The Nigerian Electricity Supply Industry and the Eligible End-Users
Recently, the Minister of Power, Works and Housing, Babatunde R. Fashola issued a directive – the EC Directive – to Nigerian Electricity Regulatory Commission (NERC) specifying the classes of end-users constituting ‘eligible customers’ in the Nigerian Electricity Supply Industry (NESI), pursuant to Section 27 of the Electric Power Sector Reform Act, 2005 (EPSRA), which allows consumers get supplies directly from a licensee i.e. power Generation Companies (GenCos).
The EPSR Act of 2005 defines ‘eligible customer’ as ‘a customer that is eligible, pursuant to a directive or directives issued by the Minister under Section 27, to purchase power from a licensee other than a distribution licensee.’
By the EC Directive, the NESI welcomed a new class of customers who are eligible to purchase electricity directly from the Generation Companies. In essence, these customers are now entitled to sidestep the electricity distribution companies (the DisCos) and enter into direct contracts with the GenCos for the purchase of electricity.
The four classes of end-users who, based on their level of consumption of power and their point of connection on the network, qualify as eligible customers include;
- End-users registered with NERC whose consumption is no less than 2MWhr/h and are connected to a metered 11kV or 33kV delivery point on the distribution network subject to a distribution use of system agreement for the delivery of electrical energy.
- End-users connected to a metered 132kV or 330kV delivery point on the transmission network under a transmission use of system agreement for connection and delivery of energy.
- End-users whose consumption is more than 2MWhr/h on a monthly basis and are connected directly to a metered 33kV delivery point on the transmission network under a transmission use of system agreement. Eligible customers in this category must have entered into a bilateral agreement with the distribution licensee licensed to operate in the location, for the construction, installation and operation of a distribution system for connection to the 33kV delivery point.
- End-users whose minimum consumption is more than 2MWhr/h on a monthly basis and are directly connected to the metering facility of a Generation Company. Again, customers in this category are required to have entered into a bilateral agreement with the distribution licensee licensed to operate in the location for the construction and operation of a distribution line.
Implications of the Policy Directive on the NESI
- Confers on consumers’ power to choose energy supplier andcreates a more efficient electricity market
- Stimulates investment in the electricity sector since generators can sign long term contracts.
- Delivers lower prices, enhanced service performance, and new service offerings for small consumers through competition.
- Sends a powerful signal that the electricity sector is evolving towards full retail competition.
- Allows a greater variety of suppliers to find innovative ways of discovering and providing what different groups of customers want in economical ways
- Promotes national economic development through:
- Supplying electricity to the productive sector of the economy.
- Supporting economies of scale through bulk purchase of electricity.
- Reducing technical and non-technical losses for bulk High Voltage supply.
- Reduced financial risk by supplying credit worthy eligible consumers
- Eligibility would introduce competition on the demand side and complete the liberalization of electric systems.
- It puts greater pressure for efficiency on the suppliers
- More Attention to customers – Utilities holding a monopoly in the sector have traditionally paid little attention to customer service.
- The presence of retailers, or the mere possibility of future competition will force existing distributors to establish appropriate customer services and commercial divisions
The policy directive can be said to be a positive in re-establishing confidence in the NESI and broadening the market. GenCos (on-grid, captive and off-grid) can now interface directly with end-users in term of trade for the supply of power without going through the DisCos unless there is need to interface through the DisCos’ network. This initiative will enhance the potentials of GenCos to reach and function at maximum capacity while realizing their operational costs and capital.