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DisCos to sign contract-based agreements to improve power supply efficiency

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IN an effort to address epileptic power supply concerns, the Nigerian Electricity Regulatory Commission (NERC) has disclosed its initiative to commit electricity distribution companies (DisCos) to contract-based commitments that are expected to enhance service delivery.

The NERC said the commitments would ensure that the distribution companies become more responsive and work closely with other value-chain players in Nigeria’s electricity supply industry (NESI).

According to the regulator, the commitments, in form of agreements, would be between the DisCos and other players in the power value-chain – the generation and transmission companies – with it as the monitor.


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The agreements, among other objectives, are being designed to ensure reliable power stability of 5,000 megawatts of electricity with a gradual plan to absorb a 7,000mw transmission capacity, and enhance market discipline, while ensuring proper alignment of all the power sector players.

The agreements are also expected to improve the capacity off-take by DisCos to attract commercial and industrial customers to provide a stable base-grid through infrastructural expansion, create certainty in the gas-power market segment through contracting as a way of improving firm gas availability to power stations, and address challenges surrounding securitisation of payments across the NESI, widening the gap between peak demand and availability generation.

A General Manager at the NERC, Sharfudeen Mahmoud, who spoke on the development, said the proposed plan would ensure that all the value-chain players work as a team to deliver power to Nigerians.

Mahmoud said, “The contract-based agreements are to ensure we get the commitment of various power stakeholders in the sector. It is to build trust between the regulators and the DisCos, while ensuring a committed response to the power sector cause.”

He added that the NERC would sanction defaulting parties in the proposed agreements, a penalty that could see them lose out on key government and World Bank intervention funds.

“When we eventually roll out the terms of the contract, we would be periodically reviewing the performance of each party and possibly penalise defaulters where necessary,” he said.

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An energy lawyer and power sector governance expert, Chuks Nwani, lauded the initiative, saying, “It is good for the different players in the power sector value-chain to have a responsible market approach to the power sector reforms. The NERC is coming up with this policy initiative and we expect players in the electricity supply industry to play according to the rules.

“I believe now that the government is taking a lead in driving market discipline. We will be seeing a new era and an end to incessant grid collapse with proper alignment of the different players in the power value chain.”

In a similar vein, an Associate Consultant to the British Department for International Development (DFID), Celestine Okeke, told THE ICIR of the need to enforce market discipline to drive reforms in the power sector.

“The power sector is enmeshed in myriads of problems. I just believe we could have a change of approach with this policy initiative. Once we get the sector right, it will serve as a springboard to our national economic development,” Okeke said.

The NERC affirmed it has already got the approvals of the DisCos and other players in the value-chain on the initiative and the plan would take effect from August 1, 2022.

 

 

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