The Nigerian Electricity Regulatory Commission (NERC) recently dis¬closed its decision to put on hold the declaration of the transition electricity market (TEM), which was originally slated for March 1, 2014, pending when all the expected conditions precedent have been satisfied.
The decision, reportedly sup¬ported by new investors in the power sector, was said to have been largely informed by the gas supply challenge still plaguing the Nigerian electricity supply industry as well as the decline in the capacity of the new players to meet their obligations to all stakeholders.
Some of the conditions prec¬edent, 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 agreement, market operations system regulations, market settlement system, and the procedures for registration and admission processes for market participants.
The Electric Power Sector Re¬form Act (EPSRA) 2005 established three market stages that define gradual competitiveness in the power privatisation market, which include TEM, mid-term electricity market and final/mature electricity market.
The TEM stage represents the intermediate step to move the elec¬tricity market in an orderly manner from an integrated whole utility to a fully competitive market structure with more differentiated players.
The core component of the TEM stage is ensuring orderliness in the transition of the monopolistic and inefficient electricity market to a private sector driven and competi¬tive one.
For instance, the declaration of TEM would make it mandatory for the Nigerian Gas Company (NGC) to be penalised if it fails to deliver on its gas supply commitments to the power producers, in line with Gas Supply Agreement signed in 2013.
Also, any power generating station that fails to deliver on its electricity generation commitments to the national grid according to the Power Purchase Agreements signed with the Nigeria Bulk Electric¬ity Trader (NBET) Plc will also be sanctioned. And the NBET would not be paid for power not supplied to the distribution companies who ultimately lose revenue for failing to supply improved electricity to households and businesses.
Apparently, electricity consumers are looking forward to the declara¬tion of the TEM sooner than later as it would help put the new investors on their toes to ensure better service delivery.
But the conclusion of the agree¬ments and regulations which make up the conditions precedent will not be a cakewalk, considering the enormity of the challenges facing the sector