In Nigeria, the Federal Government has approved the purchase of electricity directly from power generation companies (GenCos) by Distribution Companies (DisCos).
This was made public by the Nigerian Electricity Regulatory Commission (NERC) in its 2024 Multi-year Tariff Order (MYTO), which was just sent to the 11 DisCos in the nation.
NERC stated that under bilateral arrangements, DisCos can directly purchase electricity from GenCos.
The revised order, according to the regulator, acknowledges a change to the partially contracted capacity (PCC) of the DisCos in order to guarantee a minimum level of energy offtake starting on January 1, 2024.
NERC stated that 4,063MWh/h is the minimum energy offtake requirement for the 11 DisCos this year.
“To secure adequate bilateral contracts to facilitate a seamless exit from NBET’s vesting contract regime,” the statement stated that the DisCos must do.
NERC clarified that the DisCos must reduce their “exposure to volumetric energy risks” through bilateral contracts and added that, as of January 2024, they would not be able to pursue claims for revenue shortfalls resulting from generation deficits.
Through power purchase agreements, Nigerian Bulk Electricity Trading Plc (NBET) purchases electricity in bulk from production firms and sells it to the DisCos through vesting contracts. This move will bring an end to NBET’s ten-year rule.
Speaking on the development, Ayodele Oni, a partner at Bloomfield Law Practice and an expert in energy law, stated, “It looks that DisCos are now generally allowed to procure bilateral power from generation companies, directly,” given the release of each DisCo’s 2024 Multi-Year Tariff Order.