The recent directive from the Nigerian Electricity Regulatory Commission (NERC) has stirred considerable debate within the power sector. NERC has instructed Distribution Companies (DisCos) to move away from the existing single-buyer model contract with energy generation companies (GenCos).
This shift, introduced in July, is part of a broader effort to unbundle the electricity value chain within the Nigeria Electricity Supply Industry (NESI).
Under the new regulation, DisCos are mandated to establish direct contracts with GenCos, thereby bypassing the government-owned Nigerian Bulk Electricity Trading Company (NBET).
While this change is intended to streamline and improve the efficiency of contract agreements in the power sector, it has sparked concerns about potential contract breaches and disruptions.
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Officials from various DisCos have expressed that the transition may be more complex than anticipated. The move aims to create a more direct and transparent contractual relationship between power generators and distributors, but it also introduces new challenges that could impact the overall stability and functioning of the sector.
The ultimate effects of this directive on end-user customers and the broader electricity market remain to be seen, as the sector navigates this significant transformation.
With the removal of the Nigerian Bulk Electricity Trading (NBET), Distribution Companies (DisCos) are now responsible for upholding certain contracts initially managed by the federal government with generating companies. This includes continuing costly contracts like those with the Azura power plant, even if other options are available.
Under the new bilateral power arrangement, Distribution Companies (DisCos) will prioritize purchasing electricity from Generation Companies (GenCos) based on their minimum power needs.
Hydroelectric power, often the most cost-effective, will be the top choice. To avoid any single DisCo monopolizing this resource, each will be allowed to buy only a proportionate share of the hydroelectric power based on their grid allocation.