The Nigerian Electricity Regulatory Commission (NERC) has expressed alarm at power distribution companies’ (Discos) refusal to accept electricity loads despite ongoing blackouts in various parts of Nigeria.
NERC has warned of potential regulatory consequences for Discos failing to meet electricity offtake targets, emphasizing the widening gap between available power capacity and customer demand.
Regulatory Threats and Key Performance Targets:
NERC, in its quarterly report for Q3 2023, highlighted the significant concern regarding Discos rejecting electricity loads.
The report indicated that despite technical and commercial factors contributing to load rejection, Discos could face regulatory actions for not meeting their Partially Contracted Capacity (PCC) targets.
The commission stressed that the current scenario, where available capacity exceeds customer demand, should prompt Discos to offtake their PCC continuously.
Partially Activation of Contract (PAC) Regime:
The PAC regime, implemented in July 2022, established the target volume of energy for Discos as their PCC. Discos, under this regime, bear take-or-pay obligations, requiring them to pay for available power capacity, irrespective of their actual offtake.
This structure aligns with international practices, ensuring compensation for power generation companies for their availability.
Load Rejection Challenges:
Despite expectations, NERC observed a recurring issue where Discos fail to take their full PCC, often due to load rejection for commercial reasons, such as high losses in specific areas.
The commission expressed concern over this practice and initiated regulatory measures to address it.
Key Metrics in Performance Monitoring Framework:
NERC incorporated load offtake as a crucial metric in its KPI Order (Order on Performance Monitoring Framework), effective from October 2022.
Persistent load non-offtake beyond specified thresholds may trigger regulatory actions against non-compliant Discos.
Energy Offtake Performance and Discos:
An analysis of the Q3 2023 report revealed that, on average, energy offtake by Discos at their trading points increased slightly by 0.08 percent compared to the previous quarter.
Notably, all Discos, except Eko and Ibadan, took less than their available PCC during the quarter.
NERC’s Enforcement Measures:
NERC pledged to utilize its Order on Performance Monitoring Framework to enforce regulatory actions against Discos failing to meet offtake ratio targets.
The commission emphasized its commitment to daily monitoring and intervention through the situation room to ensure compliance.
Consumer Groups’ Concerns:
Consumer groups have expressed dissatisfaction with Discos’ load rejection, questioning its continuation amid widespread power supply issues.
Advocacy groups, including the Nigeria Electricity Consumer Advocacy Network, urged NERC to implement disciplinary sanctions to hold power distributors accountable.
Compensation Mechanism and Single-Buyer Model:
NERC clarified that the PAC regime mandates compensation to Discos by Generation Companies (Gencos) or the Transmission Company of Nigeria in case of capacity shortfalls.
Liquidated Damages (LDs) from Gencos are offset against Discos’ invoices issued by the Nigerian Bulk Electricity Trading Plc (NBET), reducing net payables.
Conclusion:
NERC’s vigilance and regulatory threats underscore the urgency to address load rejection issues and ensure that Discos fulfill their offtake obligations.
The ongoing analysis and intervention mechanisms aim to bring transparency and accountability to the power distribution sector in Nigeria.