INTRODUCTION AND OVERVIEW OF RECENT NERC ACTIVITIES AND OUTLOOK

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1 INTRODUCTION AND OVERVIEW OF RECENT NERC ACTIVITIES AND OUTLOOK BY ENGR. TASIU SAAD GIDARI WUDIL HEAD OF NETWORKS UNIT Engineering Standards and Safety Division NARUC PEER REVIEW WORKSHOP ACCRA GHANA DECEMBER, 2015

2 Table of Contents Introduction Profile of the Commission Objectives of the Commission Functions of the Commission Strategic Goals of the Commission Business Rules of the Commission Procedure for making Regulations Commission s Hearing Process TEM Trading Arrangement Licensing Cost Reflective Tariffs Technical and Safety Codes Customer Service Standards & Enlightenment Establishment of Customer Complaints Units (CCUs) Establishment of Forum Offices Establishment of NERC Zonal Offices Commission Orders, Guidelines and other Regulatory Frameworks Compliance Monitoring and Enforcement isap and TSG Valuation of Assets Funding of the Power Sector Diversification of Generation Fuel Mix Some Ongoing Initiatives Distinguished Visitors Programme (DVP) and NERC Fellowship Programme (NFP) Proposed Activities for Y2015 Challenges and Way Forward Conclusion 2

3 Introduction The Commission notes its key roles in the government s Power Sector Reform programme and declares its unflinching support and commitment towards achieving the objectives of the programme; Significant progress has been made that will ultimately bring about the success of the reform programme and catalyse exponential socioeconomic growth for Nigeria; The structures and conditions necessary for operating a sustainable, commercially-oriented electricity market as prescribed by the Electric Power Sector Reform Act 2005, and the Market Rules for the Nigerian Electricity Supply Industry (NESI) have been put in place; The Transitional Electricity Market (TEM) has commenced, on February 1 st, 2015, wherein trading between market participants should be guided by the Market Rules and based on commercial terms stated in fully negotiated contracts. 3

4 Profile of the Commission The Nigerian Electricity Regulatory Commission (NERC) was established pursuant to the enactment of the Electric Power Sector Reform (EPSR) Act, 2005 and was officially inaugurated on October 31, The Commission was established as an independent regulator to drive the power sector reform by ensuring fairness, transparency and a level playing field for all investors. The Commission has a Chairman, Vice Chairman and Six Commissioners. The Commission has Six Operational Divisions: Engineering Standards & Safety; Market Competition and Rates; Legal, Licensing and Enforcement; Finance and Management Services; Government & Consumer Affairs; Research & Development and Renewable Energy. The Chairman s office constitute the seventh Division. 4

5 Objects of the Commission Part III Section 32 (1) of the EPSR Act 2005 provides that the Commission shall have the following objects: To create, promote, and preserve efficient industry and market structures, and to ensure the optimal utilisation of resources for the provision of electricity services: To maximise access to electricity services, by promoting and facilitating consumer connections to distribution systems in both rural and urban areas. To ensure that an adequate supply of electricity is available to consumers. To ensure that the prices charged by licensees are fair to consumers and are sufficient to allow the licensees to finance their activities and to allow for reasonable earnings for efficient operation. To ensure the safety, security, reliability, and quality of service in the production and delivery of electricity to consumers. To ensure that regulation is fair and balanced for licensees, consumers, investors, and other stakeholders. To present quarterly reports to the President and National Assembly on its activities. 5

6 Functions of the Commission For the furtherance of the objects referred to in subsection (1) of section 32 of the Act, the Commission shall perform the following functions: Promote competition and private sector participation, when and where feasible; Establish or, as the case may be, approve appropriate operating codes and safety, security, reliability, and quality standards. Establish appropriate consumer rights and obligations regarding the provision and use of electricity services. License and regulate persons engaged in the generation, transmission, system operation, distribution, and trading of electricity. Approve amendments to the market rules. Monitor the operation of the electricity market and Undertake such other activities which are necessary or convenient for the better carrying out of or giving effect to the objects of the Commission. 6

7 Functions of the Commission... In the discharge of its functions, the Commission shall consult, from time to time, and to the extent the Commission considers appropriate, such persons or group of persons who may or are likely to be affected by the decisions or orders of the Commission including, but not limited to licensees, consumers, potential investors, and other interested parties. The Commission since inception has carried out its functions in line with its strategic goals of Uninterrupted Electricity Supply, Private Sector Participation, Consumer Protection and Fair Regulation, as clearly defined in its 5- year Strategic Plan. 7

