Unshackling the Power Sector- New Eligible Customer Regulations 2017

The Nigerian Electricity Regulatory Commission (NERC) on Monday 6 November 2017 released the newly-approved eligible customers’ regulations and outlined the terms that would guide the direct purchase of electricity by end-users from power generation companies.

In May 2017, the Minister of Power, Works and Housing, Babatunde Fashola, declared that eligible power consumers would be free to purchase electricity directly from the Generation Companies (GenCos).
These regulations have been opposed by the Distribution Companies (DisCos) however, NERC on Monday 6 November 2017 presented the approved terms to the Honourable Minister in Abuja, and announced that the 11 electricity distribution companies had been designated as suppliers of last resort in the trading framework of the new regulations.

OPEC has sought to address this situation with output cuts but experts predict that this will not be enough. Last week OPEC and its allies agreed to deeper output cuts in a bid to save declining oil prices. Following the deal, Nigeria’s Minister for Petroleum, Timipre Sylva, announced that the country will now be producing 1.412 million barrels per day, as against 1.829 million barrels per day. With this volume, if crude oil is sold at an average price of $25 bpd in April, then the country would be earning N13.41 billion per day as against the N17.29 billion that was earned prior to the cut.
The International Energy Agency’s projection is that global oil demand in April will be 29 million b/d lower than a year ago; down to a level last seen 25 years back (1995). This demonstrates that cuts in output by producers may not fully offset the near-term falls facing the market.

The NERC explained that the regulations were a product of extensive consultations with relevant stakeholders in Lagos, Kano, Yola, Jos, Port Harcourt, Enugu and Abuja. The objective of the regulations was to permit high end-customers the freedom to purchase power directly from the GenCos and as a result, the DisCos may eventually lose a good number of their high demand customers and become standby suppliers of electricity to eligible customers, where such consumers’ contract suppliers fail to meet up with the required supply.

Time will tell the effects that these regulations will have on the industry. What is clear is that the new regulations will break the monopoly DisCos currently have on distribution of Power and this will inevitably create more competition and drive prices down.

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