LEGIT NG
Power distribution companies (DisCos) in Nigeria have received a nod from the Nigerian Electricity Regulatory Commission (NERC) to buy electricity directly from commodity producers.
This development comes after ten years of relying on an intermediary called the bulk trader.
Through power purchase agreements, the government-owned Nigerian Bulk Electricity Trading Plc (NBET) usually purchases electricity in bulk from production companies and sells it to distribution companies (DisCos) through vesting contracts, with the latter supplying it to the end users.
No more intermediaries
With the new development, BusinessDay reported that DisCos can now purchase power directly from GenCos through bilateral contracts, according to the Nigerian Power Regulatory Commission (NERC) in the Multi-Year Tariff Order 2024.
According to the documents, the changes came after 11 electricity distribution companies in the nation indicated plans to withdraw from the NBET’s vesting contract regime in their tariff review petitions.
The regulator stated that on January 1, 2024, the revised order acknowledged a modification to the partially contracted capacity (PCC) of the DisCos to guarantee a minimum energy offtake.
This year, the 11 DisCos must meet a minimum energy offtake requirement of 4,063MWh/h.
It added that the DisCos are required to secure adequate bilateral contracts, which will help facilitate a seamless exit from NBET’s vesting contract regime.
NERC said the DisCos must reduce their exposure to volumetric energy risks through bilateral contracts.
