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7 Nov 2017

Customers Now To Buy Electricity Direct From Gencos - FG Reveals

The power generating companies will henceforth be allowed to deal directly with customers according to a fresh reform made by Fashola.
Mr Babatunde Fashola
The Minister of Power, Works and Housing, Mr Babatunde Fashola, yesterday endorsed the regulation for the ‘Eligible Customer’ for four categories of customers that he declared on May 15, 2017.

The regulation which was approved by commissioners at the Nigerian Electricity Regulatory Commission (NERC) on November 1 and presented to Fashola on Monday, is expected to enable Large Power Users (LPU) have options to get electricity from operators other than the 11 Distribution Companies (DisCos).

With the declaration and subsequent roll out of the regulation, each of the four categories of eligible customers in the electricity market now has an option; either to contract supply directly from the Generation Companies (GenCos) or to demand robust supply regime from their DisCos.

The new regulation of NERC obtained by Daily Trust set out certain customers that can buy power directly from the GenCos without passing through the 11 DisCos as has been the case.

These customers can exit from a DisCo after a three-month notice to it, and also reconnect following same procedure, the regulation says. Speaking after the presentation at his office in Abuja, yesterday, Fashola noted that NERC is the umpire of the power sector and gives effect through regulations to policy statements of the ministry.

The minister who recounted the gains and challenges of the new regulation, said it will help more customers to get power supply and ensure that more private investments are brought into the distribution value chain of the sector.

Presenting the regulation earlier, the Vice Chairman of NERC, Engr. Sanusi Garba, said the commission formed an internal committee led by Shamsudeen Mahmud who led a team of professionals to draft the consultation paper.

”The commission also benefited from technical advisory support from USAID because we needed to leverage on the experience of the emerging economies in the area of eligible customers.

The commission has set a two phased implementation process beginning with the immediate registration of customers who are eligible to cut off from the DisCos and have their electricity supply through the GenCos or the Transmission Company of Nigeria (TCN).

There is potential for loss of some customers at the 11 DisCos which may result in lower revenues for the incumbent regulated utilities. The DisCos through the Association of Nigerian Electricity Distributors (ANED), said the sector was not ripe for the declaration.

In an earlier position presented by their spokesman, Mr Sunday Oduntan, ANED spoke on the backdrop of the electricity market not being competitive at this stage to trigger the declaration.

Addressing this, NERC said the commission expects that since some customers will cut out from the DisCos, they should have more power to give to the existing customers to raise their revenue.

In the regulation, there is a provision for what is described as tariff rebalancing. Daily Trust reports that in a situation where the impact of the exit of some eligible customers significantly impacts on the recovery of approved revenues by the DisCos, NERC may consider tariff rebalancing and that, “the impact of the rebalancing may require a slight revision of tariffs for some classes of customers.”

There is also another section, the Competition Transition Charge (CTC) which is backed by Section 28 of the Electric Power Sector Reform (EPSR) Act 2005. The CTC, according to the regulation, will be an additional 20 per cent of the tariff being paid by the eligible customer.

The Association of Power Generating Companies (APGC) backed the declaration. The group, which represents the GenCos, said the declaration will ensure that issues of over 2,000mw stranded electricity generation and poor market liquidity will be resolved as the DisCos are not remitting enough to the market to boost further sector investments, the Executive Secretary, Dr. Joy Ogaji, said in an earlier statement.

She also noted that issues of load rejection by DisCos will be over as such excess power will be channeled to the eligible customers and no longer to the DisCos.

President, Nigeria Consumer Protection Network, Mr. Kunle Olubiyo, said declaring eligible customers became important to drive competition in the post privatisation era, he said.

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