- Says NERC’s interim rules violate power reform law
By Chineme Okafor in Abuja
The Transmission Company of Nigeria (TCN) has declared as illegal, the continuing supply of power by the 11 electricity distribution
companies (Discos) in Nigeria to industries and customers who consume heavy volumes of electricity and are on the 330 and 132 kilovolt (kV) power lines.
It also stated that by continuing to service industries on the 132kV line, the Discos were violating sections of the country’s electric
sector reform law – Electric Power Sector Reform Act 2005 (EPSRA).
According to the TCN, the Nigerian Electricity Regulatory Commission
(NERC) may have even encouraged the situation with its interim rules
and other by-legislations.
Speaking at a public hearing on its position on the Transmission
Electric Market (TEM) Order, the Managing Director of TCN, Mr. Usman
Mohammed, explained that NERC’s allocation of electricity customers
within the 132kV lines under the Eligible Consumers’ regulation was in
violation of the EPSRA.
The Discos, Mohammed said, do not incur any form of expenses or cost
in servicing consumers within the 132kV lines, adding that such lines
were maintained by the TCN and not the Discos.
In this regard, he called on the NERC to take off the Discos from the
transactional arrangements relating to consumers within the 132kV
lines in the eligible consumers regulation. His claims and calls were
however opposed by the Discos at the public hearing.
“Discos billing, charging and collecting tariff from 330kV/132kV
customers is a violation of the tariff setting principles of the
EPSRA. Currently the 330kV/132kV customers of the Discos are being
charged industrial tariffs of the Discos.
“Customers on 132kV and 330kV networks only impose costs on Gencos;
transmission wheeling system; stabilisation of the grid through
ancillary services; market administration. They do not in any way
impose costs on the Discos,” Mohammed said in his presentation at the
He added that: “It is a clear violation of Subsection 76(2) (a) to
make Discos bill them at their industrial tariffs because they are not
on Discos’ network and do not impose costs on Discos’ operations.
Simply put they are not part of Discos business activities.”
Providing further explanation, he said: “There is nothing a Disco can
do to improve the efficiency of a customer connected to a 132kV or
330kV network. If a Disco cannot affect the efficiency of a customer
as stated in 76(2) (b) because it is not connected, then the Disco
should not charge the customer.”
“There is nothing a Disco can do to improve the quality of services of
a customer connected to a 132kV or 330kV network as stated in
76(2)(c). Imposing industrial tariffs on 132kV and 330kV customers
send economically inefficient signals to the customers.”
“Unfortunately the collection of industrial tariffs for 132kV and
330kV customers by Discos is not a principle of inter-customer class
subsidy, it is simply a subsidy of Discos operations which are at best
inefficient with losses averaging more than 50 per cent,” he stated.
According to him, allowing the Discos to charge customers connected to
132kV and 330kV was a gross violation of EPSRA tariff setting
principles, which the NERC is authorised to protect.
“132kV and 330kV customers do not impose any costs on Discos; the
Discos are basically collecting revenues for services they do not
provide. The best way forward is to declare all 330kV and 132kV as
eligible customers in line with the EPSRA because eligible customer is
the only category they fall into either in the EPSRA, Market Rules or
Grid Code, and they should not be obligated to pay competition
transition charges (CTC).
“There were never customers of the Discos according to definitions in
the Grid Code, Market Rules and EPSRA. Discos charging them is a
violation of the principles of Section 76 (2) of the EPSRA and all the
330kV and 132kV customers should pay their energy and capacity charges
directly to generators who they have contracted with, while paying the
Market Operator for wheeling charges, ancillary service charges,
market operation charges and system operation charges,” Mohammed,
Turning to the NERC, he explained that Rule 8 (a) (viii) of the TEM
supplementary order was inconsistent with the provisions of the EPSRA
and other industry ruling documents. Mohammed, further stated that the
EPSRA being a law from the National Assembly was superior to any other
by-legislation of the NERC.
According to him: “Any order or regulation that is inconsistent with
the provisions of the Act, to the extent of such in consistencies
shall be deemed to be null and void. 330kV/132kV customers do not
impose any costs on the Discos – Gencos bear cost of energy and TCN
bears cost of wheeling.
The principles of Section 76(2) on tariff setting should be adhered
to. Rule 8 (a) (viii) of the TEMSO should be considered void and unenforceable.
“In the light of the foregoing, the TCN humbly urges the Commission to
review the said provisions of Rule 8 (a) (viii). The Commission should
automatically migrate 330kV/132kV to eligible customers,” he stated.