- Introduction
On 29th April 2024, the Nigerian Electricity Regulatory Commission ("NERC") issued the NESI Interim Order on Transmission System Dispatch Operations, Cross-Border Supply, and Related Matters 2024 ("the NESI Interim Order") which took effect from 1st May, 2024. The order is expected to remain in effect for an initial period of six months and may be extended if the Commission so determines. In issuing the NESI interim order, NERC took into consideration the challenges of low generation and limited visibility of energy flow on the grid, the sole reliance of the System's Operator ("SO") on limiting Distribution Companies' ("DISCO's") load off-take in managing transient and recurring grid imbalances and prioritisation of other bilateral contracts, including export to international customers as well as Eligible Customers ("EC"), which has neither been effective nor efficient. Rather, this has caused significant hardship for the customers of DISCOs due to the displacement of delivery during peak periods. The NERC has prioritised the domestic market over qualifying customers and international suppliers and acknowledged the need for uninterrupted electricity supply to users. This paper briefly summarises the NESI Interim Order to start capping electricity supplies to consumers outside of borders, the rationale behind the NESI Interim Order, and its implications.
- Exports of Cross-Border Electricity from Nigeria
Nigeria was the 53rd greatest power exporter in the world in 2022, with $153 Million in exports, based on the Observatory of Economic Complexity ("OEC"). The OEC reported that in 2022, Nigeria's top 13 exports were electricity, with the top three recipients comprising Niger ($64.3 Million), Benin ($63.7 Million), and Togo ($24.9 Million).2 According to data from the OEC, Benin became Nigeria's most rapidly expanding market for electricity exports between 2021 and 2022. However, concerning the issue of access to electricity, Nigeria, Democratic Republic of the Congo and Ethiopia were the three nations identified with majority of their populations lacking electricity as at 2021.3 Nigeria ranked the highest with 86 million persons were unable to access electricity, while Congo had 76 million and Ethiopia 55 million of their populations without electricity access.4 The Nigerian electrical industry will need "significant development to achieve stable electricity supply," according to a report released last year by the US International Trade Administration. Industry insiders predict that to sustain present operations, the nation may need to invest up to $100 billion over the next 20 years.5
- Purpose of the Order
When energy demand exceeds the transmission capacity, the national grid frequently collapses; to prevent this, the System Operator (SO) implements load shedding. NERC has observed that load shedding is applied unfairly, with the SO giving foreign suppliers and legitimate consumers precedence over DISCOs.6 DISCOs' capacity to fulfill service obligations, especially to Band A consumers, is impacted by this. Furthermore, these bilateral clients and foreign off-takers misuse their priority position by taking too much electricity during peak demand, aggravating grid instability. Their weak contract conditions with GENCOs, which are below the Nigerian Electricity Supply Industry's (NESI) operational norms, add to this disparity.7
- The Order
NERC has ordered the SOs to present a pro-rata load-shedding scheme to the Commission within seven (7) days of the issuance of the NESI Interim order. By momentarily restricting the amount of energy accessible to foreign off-takers and bilateral clients, these measures seek to improve openness, impartiality and promote supplies to DISCOs and their customers. NERC has ordered that these procedures be implemented immediately, and the order is detailed as follows. The SO will create an agenda that guarantees fair load-shedding during grid imbalances between DISCOs and International off-takers/bilateral consumers.8 All market participants (DISCOs, international off-takers, and bilateral consumers) will have their load off-take readings published by the SO, and consequences for non-compliance with specified load consumption will be enforced.9 The SO will make sure that, always, the total amount of electricity allotted to bilateral clients and international off-takers does not surpass 6% of the overall grid generation capacity. The energy provided to international off-takers/bilateral clients, for example, cannot exceed 216 MW if the total grid generation is 3,600 MW.10 GENCOs are required to make sure that the amount of energy they allocate to bilateral clients and international off-takers does not surpass 10% of their overall capacity.11
