly to consumers without passing through the electricity Distribution Companies (DisCos).

“Following a letter from the Nigerian Electricity Regulatory Commission (NERC) dated 7th July, 2021, the commission ordered the suspension of all eligible customers transactions without its approval,” NERC said in a letter with reference no: TCN/MO/003/071/002/2021.

“NERC directed TCN to forthwith stop all eligible customer transactions pending the conclusion of the review and approval of the respective applications for eligible status by the commission,” the letter added.

What it means

The above development means that all customers or groups of end-use customers registered with NERC whose consumption of electricity is no less than 2MW/hr will no longer be allowed to purchase bulk electric power from Gencos, rather they will have to deal directly with Discos.

Read also: Can Batteries Improve the Reliability of Nigerian Electricity?

It also means industries connected to a metered 132kV or 330kV delivery point on the transmission network or end-use customers, whose consumption is in excess of 2MWhr/h over the course of one month will no longer have the exclusive rights to buy power directly from Gencos.

Daniel Adebayo, a Lagos based energy lawyer exposed to Nigeria’s power sector refinery business said the original ideals of the eligible customer transactional framework was designed to give end users of electricity the right to choices or options in a near 100 percent monopolistic electricity market.

“The reality is market operators are stifling competition in ways and manners that are inimical to the collective national economic interests,” Adebayo said.

Ayodele Oni, an energy lawyer at Bloomfield Law believed eligible customer transactions was a long term initiative that would have usher in a transition from a monopolised power distribution market to a fairly competitive one and in turn, bring about significant economic growth.

“The unrestricted access to electricity by the qualified consumers will boost commercial businesses and compel other distribution companies to deliver quality and reliable power in a bid to measure up,” Oni said.

Explaining why eligible customer transactions had not had the desired impact, NERC said Genco’s duplication of power contracts is the main reason why the Eligible Customer regulation seems not to be working despite the huge potentials it provides.

According to NERC, most Gencos contracted all their Power Purchase Agreement (PPA) to Nigerian Bulk Electricity Trading (NBET) and at the same time desires eligible customers transactions which are not financially viable.

“Gencos can’t be paid twice for the same product. They need to go and renegotiate those PPA with NBET to free up the capacity they want to sell to eligible customers.” Akpeneye explained at a BusinessDay Energy event series.

Concept of Eligible customers

In July 2018, the immediate past Minister of Power, Babatunde Fashola, announced the introduction of the Eligible Customer policy, explaining that it would accelerate power supply to industries and heavy consumers.

Under the framework, large scale power users or companies can purchase power directly from generation companies without necessarily going through the distribution companies.