THE POWER SECTOR VALUE CHAIN IN NIGERIA.

Electric power generation in Nigeria started in 1896 and since then, the power industry has gone through several changes, especially in terms of privatization (NEPA and PHCN have been abolished). The generation of electricity from the national grid is through thermal and hydropower sources. The primary source of electricity generation in Nigeria comes from gas (thermal), which accounts for 86% of the capacity, with the remainder generated from hydropower sources.

The principal law regulating the power sector in Nigeria is the Electric Power Sector Reform Act, 2005 (EPSRA). Other regulatory laws include; the Rural Electrification Act, Meter Asset Provider Regulations 2018, and the Eligible Customer Regulation 2017. The primary regulatory authority is the Nigerian Electricity Regulatory Commission. This Commission protects consumers' interests, issue licenses to operators/investors, set and review electricity tariffs, and, where possible, promote competition.

Electricity tariff is the amount paid by end users for the power made available to them. Through Section 76 of the EPSRA, the Commission has established a methodology for determining electricity tariffs in the Nigerian Electricity Supply Industry (NESI). The Commission’s Tariff Order, called the Multi-Year Tariff Order (MYTO), sets out tariffs for Nigeria's power generation, transmission, and distribution. The purpose is to set service reflective tariffs for end-users considering these parameters; the Nigerian and United States inflation rate, gas prices, interest rates, and foreign exchange rates. The current MYTO 2020 regroups end-users into five (5) service bands (Band A-E) depending on the average hours of power supply to the end-user daily.?

The major active players/companies in the power sector value chain include:?

1)The Generating Companies (Gencos): These companies generate electricity through hydro(water) or thermal (gas)generation. Gas plays a vital role in power stability; therefore, the lack of gas or insufficient gas will affect power generation. Some commercial agreements drafted between gas suppliers and the Gencos include the Gas Transportation Agreement and the Gas Sale & Aggregation Agreement. Gencos are responsible for managing a power plant. There are over 20 power generating plants connected to the national grid. These plants are operated by privatised Gencos, independent power providers and Niger Delta Holding Company (NIPP). Some of the notable Gencos in Nigeria include Transcorp Power, Shiroro, Sapele, Egbin, Kainji/Jebba. Thus, the principal duty of Gencos is to generate power from the identified sources of power and generate power across the chain.?

2) Nigeria Bulk Electricity Trading Plc (NBET): NBET, a federal government-owned agency, manages and administers the electricity pool in the Nigerian Electricity Supply Industry (NESI). It buys power from Gencos through Power Purchase Agreement (PPAs), sells the power to Discos through Vesting Contracts, thereby bridging the gap between Discos and Gencos. The significant agreement executed between the Gencos and NBET is the Power Purchase Agreement which states the commercial arrangement of each party.

3) The Transmission Company (TCN):?TCN is a wholly-owned government agency, and it manages the electricity transmission network in Nigeria. It is responsible for evacuating electric power generated by Gencos and transferring the same to Discos. It wheels the power generated by the Gencos to the Discos. TCN has 3(three) main departments, namely the Transmission Service Provider (TSP), The System Operator and the Market Operator. Some commercial agreements drafted between the TCN and the Genco/Disco (as the case may be) include a grid connection agreement and an ancillary service agreement.

4) The Distributing Companies (Discos): The Discos are responsible for delivering power to end-users/consumers. For this power to be usable, they, with the aid of substation transformers, reduce the high voltage electricity generated through the transmission grid to low voltage power. Basically, Discos serve as the connection between the electricity grid and consumers. They are also responsible for billing the consumers and revenue collection. Meanwhile, the Discos are to ensure that the tariffs paid by the consumers are cost reflective tariffs in line with MYTO 2020. There are 11 (eleven) privatised Discos in Nigeria, namely: Abuja Disco, Benin Disco, Enugu Disco, Eko Disco, Port Harcourt Disco, Ibadan Disco, Ikeja Disco, Jos Disco, Kano Disco, Kaduna Disco, Yola Disco. NBET executes a vesting contract with Discos and vest the power it purchased from Gencos in the Discos.?

In conclusion, these companies are interdependent; thus, the absence of one will affect power output. Succinctly put, the power sector value chain goes thus; gas suppliers supply gas to the Gencos, NBET purchases power from Gencos and vest same in Discos. The power gets transmitted by the TCN to the Discos, who then deliver power to the end-users, YOU AND I!?

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