Electricity retailers in Nigeria can now sell their power to distribution companies (DisCos) directly

Power producing companies in Nigeria can now sell their electricity directly to electricity distribution companies (DisCos) thanks to approval from the federal government.

This information was shared with the eleven distribution companies (DisCos) in Nigeria by the Nigerian Electricity Regulatory Commission (NERC) in their recently issued Multi-year Tariff Order (MYTO) for 2024.

NERC brought to light the fact that, via bilateral contracts, DisCos can purchase power directly from GenCos.

In order to guarantee a minimum energy offtake starting January 1, 2024, the regulator has announced that the new order acknowledges an adjustment to the DisCos’ partially contracted capacity, PCC.

The 11 DisCos are required to meet a minimum energy offtake demand of 4,063MWh/h this year, according to NERC.

A smooth departure from NBET’s vesting contract system can be achieved if the DisCos “secure adequate bilateral contracts,” the statement stated.

According to NERC, the DisCos are obligated to reduce their “exposure to volumetric energy risks” through bilateral contracts. Starting in January 2024, they will not be able to claim a revenue deficit due to generation shortfalls.

With this change, the Nigerian Bulk Electricity Trading Plc (NBET) will no longer be in charge of purchasing electricity in bulk from generator firms through power purchase agreements and selling it to the DisCos through vesting contracts. NBET has been in charge for the past decade.

“It would appear that DisCos are now typically able to acquire bilateral power from generation companies, directly,” expressed Ayodele Oni, a partner at Bloomfield Law Practice and an authority on energy law. “The freshly announced 2024 Multi-Year Tariff Order for each DisCo further supports this assertion.

The bulk trader, NBET, will be transitioning soon, so this is all in good time.

According to SAREWAHAUSA research, DisCos are obligated to pay for the available capacity under the Partially Contracted Capacity (PCC) under the Partial Activation of Contract (PAC) regime, regardless of their offtake.