The Nigerian Electricity Regulatory Commission (NERC) on Tuesday stated that a greater degree of business and investment certainty had been introduced in the Nigeria’s Electricity Supply Industry (NESI).
NERC said in Abuja that NESI had finally attained the much-awaited TEM, whereby wholesale buying and selling of electricity was now based on contractual and regulatory rules, which is binding on all operators in the market.
The NERC had officially declared the Transitional Electricity Market (TEM) to start in NESI from Sunday, February 1.
The regulatory commission in an official statement explained that henceforth, it expects an improvement in gas supply to generation companies, as well as timely and appropriate remittance of revenues for purchased electricity from the various distribution companies in the market.
It noted that with effect from February 1 amendments to the market rules, its application and enforcement has now come into full force to guarantee certainty and discipline in electricity trading within the country, adding that breach of these rules would be met with stiff penalties.
“Sequel to an order of the NERC directing all electricity market participants on the take-off of the TEM with effect from February 1, 2015 and with this development, a greater degree of business and investment certainty has been introduced into the country’s electricity market, with the welcome result of setting an even firmer basis for increasing the amount of electricity available to Nigerians in short order,” NERC said in the statement.
NERC’s Chairman, Dr. Sam Amadi, was quoted to have underlined the importance of TEM to NESI when he said: “This will ensure more discipline, corporate governance, guarantee recovery on investment as well as give certainty for a sustainable and growing electricity market that would serve the need of Nigerians.”
Additionally, NERC stated in its order to market participants that the conditions precedent set out in the market rules and subsequently agreed to be necessary for effective TEM have been satisfactorily fulfilled.
“With effect from February 1, the amendments to the market rules and application and enforcement of the said market rules shall be in full force. With the effectiveness of the market rules, as amended, the TEM shall commence with effect from the same date.
“One of the implications of TEM is that the gas bottleneck which has constrained electricity supply would be reduced as gas will be supplied to electricity generation firms on a legally binding basis as regards delivery and payment,” it said.
The commission added that: “Besides, the failure of electricity distributions companies to pay for energy bought from generation firms and for deliveries on their privatisation performance obligations will now attract sanctions in line with the market rules and contractual obligations.”
According to the statement, the order dated December 31, 2014, further directed all relevant market participants, service providers and the Nigerian Bulk Electricity Trading Plc (NBET) to comply with effect from February 1, adding that from that date, the market would now be governed by the strict application of the terms and conditions of the Multi Year Tariff Order 2.1 (MYTO 2.1) that was approved on December 24, 2014 and became effective from January 1, 2015.
“This tariff order ensures that market participants now have a cost reflective tariff. The tariff order is one of the major conditions precedents for take-off of TEM.
Some other conditions include the constitution of a Dispute Resolution Panel (DRP) and Initial Stakeholder Advisory Panel (ISAP), approval of the grid code and the market rules and their implementation, among others,” it added.