NBET Seeks 5-year Operating Licence Renewal from NERC, Reports over $2bn Annual Trading Volume

*With bilateral contracting regime, regulator says parties to bear own risks

Emmanuel Addeh in Abuja

The Nigerian Bulk Electricity Trading Plc (NBET) yesterday attended a public hearing organised for it by the Nigerian Electricity Regulatory Commission (NERC), where it sought to convince the power sector regulator on why it deserved to be given a renewal of its operating licence which expires November 21 this year.

At the event which held at the NERC headquarters in Abuja, the organisation told the NERC commissioners that over the years it had achieved the milestone of trading in excess of $2 billion every year.

NBET was set up by the federal government to act as a link between the Generation Companies (Gencos) and Distribution Companies (Discos) through Power Purchase Agreement (PPA) and Vesting Contracts.

To this extent, NBET ensures that Gencos are paid through the prime source of revenue which is the payment receipts from the Discos for energy sales through vesting contracts. Essentially, it is the manager and administrator of the power pool.

Managing Director and Chief Executive of NBET, Johnson Akinnawo, who was grilled by the NERC officials at the event attended by representatives of Gencos, Discos, Transmission Company of Nigeria (TCN), experts, consumers, among others, stressed that in addition, NBET incentivised greenfield power generation investment of close to $1 billion in the industry.

“The Bureau of Public Enterprises and Ministry of Finance Incorporated are NBET’s shareholders with 80 per cent and 20 per cent stakes respectively. NBET was incorporated on July 29, 2010 and it commenced trading in the Nigerian Electricity Supply Industry (NESI) in February 2015, which marked the start of the Transitional Electricity Market (TEM).

“It has transparently administered a contracts portfolio with an annual trading volume in excess of $2 billion. It has made considerable progress in the quest to achieve its mission of being an effective and efficient catalyst for private sector investment into the electricity industry in Nigeria’,  the NBET chief executive stated.

Akinnawo stressed that the execution of power purchase agreements and vesting contracts paved the way for the privatisation involving about $2.5 billion  investment in Gencos and DisCos respectively.

According to him, the vision of the organisation is the attainment of a self-sustaining electricity market driven by market forces, where public funding will no longer be a key driver of investments and transactions.

But before that level is attained, Akinnawo argued that the NBET still has a critical role to play and therefore requested that the current operating licence should be renewed for another half a decade.

While acknowledging the recent order on bilateral contracting in the sector, NBET stated that it would require a payment plan and commitments from all Discos prior to the operationalisation and commencement of the new contracting order by NERC.

“NBET requires this firm payment commitment on the invoices issued to Discos for it to honour its contractual payments to Gencos. Discos will be required to settle the historic non-tariff shortfall portion of the market obligations while the FGN will be taking responsibility for the tariff shortfall portion.
“Within the five-year trading licence period, NBET will transform into an energy exchange with the following key objectives.

“To promote bilateral trading between Gencos/Independent Power Producers (IPPs) and commercial/industrial customers through an automated energy trading platform/exchange developed and deployed for the sale of electricity, with multiple energy brokers playing a key role in linking energy suppliers and customers registered on the platform.

“It will enhance the rapid growth of the market, create a diversified trading environment, play a key role in closing the supply-demand gap for electricity in the country and catalyse a self-sustaining electricity market where public funding and guarantees will cease to be the key drivers of investments and transactions,” the MD said.

Earlier, NERC’s Commissioner, Legal, Licensing and Compliance, Dafe Akpeneye, who headed the panel, supported by Nathan Shatti, NERC’s Commissioner, Finance and Management Services as well as Chidi Ike, Commissioner, Engineering, Performance and Monitoring, noted that the meeting was called to discuss NBET’s application for the renewal of its licence.

He stated that NBET was established further to the old legislation that governed the power sector as a special trader and as a traditional institution to balance the sector at that point.

Akpeneye pointed out that NBET had an initial run of 10 years which expired in 2021, wherein they were issued another renewal that expires in November of this year.

“The commission doesn’t believe that we know it all, we are not seven wise men, and we think that in view of how the industry is changing and evolving, it’s important that we get critical stakeholders’ input into the consideration of the NBET’s request for the renewal of their licence,” he explained.

However, he argued that a lot of things that NBET was designed to do, could not be done through no fault of theirs,  admitting that since the last renewal that was issued to NBET, the sector had changed.

“I don’t think there’s been more changes in our sector than has happened in the past one year or so. The legal framework has changed. The constitution has been amended to fully allow sub-nationals unfettered access to be full players and regulators in the sector.

“The legal framework upon which we regulate the sector has also changed. We now have the Electricity Act. Certain regulatory initiatives taken by the commission, in view of current economic situations, also changed as well.

“We are moving to financial contracting. We now have cost-reflective tariffs for a certain band of customers. And with that as well, we can see that there’s been vast improvement in supply.

“The next move now is to move to bilateral contracting, whereby the excuse of government is not standing in our way, or government will no longer be there. If mainstream enters into a contract with a utility, those are two private parties, and they will bear the full consequences of the terms of their commercial transactions”

“No one is going to run to the House Committee on Power or the Senate Committee on Power or to the Villa and say, ‘put pressure or intervene’. It’s a transaction between two private parties, and their performance will be held by the terms of the contract,” he stressed.