The Nigeria Electricity Regulatory Commission (NERC) has ordered the Nigeria Bulk Electricity Trading (NBET) to cease forthwith entering into new contracts of purchasing and resale of electricity in the Nigeria Electricity Supply Industry (NESI)
This followers NERC order on the Transition to Bilateral Trading in the Nigerian Electricity Supply Industry (NESI) which takes effect from 25 July 2024 and shall remain in force till otherwise stated. This is against the background that NERC has also licenced 10 private companies that have indicated interest in trading electricity bilaterally with DisCos and eligible customers.
However, NERC directed NBET to continue to administer the fully effective contracts with five GenCos: Azura Power West Africa Ltd, Omotosho Power Plc, Olorosungo Power Plc, Nigerian Agip Oil Company Ltd, and Shell Petroleum Development Company Ltd.
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The Order dated 25 July was jointly signed by NERC Chairman, Sanusi Garba and Commissioner Legal, Licensing and Compliance, Dafe C. Akpeneye.
NBET was incorporated on 29 July 2010 by the Federal Government of Nigeria to act as a credible and creditworthy off-taker and to be provided with credit support and/or capitalisation by the Federal Government thus enabling the company guarantee payments to GenCos while facilitating bankable project financed independent power projects.
NBET was subsequently licensed as a bulk trader by the NERC on 23 August 2011 with a key mandate of procuring and sale of bulk electricity and ancillary services to DisCos, pursuant to sections 25 (a) and 68(2) of EPSRA and parts 5 and 7 of the Market Rules for Transitional and Medium-Term Stages of NESI (“Market Rules”). The licence issued to NBET had a tenure of 10 (ten) years and subject to renewal as may be determined by the Commission.
The energy and capacity contracted by NBET is vested onto DisCos based on the guaranteed share of capacity as provided in the executed Vesting Contract (“VC”) between NBET and the DisCos.
NERC Explains: “The Commission has, since 2022, issued trading licences to 10 (ten) private companies that have indicated interest in trading electricity bilaterally with DisCos and eligible customers. The interest in electricity trading so far indicates that there is significant potential in the wholesale trade of electricity outside the NBET single buyer pool.
“The Commission has further received requests for regulatory approval from some of the aspirational DisCos for the purchase of electricity from parties other than NBET, i.e. directly from the GenCos or through other trading licensees.
“On the supply side, the Commission has further received notifications from several GenCos signalling their intention to exercise the partial or full exit rights contained in their PPAs with NBET with a view to contracting for the supply of electricity directly to DisCos, other bulk traders and eligible customers, in furtherance of the provisions of the Act.
“The key incentive of GenCos contracting bilaterally for energy and capacity with DisCos is to secure satisfactory off-take commitments backed by some form of payment guarantees, thus enabling more predictability in generation and gas availability.”
NERC further granted all other power plants with “take and pay” Power Purchase Agreements (PPAs) or interim energy sales agreements with NBET 60 days from the commencement date of this Order to negotiate and contract with DisCos on bilateral agreement basis the capacity currently with NBET.
