The Nigeria electricity trading is changing from a perceived single-buyer to a bilateral trading framework.

In simple english, NBET (read as govt) has initiate a gradual and quick plan to exit the market and allow independent players to operate.

THREAD!!!

Based on the diagram you saw above, the industry is operated by various contract across all levels.

The contract in red are not fully effective because of one reason or the other.

It is good for us to know where we are now,
where we want to be in the immediate future and our plan for the long term future.

This is a demonstration of how trading and contract is currently being operated in the market.

@NERCNG is pushing the market to a bilateral trading in the next 60 days where GenCos will begin to trade directly with DisCos eliminating NBET as the Govt agent.

Based on the below table, NBET will only supply c. 35% of energy while GenCos and DisCos should trade between them the remaining 65%

This is how the market would be based on the above regulatory Order.

Considering NBET would still hold about 35% of the contracted capacity for DisCos based on the July MYTO Order, the market will witness significant deviation in terms of electricity availability.

If this gradual process proved to be working, NBET will totally exit the market making the structure be like:

Look at the representation of all the 3 contractual trading framework below:

We are in option A.

We want to change to option B in the next 60 days.

If option B proves to be working, we move to option C.

In simple english, bilateral trading means...

Ikeja DisCo buying power from Egbin Power Plant

Kaduna Electric buying power from Kainji Dam

PH Disco buying power from Geregu Power Plant

All of these transactions is direct without the interference of NBET......

How does that affect me or you?

1. If this is implemented, it means the DisCo serving you should secure contract with any GenCo available or else, risk losing almost 60% of the supply in the DisCo coverage area. E.g Yola would get 50MW from NBET while the remaining 63MW

must come from a GenCo or else the entire states under Yola DisCo would have to manage 50MW.🤷‍♂️

2. This would either be absolutely good for you or totally bad for you depending on how the DisCo under your coverage area performs.
For example, Abuja need to seek a bilateral contract of energy totalling 449MW which is more than 70% of its energy supply.

Let us do some minor calculation considering the indices below for AEDC:

NB: This is for May 2024

You need 449MW from a GenCo.

Generation cost is N87.33/Kwh
Transmission Cost is N8.9/Kwh
Total Cost of power is N96.23/Kwh

449MW x 1000 = 449,000 Kwh

449,000 * N96.23 = N43 million per hour

If customers under AEDC consumes 449MW every day for at least, let's say 23 days
The total cost of power would be N43m * 24 hours * 23 days which is equivalent to N23.8 billion naira ONLY as cost of power.

This N23 billion is excluding opex cost (fixed & variable), depreciation and return on investment.

I considered 23 days because there are failures. You can have light for 72 hours straight and go blackout for another 10 hours.

Also, the reason why you saw that cost of power is around N96/Kwh is because its grid power, which is cheaper because of economies of scale.

Trading bilateral between GenCos and DisCos would definitely increase the cost because the GenCo has to recover his cost in full from the offtaker.

The average selling price based on the data above is N156.9, which would make your total revenue to be N38b for that month.
Remember there are cost which I did not factor like Opex, Depreciation and ROI which can be up to N10 billion or more because of the complexity, manpower, operations & Maintenance of DisCos activities.

SP of N156/Kwh is realistic average than using band A or band B-E prices.

This mathematics is just based on the 70% of AEDC energy supply.

Fun fact - AEDC never collected up to N20 billion from customers prior to increasing band A tariff, highest is in March 2024 totalling N16.7b based on 100% energy supplied NOT the 70% that I just did.

After adjusting tariff for band A, they have collect around N22 billion in May 2024, leaving around N5b on the table as collection losses (bad debt).

DisCos like Kano Electricity collected N6.8 billion from customers leaving N6.4 billion as losses for the month. check others:

Why am I doing all this calculations?

Simple, it is just to tell you that the DisCos cannot afford to make those losses any longer and if they do, Government is not around to carry the liability hence, GenCos would cut them off immediately rendering you in darkness.

In trading bilateral, every single Kwh of energy consumed must be paid for, either by the customer or from the DisCo's purse. Payment default is not possible because 80% of the GenCos are using gas and if they default, gas companies would cut them off.

This is part of the reason why before you secure a contract, you must provide a bank guarantee (BG).

Getting bank guarantee is one of the difficult things all the DisCos are battling because of poor financial position. Most, if not all, are finding it hard to secure a BG.
NERC will fully support them recover generation cost to avoid payment default.

It means those customers on average N60/Kwh may likely witness an increase sooner rather than later.

The post is already too long but let me summarise the two (2) kind of contract currently in the industry:

1. Take-and-pay
2. Take-or-pay

Take-and-pay is what is in effect for most GenCos and DisCos and NERC has advised all the participant to prepare shifting from Take-and-pay to Take-or-pay fully.

Take-and-pay it means you can only pay for the light that is generated and delivered to you as a DisCo.

Take-or-pay means either GenCo provide you with light or he pay damages for failing to do so, and if the GenCo provides the light, the DisCos must consume the light or risk paying damages to the GenCos for inability to consume the power generated.

It is a close-ended system, every player must perform or risk being punished.

nlfpmod:


Credit: Habu Sadeik

MrSqm:
Stable electricity first

DevilsEqual:
EEDC dey go still dey give us the normal 16hours light

This sounds cool tho. It will increase power generation and supply if people are ready to pay

nlfpmod:

Racoon:
Hehehe! Just like the privatisation of NEPA to GENCOs/DISCOs, another policy somersault with translocation from one corrupt band of looters to another. This change of name means nothing as far a power improvement is concern.

Puss360:
🤣🤣🤣...the calculations heavy pass average Nigerian brain...

Long and short, be say hope say light go dey ooo...?