Discos, TCN Bicker over Legality of Market Trading Framework

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Stories by Chineme Okafor in Abuja

Electricity distribution companies (Discos) in Nigeria’s power market are at loggerheads with the Transmission Company of Nigeria (TCN) over request by the TCN to declare a segment of the Transition Electricity Market (TEM) illegal, null and void.

The controversial part of the TEM has to do with the supply of electricity to consumers under the 330/132 kilovolt (kV) supply line under the new eligible consumers’ regulation of the Nigerian Electricity Regulatory Commission (NERC) and which the TCN said should not be ceded to the Discos, saying the latter have no direct interface with the high voltage line.

Based on this, the TCN has requested the NERC to render that part of the TEM null and void, arguing that the Discos do not incur any form of expenses or cost in servicing consumers within the 132kV lines which the TCN alone reportedly maintains.
The TCN’s position was however supported by manufacturers and power generation companies (Gencos) at a public hearing recently organised by the NERC on the issue in Abuja.

But the Discos in their opposition to the TCN’s submission, warned the NERC, saying if it concedes to the arguments, its implication would include the widening of the existing financial shortfall in the market which it alleged was about N1.5 trillion.
The Discos were represented at the public hearing by their umbrella body, the Association of Nigeria Electricity Distributors (ANED) and they further held that the NERC had no power to entertain the request of the TCN.

While they claimed that it was only the National Assembly and a court of competent jurisdiction that could entertain such request for a review of segments of the TEM, the Gencos and members of the Manufacturers Association of Nigeria (MAN) insisted that a change of the TEM order was necessary.

In their submission, the Regulatory Manager of ANED, Mr. Adetunji Adeyeye, said it was not within the powers of the NERC to grant the TCN its prayers no matter how significant its arguments were.
“TEM itself is not something that NERC can declare null and void because it doesn’t come under the review processes under section 50 which declares what you can actually review. “The only person that can declare that null and void prayer is the court or an amendment by the National Assembly,” Adeyeye said.

He noted that the suitability of the issues the TCN raised about the 330/132kV customers were already covered by the contractual agreement it (TCN) was party to, adding that the TCN could not have come up with the argument that because the Discos do not remit market revenue on time, it would then seek to collect the revenue directly.

“If we have that gap only in generation cost, that shows there is going to be a huge shortfall, and liquidity crises if the prayer of TCN is granted by having those major customers.
“They are the major purchaser of bulk power…it will make the shortfall we have in the industry to balloon. Today the shortfall is N1.5 trillion,” he explained.

However, in his submission, the President of MAN, Mr. Mansur Ahmed, countered the argument of the Discos, stating that Nigeria ought to review the content of the TEM to make progress in the electricity industry.
Ahmed, said MAN was in support of the TCN request to NERC, adding that the rule should be continuously monitored while Nigeria completely eliminate all he said were distortions that retard the growth of its economy.

“We support the presentation by TCN because we see in it the opportunity to bring self-improvement and availability in the power we are getting. When this presentation’s recommendations are accepted, there is not going to be less power for Discos to distribute. The total power that is generated and distributed will improve and bring improvement to our economy as a whole,” Ahmed, stated.

Buttressing the arguments of the TCN, its Managing Director, Mr. Usman Mohammed, stated that: “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).”

Mohammed, further noted: “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.”

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, adding that the EPSRA being a law from the National Assembly was superior to any other by-legislation of the NERC.

Report: Nigeria Supplied 7.3% of Global LNG Demand in 2018
Nigeria in 2018, delivered up to 7.3 per cent, which was about 21.3 metric tonnes (mt) of the liquefied natural gas (LNG) volume in the world, the International Gas Union (IGU) has disclosed.

The IGU in the 2018 edition of its world LNG report obtained by THISDAY, stated that at 7.3 per cent, the country was the fourth largest LNG suppliers in the world in the year under review, coming behind Qatar which supplied 27.6 per cent; Australia – 19.2 per cent; and Malaysia – nine per cent respectively.

It, however, indicated that Indonesia with a market share of 5.5 per cent and the United State – 4.5 per cent, were behind Nigeria as the fifth and sixth largest LNG suppliers in the world.
According to the report, in 2018, Nigeria recorded its highest LNG export volume of 21.3mt, adding that this was made possible by increased feedstock to the country’s only LNG producer and supplier, the Nigeria LNG (NLNG) Limited.
“The order of the top five exporters by share (Qatar, Australia, Malaysia, Nigeria, and Indonesia, respectively) remained the same between 2015 and 2017.

“Liquefaction capacity is concentrated in Qatar, Australia, Malaysia, Indonesia, Algeria, and Nigeria, each of which has at least 20MTPA of capacity. Together, these six countries comprised more than two-thirds of the world’s nominal liquefaction capacity in 2017,” said the IGU report.
It further explained: “After steady growth in recent years, global LNG trade increased sharply in 2017, rising by 35.2MT to reach 293.1MT. This marks the fourth consecutive year of incremental growth, and the second-largest annual increase ever (behind only 2010).

“The increase was driven by higher production at liquefaction plants in Australia, as well as full year production and new trains at Sabine Pass LNG in the United States. Several older projects recorded increased production after working to solve feedstock or technical issues, including Nigeria LNG, Arzew and Skikda LNG, and Angola LNG.”

The report noted that: “Many countries that had exported lower amounts of LNG during 2016 – including Nigeria, Algeria, Trinidad, Brunei, and Equatorial Guinea – rebounded during 2017. In Nigeria, strong gas production as well as a lack of disruptions due to local unrest allowed exports to reach a record 21.3MT.”

The report stated that in 2017, more traditional European trade patterns returned to the LNG market, including a move away from LNG re-loading due to global supply increases and stable demand.
It added that Spain, Italy, Portugal and France returned to more traditional LNG uptake, while in North America, Mexican imports of LNG were up, as additional low-cost US shale gas imports were unavailable due to pipeline delays.

“Unlike 2016, the increases in world trade occurred without new major entrants to the world LNG market. Qatar continued to be the world’s leading exporter of LNG, with 2017 liquefaction reaching 81.0 million tonnes per annum (MTPA), followed by Australia, Malaysia, Nigeria, Indonesia, and the United States.

“Australia and the United States led in growth of exports by increases over 2016 of 11.9MTPA and 10.2MTPA, respectively. There are 92MTPA of liquefaction capacity under construction world-wide, and we expect about one-third to come online this year in far-reaching locations of Australia, Cameroon, Indonesia, Malaysia, Russia, and the United States,” the report stated.