It’s Illegal for Discos to Supply Power to Industries, Heavy Users, Says TCN

•  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

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.”

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,

noted.

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.