NERC To Decide On NBET’s Application For Five-Year License Renewal -Akpeneye
By Sunday Etuka, Abuja
The Nigerian Electricity Regulatory Commission (NERC) says it would decide on the necessity to renew the trading license of the Nigerian Bulk Electricity Trading Company Plc (NBET), which will expire on November 21, 2024.
NERC Commissioner, Legal, Licensing, and Compliance, Dafe Akpeneye, made this declaration at the Public Hearing on the application filed by NBET for the renewal of the license, held at the Commission’s Headquarters on Thursday in Abuja.
Speaking earlier in a presentation to justify the need for five-year trading license renewal as the power sector enters into bilateral regime, the Acting Managing Director of NBET, Mr. John Akinnawo, said NBET transparently administered contracts with an annual trading volume in excess of $2 billion.
Akinnawo contended that the renewal of the license would aid in the recovery of outstanding debts owed to NBET by Distribution Companies (DisCos), International Customers, Market Operators, and Ajaokuta Steel Company Limited.
He said the renewal of the license would enhance the rapid growth of the market, create a diversified trading environment, and play a key role in closing the supply-demand gap for electricity in the country.
According to him, the renewal of the license would also catalyse a self-sustaining electricity market where public funding and guarantees will cease to be the key drivers of investments and transactions.
The MD said the renewal would promote bilateral trading between the GenCos/Independent power producers and commercial industrial customers.
It would also help with the review of existing PPAs, with a view to deriving further value for the electricity market.
Speaking in support of the renewal of the license for NBET, the Managing Director of Azura Power, Edu Okeke, submitted that NBET’s license should be renewed indefinitely in order to encourage market liquidity and stability.
Corroborating him, the General Manager, Regulation, ISO, TCN (Market Operator), Engr. Edmund Eje, said there is no better entity that would play the role like NBET, therefore, NBET should be given the opportunity to midwife the market to fruition.
In his response, Commissioner Akpeneye said the Commission was yet to decide on which way to follow, noting that on the strength of the presentation, a decision would be taken.
He said the meeting was convened to harvest stakeholders inputs on the matter, adding that the sector was moving to a bilateral contracting regime where parties will bear the terms of their contracts instead of running to government or the regulator.
He stressed that the legal framework has changed with the advent of the Electricity Act so, it is now strictly private.
Recall that the Electricity Power Sector Reform Act (EPSRA) created NBET to buy and sell electricity in bulk from power producers, and to temporarily help resolve the liquidity issue in the sector.
NBET was licensed as a bulk trader by the Commission on August 23, 2011. The license issued to NBET had a tenure of 10 (ten) years and was subject to renewal as may be determined by the Commission.
Following stakeholder engagements on NBET’s continued role in Nigerian Electricity Supply Industry (NESI), the Commission renewed the initial 10-year license 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 into new contracts for buying and selling of electricity and transfer its current contracts to new buyers.
Consequently, in July this year, NERC issued an order stopping NBET from entering into new contracts for the purchase and resale of electricity and ancillary services in 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-generation companies as other traders emerge in the sector.
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).
The Commission had, since 2022, issued trading licenses to 10 (ten) private companies that have indicated interest in trading electricity bilaterally with DisCos and eligible customers.
NERC revealed that 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 said it 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.