All contracts—both current and proposed—with foreign off-takers and bilateral clients must be submitted to NERC for review and approval.12 To track grid offtakes in real time, NERC has instructed the SO to install smart meters on all DISCOs' 33kV distribution locations, as well as those of international off-takers and bilateral clients. These meters must be placed before potential consumers can start off-taking.13 In addition, the IOT meters' installation and data streaming must be finished within three (3) months after the order date.14 Also, to provide real-time/instantaneous visibility of the capacity given and off-taken by counterparties in each transaction, the SO shall establish the setting up of IOT meters along with data capture at offtake and delivery sites as a condition precedent for any additional operation.15
- Implications
NERC's directive has been lauded by consumers because it will enable DISCOs to provide a more dependable power supply as load shedding gets fairer. DISCOs may get higher daily allotment because of limitations on bilateral and international off-takers, which might boost supplies to lower Bands. Upward Band upgrades could result from increasing NESI liquidity and revenue. But it might put a burden on GENCOs' connections with these clients, perhaps leading to force majeure claims. However, in the interim six-month period of the directive, temporary agreements may lessen the effects as GENCOs look for alternate sources of power.16
Following the NERC guidelines, all parties involved in NESI are advised to abide by the NESI Interim Order on Transmission System Dispatch Operations, Cross-Border Supply, and Related Matters 2024. SOs ought to create and submit proportional load-shedding plans as soon as possible to guarantee that all off-takers receive an equal share of the load during instabilities in the grid. The SO should also put in place mechanisms to keep an eye on and enforce adherence to contractual selections and grid directions, as well as to ensure openness by making hourly measurements and settlement reports publicly available.
- Conclusion
The NESI Interim Order might have some detrimental effects, but it also has the potential to have favorable effects on the NESI, so it shouldn't be ignored. The Order has the potential to change service delivery and draw additional investments to the NESI by increasing the amount of energy available to domestic consumers, probably increasing revenue for DISCOs, and improving the NESI's liquidity. The goal of the NESI Interim Order is to improve grid operations' reliability, equity, and visibility for the benefit of all consumers. DISCOs, on the other hand, are encouraged to develop and renovate vital infrastructure to guarantee their capacity effectively offtake the extra energy. To reduce the impact on national supply requirements and manage risks to the Nigerian Electricity Market, the Order addresses suboptimal grid dispatching procedures and places temporary limitations on overseas customer supply. To support the development of a more robust and sustainable environment for Nigeria's energy supply, operators are urged to put the directives included in the order into immediate action.
Footnotes
* Lilian Adat is a Senior Associate at Alliance Law Firm, Port Harcourt Office, while Ahmed Sani and Atake Anthonia are both Associates of the same law firm at the Abuja and Port Harcourt offices respectively.
2. Yunus Kemp., "Electricity Exports from Nigeria to Neighbouring Countries Capped" (https://www.esi-africa.com/industry-sectors/transmission-and-distribution/electricity-exports-from-nigeria-to-neighbouring-countries-capped/) accessed May 15, 2024.
3. Tracking SDG The Energy Progress Report 2023, p 33. (https://trackingsdg7.esmap.org/data/files/download-documents/sdg7-report2023-full_report.pdf) assessed May 15, 2024.
4. Ibid.
5. (n 2).
6. Joseph-Condotti W., "Decoding the Order: Interim Order on Transmission System Dispatch Operations, Cross-Border Supply and Related Matters 2024 – It is about time!" (https://www.linkedin.com/pulse/decoding-order-interim-transmission-system-dispatch-joseph-condotti--4wjof/)accessed May 15 2024.
7. Ibid.
8. Paragraph 9(A), the Order.
9. Paragraph 9(B), the Order.
10. Paragraph 9(D), the Order.
11. Paragraph 9(E), the Order.
12. Paragraph 9(I), the Order.
13. Paragraph 9(J), the Order.
14. Paragraph 9(K), the Order.
15. Paragraph 9(L), the Order.
16. Ibid note 4.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.