The Nigerian Electricity Regulatory Commission (NERC) is worried about power distribution companies (Discos) rejecting electricity loads despite widespread blackouts in Nigeria.
The regulator threatens regulatory actions if Discos fail to meet performance targets for electricity offtake, citing a significant gap between available power capacity and customer demand.
In its recent quarterly report for Q3 2023, NERC highlights the Partial Activation of Contract (PAC) regime, effective since July 2022.
This regime sets the target volume of energy Discos must off-take at any time as their Partially Contracted Capacity (PCC). Discos, under PAC, have take-or-pay obligations, meaning they must pay for available power capacity regardless of offtake.
Despite international best practices promoting full PCC offtake, NERC observes that many Discos do not achieve this due to technical limitations and commercial reasons such as high losses in certain areas.
To address this, load offtake becomes a key metric in the Performance Monitoring Framework issued to Discos in October 2022.
Persistently low load offtake may trigger regulatory actions against Discos, according to the framework. Discos with offtake ratios below 100 percent face increased wholesale energy costs as they still pay for unused capacity.
In Q3 2023, Discos, on average, offtook 3,253.83 megawatts-hour/hour, with only Eko and Ibadan Discos surpassing their PCC.
NERC vows to enforce regulatory actions against Discos failing to meet offtake targets, using the Performance Monitoring Framework.
The commission’s situation room will monitor daily energy offtake performance and intervene when necessary.
Consumer groups express frustration over load rejection amid poor electricity supply. The National Secretary of Nigeria Electricity Consumer Advocacy Network urges NERC to enforce disciplinary sanctions against Discos to improve electricity supply.
NERC explains that the PAC regime requires compensation to Discos from power generation companies (Gencos) or the Transmission Company of Nigeria in case of capacity shortfalls.
Liquidated Damages (LDs) from Gencos offset invoices to Discos, reducing payable amounts in the event of generation shortfalls.
In the single-buyer model, the System Operator directs Discos to offtake their entire PCC when there’s sufficient generation capacity. If generation falls short, available capacity is prorated among Discos based on their PCCs.