8 Strategic Goals of the Commission As a matter of priority, the Commission developed a 5-year Strategic Plan that would enable it achieve its mandates: Goal 1: Uninterrupted Electricity Constant and reliable power supply is critical to the growth of the Nigerian economy, the supply of power is expected to cover a wide national footprint to maximise access to electricity in Nigeria. 8

9 Strategic Goals of the Commission.. Goal 2: Private Sector Participation The Commission is entrusted with encouraging the participation of the private sector in the electricity market. The Commission ensures that regulations which encourage profitable pricing and effective competition among market players are developed and implemented; appropriate Codes of Conduct and Rules of engagement are also enforced to ensure an efficient and investor-friendly market. 9

10 Strategic Goals of the Commission... Goal 3: Fair Regulation The Commission shall ensure: that it is even-handed in its regulation of the industry; vigilant oversight of the industry; to be both firm and fair in enforcement of Rules and Regulations. Goal 4: Consumer Protection The Commission is charged with ensuring consumers fulfil their obligations by paying for power used and their interests are protected. In discharging this responsibility, the Commission has developed the following Customer Regulations 10

11 Business Rules of the Commission In exercise of the Powers conferred by Section 96 (2) (a) of the Electric Power Sector Reform Act 2005 (Act No. 6 of 2005), the Nigerian Electricity Regulatory Commission has developed the Business Rules for the conduct of its proceedings and discharge of its functions, hereafter referred to as the Business Rules of the Commission. The Business Rules cover Meetings of the Commission, Proceedings before the Commission, Authority to Represent, Burden of Proof, Initiation of Proceedings and Petitions, Petitions and Pleadings before the Commission, General Headings, Affidavit in Support, Presentation and Scrutiny of Petitions, Public Hearings etc. 11

12 Procedure for making Regulations NERC ensures that its rule-making procedures are transparent and involves all stakeholders, NERC develops the draft Regulation, Draft Regulation is published in several newspapers and posted on the website for comments, Draft Regulation is also sent directly to key stakeholders for their input, NERC collates all inputs and where necessary holds a public hearing on the matter, Final Draft is made after incorporating relevant comments and draft is sent to the Commission for approval, Approved Regulation is sent to the Ministry of Justice for gazzeting

13 Commission s Hearing Process 1. The Commission may hold a public hearing on any matter which it is empowered under the Act and which the Commission determines to be of significant interest to the general public. 2. The Commission shall as far as reasonably practicable notify all persons having an interest in such matter and give them the opportunity to make representations if they so wish. 3. Such notification may be by mail or by a paid advertisement published in at least two (2) newspapers; one of which shall be a national daily newspaper and one having wide circulation in the local area. 4. Persons making representations may make written representations to be submitted by the date fixed by the Commission for such submissions; or may make oral representations on the date fixed for the public hearing. 5. The Commission shall take into due consideration the representations made during the public hearing in making a Decision on the matter for which the public hearing was held. 13

14 Dispute Resolution Mechanism One of the expectations of the market design in the Nigerian Electricity Supply Industry (NESI) is the creation of a robust mechanism for the settlement of disputes between Market participants. The appointment of a Dispute Resolution Counselor (DRC) and the constitution of a Dispute Resolution Panel (DRP) are conditions precedent for the commencement of the transitional stage of the Market. The Commission has already established the Dispute Resolution Panel in accordance with the provisions of the Market Rules. The Panel consists of the Councillor and 14 Panel Members. 14

15 Power Industry Structure, Model Agreements and TEM The Commission has developed and Released Industry Trading Arrangements and Model Industry Agreements such as PPA, Connection Agreement, Use of System Agreement etc. In an effort to ensure the development of the Electricity Market, the Commission in the year 2014 focused mainly on activities that would bring the Transitional Electricity Market (TEM) speedily to fruition. The TEM has commenced on 1st of February,

16 TEM Trading Arrangement NIPP Plants (Geregu, Alaoji, etc.) Sellers PRIVATISED SUCCESSOR GENCOS (Kainji, Shiroro, Egbin, Afam, Geregu,etc) Existing IPPs Future IPPs The TSP PPAs System Operator SPECIAL TRADER Nigerian electricity Bulk Trading Company plc Bilateral Contracts Market Operator Vesting Contracts Buyers DISTRIBUTION COMPANIES Abuja Benin Eko Enugu Ibadan Ikeja Jos Kaduna Kano Yola PHC 16 16

