- DisCos illiquidity may constrain the activation of bilateral power contracts with GenCos.
- NERC had instructed Eko, Ikeja, and Abuja to commence implementing the contracts.
The non-buoyancy of many of the Distribution Companies (DisCos) and the perceived opacity of the project details may pose a serious challenge in the implementation of the bilateral power contracts, which the Nigerian Electricity Regulatory Commission (NERC) has instructed some Discos to activate with Generation Companies (GenCos).
NERC had, in a letter sent to three DisCos, namely: Eko, Ikeja, and Abuja, instructed them to commence implementation of the bilateral power contracts with GenCos with effect from March 31, 2023.
Eko and Abuja DisCos have confirmed the NERC’s instruction, saying they were working towards commencing full implementation this year as instructed by the regulator.
This bilateral power contract is coming after the failure of the Partial Activation exercise superintended by NERC and the Nigerian Bulk Electricity Trading Plc (NBET), with the target that at least 5000 MW of power was generated, paid for 100 per cent and successfully delivered to consumers daily with effect from July 1, 2022.
But GenCos attributed the collapse of the partial activation to the imposition of the contract and its terms on them and the lack of crucial contractual details in the agreement document handed to them by the regulator.
While bilateral contracts may be a boost for the market, however, the indebtedness and poor financial positions of most of the Discos in Nigeria, coupled with the alleged lack of a detailed plan that shows how DisCos will pay for energy bought, agreed sanctions for default by a party amongst other necessary factors have been identified as major concerns that may affect the success of the bilateral regime being promoted by NERC.