Three years after, heavy power consumers who were declared eligible customers within the Nigerian Electricity Supply Industry (NESI) who could buy power directly from electricity generation companies (GenCos), are still unable to benefit from the initiative.
These electricity consumers were declared eligible customers in May 2017 by the Minister of Power acting on powers from the Electric Power Sector Reform Act (EPSRA) 2005.
A review of the Nigerian Electricity Regulatory Commission’s reports and remarks made by its officials indicates that the regulator was not satisfied that the applicants would not sell already contracted power to the grid under the framework.
According to Dafe Akpeneye, NERC’s commissioner, legal regulatory licensing, most GenCos have already contracted all generated power to the national grid in their various Power Purchase Agreements (PPAs) with the Nigerian Bulk Electricity Trading (NBET), hence the Commission has refused to approve their resell under the Eligible Customer arrangement.
“GenCos cannot be paid twice for the same product. They need to go and renegotiate those PPAs with NBET to free up the capacity they want to sell to eligible customers,” Akpeneye explained at BusinessDay Energy Conference held last week.
NERC, in its latest quarterly report, notes that no new eligible customer application was received as at Q4 2019. The Commission further says it continued with the technical evaluation of 14 existing Eligible Customer applications with a total capacity of 245.455MW.
“During the quarter under review, no new eligible customer application was received but the Commission continued with the technical evaluation of 14 existing Eligible Customer applications with a total capacity of 245.455MW,” NERC notes in its latest quarterly report.
However, the regulator may not be entirely blameless. After publishing the regulation in 2017, it was only on July 30, 2020, it issued the guidelines on filing applications for a key component of the regulation, the Competition Transition Charge.
The framers of the ESPRA understand that migrating large-scale electricity users from DisCos network will cause a massive revenue loss. So, it provides a mechanism for DisCos to recover the cost by mandating beneficiaries, the EPSRA had contemplated that NERC would implement CTCs to cushion these effects.
The CTC is a charge to be collected by the DisCos in addition to the approved tariff under the Multi-Year Tariff Order, as compensation for its loss of revenue in respect of committed prudent expenditures, and inability to earn the permitted rates of return on its assets as guaranteed by the EPSRA, in each case, resulting from the exit of an eligible customer (EC) from the DisCo or NBET’s network.
“However, since the introduction of the EC regime, stakeholders across the sector value chain have long awaited the implementation of the CTC framework with keen interest,” said analysts at Olaniwun Ajayi, led by Wolemi Esan, in their review of the CTC guidelines.
According to the analysts, the guidelines may yet present a fresh set of challenges. For example, “while the guidelines prescribe that the DisCos are to make projections of losses that may be suffered, there is a chance that the loss actually suffered may exceed the projections made by the DisCos as some losses may not reasonably be envisaged prior to the exit of the EC,” the analysts said.
The guidelines also do not provide clarity on what would be the penalty for non-payment on the part of the EC, especially as the penalty for non-payment of tariffs is typically the disconnection of the defaulting customer.
The new guidelines also do not seem to take into account end users that have already exited the DisCos’ networks and have since implemented off-take arrangements with GenCos according to the analysis.
The impact of these, experts say, is that implementation of the regulation may further be delayed. The Manufacturers Association of Nigeria (MAN) says 40 percent of business cost goes to paying for power due to Nigeria’s creaking national grid. The use of dirty fuels like diesels contributes to environmental pollution.
The contractual framework contemplated in the Eligible Customer regulation is such that the distribution companies, the Transmission Company of Nigeria as well as power producers all stand to generate some revenue depending on the particular class of customers involved and the signing of agreements.
According to NERC, the first category of eligible customers comprises of a group of end-users registered with the Commission whose consumption is no less than 2MWhr/h and connected to a metered 11kV or 33kV delivery point on the distribution network and subject to a distribution use of system agreement for the delivery of electrical energy.
The next category of eligible customers are those connected to a metered 132kV or 330kV delivery point on the transmission network under a transmission use of system agreement for connection and delivery of energy.
Other categories of customers under the declaration consist of those with consumption in excess of 2MWhr/h on monthly basis and connected directly to a metered 33kV delivery point on the transmission network under a transmission use of system agreement.
The last category are eligible customers whose minimum consumption is more than 2MWhr/h over a period of one month and directly connected to the metering facility of a generation company.
