TCN: It’s Illegal for Discos to Supply Industrial Users

Managing Director of the TCN, Mr. Usman Mohammed
  • Says NERC’s interim rules violate power sector reform law

Chineme Okafor in Abuja

The Transmission Company of Nigeria (TCN) Wednesday stated that by allocating electricity consumers within the 132kv lines to the distribution companies (Discos), the Nigerian Electricity Regulatory Commission (NERC) has violated the Electric Power Sector Reform Act (EPSR) of 2005.

TCN has also insisted that it is illegal for the Discos to supply electricity to industries and customers who consume heavy volumes of electricity and are on the 330 and 132 kilovolt (kV) power lines.

It further alleged that NERC encouraged this arrangement with its interim rules and other by-legislations.

Speaking yesterday 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.

Mohammed insisted that the Discos 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.
Mohammed 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.

“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 public hearing.

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.”

Mohammed further explained that: “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 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).

“They 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, noted.

Turning to the NERC, he explained that Rule 8 (a) (viii) of the TEM (Transition Electricity Market) 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.

“Any order or regulation that is inconsistent with the provisions of the Act to the extent of such inconsistencies 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.