The Nigeria Electricity Regulatory Commission (NERC) has directed the Nigeria Bulk Electricity Trading (NBET) company to immediately cease entering into new contracts for the purchase and sale of electricity within the Nigerian Electricity Supply Industry (NESI).
This directive was issued in an Order signed by NERC Chairman Mr Sanusi Garba and Mr Dafe Akpeneye, Commissioner for Legal, Licensing, and Compliance, on Sunday, July 28, 2024, in Abuja.
The Order highlights that since 2022, up to 10 firms have been licensed and shown interest in trading electricity directly with Distribution Companies (DisCos) and eligible customers. Under the new order, NBET must stop engaging in new electricity and ancillary services contracts.
Any contract executed by NBET in violation of this order will not be approved and will be considered an infraction subject to regulatory sanction.
The new directive allows DisCos to purchase electricity directly from generation companies (GenCos) without NBET acting as an intermediary. NBET is instructed to continue managing existing contracts with five specified GenCos based on their “take or pay” capacities or the average available capacity of their plants in 2023. Capacity from these plants will be allocated to DisCos according to their vesting contracts.
The objectives of this new initiative are to:
- Encourage direct energy contracts between generators or traders and DisCos to reduce the Federal Government’s financial risks.
- Create a more competitive market by changing NBET’s role from being the sole bulk electricity trader.
- Allow hydro and thermal generators with “take-and-pay” contracts to trade directly with DisCos.
- Shift bulk energy trading contracts to “take-or-pay” agreements to increase certainty and discipline among market participants.
Notably, the Electricity Power Sector Reform Act (EPSRA) established NBET to temporarily buy and sell electricity in bulk from power producers to address financial issues in the sector. NBET was licensed as a bulk trader by NERC on August 23, 2011, with a 10-year tenure and potential for renewal as determined by the Commission.