17 Licensing A primary instrument for the actualization of the Commission s mandate of regulating and promoting private sector participation in the Nigerian Electricity Sector Industry (NESI) is the licensing of existing as well as prospective private operators of electricity services. Since inception, the Commission has issued a total of 114 licenses, of which 63 were on-grid generation, 27 off-grid generation, five embedded generation, 15 distribution, one bulk trading and three for transmission. The total amount of electricity to be derived from all generation licenses is 31, Megawatts. The Commission has licensed the Nigerian Electricity Bulk Trading Company (NBETC) with clear framework for bulk power procurement and the partial risk guarantee (PRG) provided by the World Bank. 17

18 Cost Reflective Tariffs The Commission in a bid to provide cost reflective tariffs that will incentivize efficient consumption and increase generation, transmission and distribution capacities of electricity in 2008, successfully developed the Multi-Year Tariff Order (MYTO). The MYTO is a 25 year tariff path for the industry that allows for major reviews every five years, as well as biannual minor reviews every year since 2008, a major review of the MYTO was carried out in

19 Cost Reflective Tariffs... The Commission is currently undertaking a special review of the Tariffs to accommodate changes in the ATC&C levels. 19

20 Gas Tariffs Furthermore for Nigeria to get adequate supply of gas for electricity generation, the Commission has recently approved new cost reflective gas prices (molecules and transportation) and is working with Gencos to ensure contracts are executed and effective. The Commission is working with the Market Operator and NBET to make sure that there is a renewed commitment to prompt payment for gas consumed by the new owners of power plants. All these together will assure the gas suppliers of favorable atmosphere for them to supply uninterrupted, adequate and quality gas to power plants thereby improving availability of power to Nigerians. This I believe will ensure sustainability of gas supply to the power stations. 20

21 Technical and Safety Codes In exercise of its powers to make Regulations conferred by the Electric Power Sector Reform Act 2005, the Commission has since 2007 developed no fewer than twenty eight (28) regulations that are operational. There are currently a total of twelve (12) regulations at various stages of completion. Development of technical and safety codes, standards to ensure adequacy, safety, reliability, quality and customer protection in electricity supply. 21

22 Technical Codes Grid Code: Grid Code contains the day to day operating procedures and principles governing the development, maintenance and operations of an effective, well coordinated and economic transmission system for the electricity sector in Nigeria. In a nutshell, one can say that the Grid Code is the operating standard for the transmission system. Distribution Code: It contains the day to day operating procedures and principles governing the development, operation and maintenance of an effective and well coordinated and economic distribution system

23 Technical Codes.. Metering Code: It contains the day to day operating procedures and standards to ensure that modern accurate metering systems with reliable communication facilities are deployed across the industry s production and supply chains to measure and record energy production and utilization. Nigerian Electricity Supply and Installation Standards (NESIS) Regulations. The Commission has reviewed the review of CAP 106 Regulations and replaced with the construction standards that cut across generation, transmission and distribution known as Nigerian Electricity Supply and Installation Standards (NESIS) Regulations

24 Health & Safety Code and Manual To address the incessant electrocution cases and accidents in the power sector, the Commission has developed, with the assistance of USTDA, a world class Health and Safety Standards Manual (HSSM) to ensure the optimum provision of health & safety of the power industry in Nigeria. Further, the Commission has developed the Health & Safety Code from the HSSM with compliance and penalty provisions

25 Customer Service Standards and Enlightenment The Commission has developed four (4) Customer Protection Regulations: Customer Complaints Handling Standards and Procedures Customer Service Standards of Performance for Distribution Companies Connection & Disconnection Procedures Meter Reading, Billing, Cash Collections and Credit Management for Electricity Supplies Power Consumer Assemblies (PCA): The Power Consumer Assemblies are meetings where the Commission provides the opportunity for the power providers and users to get together and thrash out areas of misunderstanding with the Commission in attendance as the umpire. The Commission organized numerous PCAs in all geopolitical zones of the country. 25

