Chinedu Nebo, minister of power, has disclosed plans by the federal government to begin a Transitional Electricity Market (TEM), a stage that will ensure accountability and boost further investment in the Nigerian electricity market.
The Minister stated this recently at the signing of a Memorandum of Understanding with nine gas producing companies.
He said the ministry was working assiduously to make sure that all conditions precedent to the declaration of the TEM were fulfilled.
“The conclusion of the agreement has restored liquidity to the electricity market and has given impetus to the readiness for the declaration of the Transitional Electricity Market,” the Power Minister said.
Nebo said the ministry has developed an operator platform to ensure that transparency was maintained in the market, and that in the past few weeks power generation has increased to between 4,000megawatts (mw) and 4,600mw, which is the highest generation the country has ever witnessed.
He said government intervention in the sector was a measure of its desire to ensure the economic viability of the electricity sector.
“Prior to the handover and even after the handover, the market has continued to accrue a lot of debts due to non payment for gas and also for power supplied. That is the reason the governor of the CBN working with petroleum resources minister, myself and chairman of NERC came up with this CBN Nigerian Electricity Supply Industry Fund in an intervention by the CBN in collaboration with local deposit money banks to infuse liquidity into the system and to wipe the debts and put the young market in a clean slate,” Nebo explained.
The electricity market is currently operating under a set of government interim rules. The interim rules were developed and issued by the Nigerian Electricity Regulatory Commission, NERC in December 2013 to conduct the market in the pre-TEM phase until the declaration of TEM.
The interim rules order was later modified with the revision taking place with effect from May 1, 2014.
Delay in the declaration of the Transitional electricity market (TEM) is holding down the implementation of several agreements, including power purchase agreements (PPAs), gas supply aggregation agreements (GSAA) and gas transportation agreements (GTAs), which would have unlocked the potential of the Nigerian electricity supply industry, investigations show.
Industry analysts say the delay is capable of stalling the inflow of the much-needed funds and capacities into the sector as it increases the risk profile of the sector.
TEM represents the intermediate step to move the electricity market in an orderly manner from an integrated whole utility to a fully competitive market structure with more differentiated players.
For instance, the declaration of the TEM would make it mandatory for the Nigerian Gas Company (NGC), a subsidiary of the NNPC, to be penalised in the event of failure to deliver on its gas supply commitments to the power producers, in line with the Gas Supply Agreement signed in 2013.
Gas-producing companies involved at the agreement signing include Chevron, Shell Petroleum Development Company (SPDC), Nigeria Petroleum Development Company, (NPDC), SEPLAT Petroleum, Agip, Oando, Pan Ocean, Total and Nigeria Gas Company.