The Electric Power Sector Reform Act of 2005 (the Act) served as a legal framework for restructuring Nigeria's power sector. This act mandated the separation of the electricity industry into
three distinct segments: generation, transmission, and distribution. The aim was to create a more efficient and reliable power sector by introducing competition and fostering private sector participation. However, the Act has now been superseded by the Electricity Act of 2023, which introduces further reforms and expands the scope of activities related to electricity generation, transmission, and distribution. This new Act empowers state governments
and private individuals to participate in electricity generation and distribution, beyond the 11 existing distribution companies.
The Electricity Act introduced a new system for the electricity market based on rules and contracts.
Management of different stages in market development relies on specific rules for the interim, pre-transitional, and transitional phases. These rules are
documented in the Market Rules.
Highlights of the Market Rules
Market Rules Development
Section 26 of the Electric Power Sector Reform Act of 2005 required the development of market rules by the System Operator. These rules, upon the recommendation of the Minister and approval by the President, govern the establishment and management of electricity and ancillary services markets.
The Market Rules are essential for running and managing the electricity market. They are overseen by the Market Operator, under the guidance of
the System Operator. With the new Electricity Act of 2023, these rules are being reviewed and updated to fit the new regulatory framework.
Objectives of the Market Rules
The Market Rules aim to:
Establish and govern an efficient, competitive, transparent, and reliable market for the sale and purchase of wholesale electricity and ancillary services in Nigeria.
Ensure coordination and adequate participation by aligning the Grid Code with the Market Rules, promoting a seamless integration between these two regulatory documents.
Establish the electricity trading system for the Nigerian Electricity Supply Industry (NESI), with provisions for different stages of market development.
Transitional Stage:
During this stage, the Market Operator is responsible for:
Energy Procurement and Contracting: Managing the procurement and contracting of energy supplies to meet market demands.
Energy Metering and Settlement of Contracts: Ensuring accurate metering of energy transactions and the settlement of contractual obligations.
Collection of Charges:
Transmission Service Provider (TSP) charges.
Ancillary Service costs.
System Operation and Market Administration Charge.
Medium Term Market:
In this stage, the responsibilities of the Market Operator expand to include:
Trading in Imbalance Energy: Facilitating the trading of energy imbalances to maintain market stability.
Settlement of Charges and Payments: Managing the settlement of charges and payments related to energy, ancillary services, and transmission use of the system.
Collection of Charges:
System Operation and Market Administration Charge.
Cost of Imbalance Energy.
Administration and Enforcement: Setting up a system for the administration and enforcement of the Market Rules to ensure compliance and efficient market operations.
Market Rules Overview
The Market Rules are binding on all participants, including those who hold licenses, the TSP, the System Operator, and the Market Operator. These rules also apply to individuals and entities
registered with the Market Operator as participants or applicant participants....It aims to do this without any discrimination, meaning that all users—regardless of their size or type—are treated equally.
By adhering to these rules, participants and operators agree to observe and perform their obligations as stipulated.
The Market Rules complement and supplement the Grid Code, and together, they form the comprehensive regulatory framework for the planning, dispatch, and operation of the electricity system and the administration of the Wholesale Electricity Market in Nigeria.
Complementary Procedures
Operating Procedures and Market Proceduresfurther complement and supplement the Market Rules, providing detailed guidelines and protocols for the practical implementation and operational aspects of the market.
Some of the NESI industry participants are:
1.
Federal Ministry of Power (FMP)
2.
Nigerian Electricity Regulatory Commission (NERC)
3.
Electricity Generation Companies (GenCos)
4.
Transmission Company of Nigeria (TCN)
5.
Electricity Distribution Companies (DisCos)
6.
Nigerian Bulk Electricity Trading Plc (NBET)
7.
Gas Aggregator Company of Nigeria (GACN)
8.
Nigerian Electricity Management Service Agency (NEMSA)
9.
Independent System Operator (ISO)
10.
National Hydroelectric Power Producing Areas Development Commission (N-HYPPADEC)
