NERC, the Nigerian Electricity Regulatory Commission, has made a bold move to prioritize domestic electricity supply by ordering a cutback in power supplies to international customers. This directive comes in response to the significant hardship faced by Nigerians, as bilateral contracts for exports have been taking precedence over domestic supply. Starting from May 1, NERC has imposed a 6% cap on the total grid generation available to international off-takers for the next six months.
Nigerian power firms have agreements with neighboring countries to deliver energy, providing them with foreign currency support. However, these firms have not consistently paid their bills on time. Nigeria has been grappling with frequent power cuts, a situation that has worsened recently. Despite the increase in tariffs for some domestic customers, power companies are still unable to meet the demand.
This directive by NERC could create some uncertainty in the sector, as it requires power generation companies to adjust their production and distribution, potentially modifying contracts on short notice. Additionally, it could lead to increased financial challenges, as revenue from overseas customers is reduced, requiring power distribution firms, many of which already owe significant debts, to step up their repayment.
The directive has already shown some positive effects, as electricity supply from the national grid has increased since its implementation. NERC highlighted the lax terms in current international contracts, with off-takers often exceeding their contracted levels during peak operations, to the detriment of other grid users. The regulator also noted the non-enforcement of penalties for violating grid regulations.
International customers currently owe Nigerian power companies a combined $12.02 million in unpaid debt, prompting NERC to implement interim caps on capacities supplied to them. The regulator also instructed the system operator to develop a load-shedding scheme ensuring equitable adjustment to load allocation for all off-takers.
Furthermore, NERC directed the installation of integrated Internet of Things (IoT) meters at all off-take and delivery points of eligible customers to provide real-time visibility of aggregate off-take by grid customers. These regulatory measures aim to improve domestic electricity supply by addressing challenges in the sector and ensuring fair distribution among all stakeholders.
