The Nigerian Bulk Electricity Trading Plc (NBET) is set to exit the electricity market as the Nigerian Electricity Regulatory Commission (NERC) is licensing multiple firms that will buy and sell electricity in bulk from the power generators.
NERC, in an Order dated July 25, 2024 signed by its Chairman, Engr. Sanusi Garba, and Commissioner, Legal, Licensing and Compliance, Dafe Akpeneye, said, “NBET shall forthwith cease to enter into new contracts for the purchase and resale of electricity and ancillary services in Nigerian Electricity Supply Industry (NESI)”.
The Commission said, any contract executed by NBET in violation of this Order shall not be approved by the Commission and shall be treated as an infraction that is subject to regulatory sanction.
It has also cut NBET energy trading to five GenCos as other traders emerge.
It said, NBET shall, in the interim, continue to administer the fully effective contracts with 5 (five) Generation Companies (GenCos): Azura Power West Africa Ltd, Omotosho Power PLC, Olorunsogo Power PLC, Nigerian Agip Oil Company Ltd, and Shell Petroleum Development Company of Nigeria Ltd. based on the minimum “take or pay” capacities contained in their respective Power Purchase Agreements (PPAs).
NERC said, the capacity from the 5 plants shall be vested to Distribution Companies (DisCos) based on the guaranteed share of capacity contained in their respective vesting contracts.
Recall that the Electricity Power Sector Reform Act (EPSRA) created NBET to buy and sell electricity in bulk from power producers. NBET was meant to help with the sector’s financial problems temporarily.
NBET was licensed as a bulk trader by the Commission on August 23, 2011. The licence issued to NBET had a tenure of 10 (ten) years and subject to renewal as may be determined by the Commission.
Following stakeholder engagements on NBET’s continued role in NESI, the Commission renewed the initial 10-year licence issued to NBET upon expiration in August 2021 but for a term of 3 years, noting that the continued role of the NBET in the market has been a disincentive for the transition to bilateral contracting between DisCos and GenCos thus exposing the FGN to the risk of revenue shortfalls beyond tariff support.
As part of transitioning to medium-term and long-term electricity markets, the EA empowers NERC to instruct NBET to stop entering new contracts for buying and selling of electricity, thus asked NBET to transfer its current contracts to new buyers as the Act specified.
The Commission had, 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.
According to NERC, 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.
TheFact Daily gathered that following this development, NBET has only one year to exit the Nigerian electricity market.
