- DisCos can now procure electricity directly from GenCos through bilateral contracts.
- This new development comes as NBET exits the NESI market.
The Federal Government, through the Nigerian Electricity Regulatory Commission (NERC), has permitted Electricity Distribution Companies (DisCos) in Nigeria to buy electricity directly from power generation companies (GenCos). NERC disclosed this in its 2024 Multi-year Tariff Order (MYTO) issued to the country’s 11 DisCos. This new development comes as NBET exits the NESI market. The regulator stated that the DisCos can procure electricity directly from GenCos through bilateral contracts.
NERC said the new order recognises a revision to the DisCos’ partially contracted capacity to ensure a minimum energy offtake from January 1 2024. It also added that this year’s minimum energy offtake requirement for the 11 DisCos is 4,063MWh/h. The MYTO further showed that the regulator expects the DisCos to secure adequate bilateral contracts to facilitate a seamless exit from the Nigerian Bulk Electricity Trading Plc’s (NBET) vesting contract regime.
The regulator explained that through bilateral contracts, the DisCos are required to mitigate their exposure to volumetric energy risks, adding that they would have no recourse to claim revenue shortfall arising from generation shortfalls effective January 2024. The development will end the ten-year reign of NBET, which buys electricity in bulk from generation companies through power purchase agreements and sells through vesting contracts to the DisCos. Some of the 11 DisCos are already making moves to purchase electricity from the GenCos.