NERC grants Gencos right to sell electricity directly to customers

Nigeria's power sector is undergoing a significant revolution with the recent declaration of the eligible customers regime by the Minister of Power, Works, and Housing, Babatunde Fashola. This policy directive allows generators to sell power directly to eligible customers, marking a major shift in the country's power sector. Tunde Gbajumo, Managing Director at Powergen Advisers, explained that eligible customers are defined by the Minister in section 27 of the BCR, with the first declaration identifying four classes of eligible customers. The first class consists of customers consuming over two megawatts per hour of electricity connected at a 33KV level. The second class includes customers connected directly to a generation company, providing a game-changing opportunity for direct procurement. Two other classes encompass customers connected to high voltage networks above 1.32KV and those connected to the 33KV network via the transmission network. This development is a significant step towards aligning policy and action within the sector, allowing generators to sell surplus power to neighboring customers. This move addresses the issue of surplus capacity that previously remained underutilized due to regulatory constraints. The impact of this policy extends primarily to the industrial and commercial sectors, targeting businesses that are high consumers of electricity. Gbajumo emphasized the potential benefits for industrial zones relying on diesel generators to now procure power directly from nearby generators, leading to cost savings, reduced reliance on imported diesel, and positive effects on foreign exchange. The regulation also enables distribution of excess capacity from generation companies to customers consuming at least two megawatts, opening up opportunities for businesses like the Shell building in Marina to procure power directly. While there are uncertainties regarding the fine-tuning of the regulation by NERC, the overall intent is to drive industrial growth by providing a reliable power supply to factories and commercial consumers. The conversation also touched upon challenges within the power sector, particularly accusations against distribution companies (discos) for mishandling market revenue collections. Gbajumo drew parallels with the petroleum industry, likening discos to petrol stations that distribute electricity to end users. He highlighted issues such as non-payment by consumers, tariff inadequacies, and the failure of discos to settle debts owed to bulk electricity providers, creating financial strains within the sector. The discussion outlined the ongoing debate on cost-reflective tariffs and the Power Sector Recovery Program aimed at addressing tariff adjustments to ensure sustainability and investment attractiveness within the sector. Despite the complexities and criticisms surrounding distribution companies, the sector remains optimistic about overcoming challenges through regulatory reforms and market-driven policies such as the eligible customers regime. Overall, the implementation of the eligible customers regime signifies a transformative shift in Nigeria's power sector, offering new opportunities for investors, existing generation companies, and high-consuming industrial and commercial customers. The policy sets the stage for increased efficiency, reduced reliance on diesel generators, and improved access to reliable electricity for businesses across the country. As the sector continues to evolve and adapt to changing market dynamics, stakeholders are optimistic about the prospects for growth, innovation, and sustainability in Nigeria's power industry.