Competition to peak in electricity sector as FG is set to declare transition electricity market

By The Citizen

The Nigerian Federal Government has announced that it is read to declare the much awaited Transitional Electricity Market, which will mark the commencement of full competition in the industry.

Diclosing this in Abuja on Monday during the inauguration of members of the Dispute Resolution Panel of the Nigerian Electricity Supply Industry, the Chairman, NERC, Dr. Sam Amadi, said, 'By today's event, we have met the last condition precedent for the commencement of the TEM as prescribed by the market rules.

'Now that we have completed the last of the formal conditions precedent and we are effectively handling the informal conditions precedent, NERC is poised to recommend to the Minister of Power to declare the commencement of the TEM at a named date.'

Amadi, pointed out some informal conditions precedent that were not listed in the market rules, but were necessary for the optimal working of the market.

'For this stage of the market, certain formal and informal conditions precedent need to be met. The formal conditions precedent include the approval of grid codes and market rules, the establishment of an independent regulator, the establishment of market operation and system operation with functional capabilities, and the establishment of a market dispute resolution mechanism,” he stated.

In 2011, NERC established an industry wide Transition Steering Group to manage the efforts of stakeholders in the power sector to achieve the conditions precedent for the commencement of the TEM.

The Electric Power Sector Reform Act, 2005 prescribes that the market will enter into a transitional stage before the beginning of full competitive electricity market.

Some of the conditions, which are expected to be met during the interim period between the completion of the privatisation process and the start of the TEM include the execution of the market participation agreement, market operations system regulations, market settlement system, and the procedures for registration and admission processes for market participants.

The Federal Government had on March 17, 2014 announced the indefinite suspension of the implementation of the TEM, saying that it was not concerned about the declaration of the TEM but was bothered about putting the right market conditions in place for the sector to thrive.

If TEM is eventually declared,  one significant change under the new arrangement is that participants in the market will commence full trading by contracts. During this stage of the market, institutional and normative structures of a competitive and efficient electricity market will be put in place. The Nigerian Electricity Regulatory Commission said it had successfully satisfied all the conditions precedent for the commencement of the TEM as prescribed by the electricity market rules.

The declaration of the TEM had been postponed last year due to the fact that certain conditions had not been met and it was slated to commence on March 1, 2014. It, however, did not commence on that date.