FG activates new electricity system today

Activities in the power sector today enters a critical stage with the commencement of the Transitional Electricity Market (TEM) that ensures that all contracts and agreements between operators become activated and effective.

TEM was declared by the Minister of Power, Chinedu Nebo, having been satisfied that all Conditions Precedents (CPs) have been met.

With the commencement of TEM all contracts entered into at privatisation of the sector would be activated and activities in the electricity market would carry the obligations outlined in the contracts.

A framework of contracts, regulations, market rules, systems and processes will drive the electricity market under TEM.

Chidi Onyia, Chief of Staff to Nebo, explained in Abuja on Wednesday that while the benefits of the power sector reform are expected to be gradual due to decades of neglect suffered by the sector, the commencement of TEM increases the performance expectations for all the new market participants and facilitates the much needed discipline in the market.

“It demonstrates that the power sector is maturing and advancing in the right direction under the right conditions, within the right environment,” he said.

He stated that under TEM “all parties pay for services received and are paid for services rendered. Unlike before, there are consequences for market participants who fail to deliver on contracted services. It is expected that the activation of contracts will lead to market behaviour that will produce sustainable and comprehensive electricity supply to Nigerians.”

“As it is in other climes, in electricity markets around the world, tariff will adjust automatically when there are changes in key market inputs such as gas, however, within a regulatory framework. “Furthermore, tariff adjustments will occur to attract needed investments and NERC, in its role as the power sector regulator, will ensure that there is no abuse of market power or exploitation of its customers,” he stated.

Onyia explained further that the new transitional electricity market “will protect electricity consumers from market inefficiencies by ensuring that market contracts are adhered to while liabilities would be allocated to the appropriate contracting parties.

“Unfortunately, over all, Nigerians have been deprived of this necessity for far too long. We urge fellow Nigerians to join us in this reform process by paying their electric bills and to report any fraudulent activity or act of vandalism of their electric power infrastructure to the appropriate authorities,” he stated.

Under TEM all the power generation companies (gencos) and independent power producers (IPP) trade with the 11 electricity distribution companies (discos) through the Nigerian Bulk Electricity Trading Company (NBET-Special Trader).

According to the Nigerian Electricity Regulatory Commission (NERC), under TEM, the network would be operated by the Transmission Company of Nigeria (TCN) which serves as the Transmission Service Provider (TSP) with the Independent System Operator (ISO) housing the System Operator (SO) and the Market Operator (MO). Both the SO and MO will work with NERC to manage the system.

“The SO will actually tell a power station to come on or to go off to make sure that the system is maintained. As the SO is doing this there are meters to measure who is taking what and for how many hours, the data is communicated directly to the MO on how the invoicing is to be done.

While NBET enters into power purchase agreement with the generation companies, it goes into vesting contracts with the discos.

The market rules provide the guidelines for trading in the various stages of development but ultimately the market aim is to get to the competitive stage where there will be no need for NBET and other intermediaries. But the discos are able to go into bilateral agreements with gencos and electricity traded, and the operators make sure that invoicing is done and payments made accordingly.

NERC had last week approved a new tariff regime in preparation for the take off of TEM.