NERC Threatens Discos With Sanctions for Rejecting Power

The Nigerian Electricity Regulatory Commission has expressed concern over the electricity load rejection by power distribution companies despite the blackout witnessed in many parts of Nigeria.

It threatened to enforce appropriate regulatory actions against Discos that fail to meet the key performance targets for electricity offtake, stressing that the disparity between available power capacity and customer demand was becoming large.

The power sector regulator in its latest quarterly report for the third quarter of 2023 on Friday, stated that the Partial Activation of Contract regime, which took effect in July 2022, defined the target volume of energy to be off-taken by Discos at any time as their Partially Contracted Capacity.

It explained that under the PAC regime, Discos had take-or-pay obligations on their PCC, meaning that they must pay for available power capacity irrespective of their offtake.

It said this structure was consistent with international best practices for long-term contract-based power procurement and ensures that power generation companies earn capacity payments to compensate them for availability.

It noted that considering the large disparity between available capacity and customer demand, it is expected that Discos will offtake their Partially Contracted Capacity at all times provided that the generation is available.

Meanwhile, the commission explained that the Partial Activation of Contract regime also mandates Gencos or the Transmission Company of Nigeria to compensate Discos through Liquidated Damages in the event of capacity shortfalls.

According to the regulator, under the single-buyer model being operated in the power sector, when there is a shortfall in generation, LDs from Gecos are treated as net-offs in the invoices issued to NBET thereby reducing the net payables due from Discos