Delayed TEM implementation affects power sector agreements

It has come to the fore that some essential agreements that could lead to enhanced power supply in the country are now being shunned by investors in the companies unbundled from the Power Holding Company of Nigeria (PHCN) due to delay in the implementation of the Transitional Electricity Market (TEM).

These agreements, Gas Supply and Purchase (GPSAs), Power Supply and Purchase and others, cannot be signed because of delay in the implementation of TEM.

The implementation of TEM, according to the Nigerian Electricity Regulatory Commission (NERC) will set in motion, the execution of  rules that would guide the Nigerian Electricity Supply Industry (NESI) as well as the enforcement of compliance and sanction of defaulting market participants in the electricity supply value chain.

Chairman of NERC, Sam Amadi

Chairman of NERC, Sam Amadi

NERC explained that TEM would also ensure that the electricity market is operated in an orderly manner with all the participants (gas suppliers, power generation firms, distribution firms that buy the power, and the transmission firms that wheel the power to different parts of the country), expected to show commitment to sanctity of contract or be penalised.

What guides the market is the interim market rules provided by the power sector regulator – the Nigerian Electricity Regulatory Commission (NERC). The interim rules will continue to guide the operation of all the market participants until the TEM is fully in place.

The interim rules were issued before the takeover of the successor companies in November last year by new investors and modified in April this year to address the challenges observed in the sector between the time of handover and end of first quarter of this year.

TEM is an important implementation an instrument that will drive the electricity market.

For instance, the Group Chief Executive Officer, Forte Oil Plc, owner of the privatised Geregu Power Plant, Mr. Akin Akinfemiwa,said recently that the company has not signed Gas Supply and Gas Purchase Agreements GPSAs  because it needed guarantee of an uninterrupted gas supply and the purchase of the power it will generate.

Forte Oil has invested $90 million in the Geregu Power Plant to overhaul it and bring its output to the installed 414 megawatts (Mw) capacity from about 100Mw it  generates.

He said: “Gas supply to the power plant is subject to the TEM.  We have not been able to sign the appropriate GPSAs for us to guarantee maximum supply to the plant. “Obviously, when we sell, we will not be able to sell everything we generate because of the existing market dynamics. So, once the TEM is introduced, we can now call for enough gas for us to be able to generate in line with the TEM.

“The renovation work on the plant is expected to be completed in the next 18 months (first quarter of 2016) and will bring the plant’s generation to 414Mw at full capacity.”

There are also insinuations that the Transcorp Ughelli Power Limited is looking forward to seeing  the  TEM started because it believed to have the potentials of  increase the expected revenue for the company and its shareholders.

The objectives of the rules are to establish a framework to govern trading arrangements during the Interim period when Power Purchase Agreements (PPAs) between the privatised Power Holding Company of Nigeria (PHCN) successor generation companies and Nigerian Bulk Electricity Trading Plc (NBET) and Vesting Contracts between NBET and the privatised PHCN successor distribution companies will not be effective.”
TEM is expected to commence in November, this year after earlier dates of commencements in March and September this year failed.

Source: The Nation

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