26 Customer Service Standards Customer Complaints Handling Standards and Procedures: This document introduces a process for redressing complaints by electricity consumers throughout the country by setting up a two level structure, the Customer Complaints Unit which is expected to take care of complaints at the distribution companies level; and the Customer Complaints Forum to be established by NERC at all distribution zones to handle matters referred from the Customer Complaints Unit. Connections & Disconnections Procedures For Electricity Services: This document establishes standards and procedures for providing customers with electricity at their homes or business places. It explains the procedures for obtaining supply of electricity including the documentation required. The document also puts in place guidelines that ensure that distribution companies adhere strictly to laid-down procedures for disconnecting defaulting customers in a methodical manner without infringing their rights. 26

27 Customer Service Standards... Customer Service Standards of Performance For Distribution Companies: These are minimum service standards expected from distribution companies in the provision of electricity supply to customers. They cover issues of time allowed in attending to faults, obligations with respect to replacement of faulty equipment, installation of equipment such as meters, minimum duration for attending to other technical problems that may impinge on the provision of uninterrupted electricity supply to customers. Meter Reading, Billing, Cash Collection & Credit Management For Electricity Supplies: This document deals with procedures concerning accurate meter reading by distribution companies, correct billing, adjustment of bills where overcharges and undercharges exist and processes for payment of bills. This will ensure that customers are spared the vexed problem of estimated bills. 27

28 Establishment of Customer Complaints Units (CCUs) The Commission directed the establishment of the CCUs by the DisCos: At Least One Customer Complaints Unit (CCU) established in Each Distribution Area Headed By Senior Officer Customer Complaints Officer Staffed By Distribution Company Staff Complaints Must Be Handled in Accordance with Distribution Company s Own Written Complaints Procedure as agreed By NERC. Complaints must be in writing (Including ). Customer Complaints Officer will write Statement of Complaint for non-literate Customers. 28

29 Establishment of Forum Offices NERC has directed the establishment of a Forum Office in the Operational Area of each Distribution Company. Secretary & Administrative Support provided By NERC. Office space and other required facilities provided by Distribution Companies. The Forum Office shall comprise Five (5) Part-Time Members: Representative of Household Customers Representative of Commercial Customers Representative of Industrial Customers Representative of NGO operating in Distribution Company s Area Qualified Electrical Engineer based in Distribution Company s Area. 29

30 Establishment of NERC Zonal Offices Commissioning of Zonal Offices in the six geopolitical zones: The Commission commissioned its zonal offices in Owerri, Calabar, Ado Ekiti, Makurdi, Sokoto and Gombe. 30

31 Orders, Guidelines Legal and Other Regulatory Frameworks Market Rules: The Market Rules (MR) is the document governing the commercial administration of the market Bulk procurement Guidelines: NERC has introduced bulk electricity guidelines that will encourage investment in the power industry. The guideline will also facilitate speedy procurement of generated power on a sustainable and long term basis emphasizing technical/management competence, financial capacity and value for money for electricity consumers. (Suspended) 31

32 Orders, Guidelines Legal and Other Regulatory Frameworks... Order on customer metering: The Commission developed a scheme to act as a stop gap measure to address the metering gap in the industry - Credited Advance Payment for Metering Implementation (CAPMI); Methodology on Estimated Billing: The Commission has also developed a Methodology for billing customers without electricity meters in their premises. This is aimed at reducing the rate of ridiculous bills being given to customers; 32

33 Orders, Guidelines Legal and Other Regulatory Frameworks... Independent Electricity Distribution Networks (IEDN) Regulations: This framework Encourages smaller generation to be evacuated through the distribution network. State governments stand to benefit as state owned IPPS can now have power evacuated to local distribution networks translating to greater control; Embedded Generation Regulations: This regulation will enable Discos to 33

34 Orders, Guidelines Legal and Other Regulatory Frameworks... Development of Feed in Tariffs for renewable energy: For the purpose of having a more robust and encompassing tariff structure in Nigeria, the Commission has developed feed- in tariffs for small hydro, solar and wind for the NESI; Acquisition of Land and Access Rights for Power Projects: This to articulate the policies and procedures 34

35 Orders, Guidelines Legal and Other Regulatory Frameworks... Order on the suspension/withdrawal of non-performing licenses in line with clause 17 of the EPSR Act, 2005 which lists five conditions for cancellation. Amendment of the MYTO 2.1 Order on collection losses. NERC has mandated DISCOs not to pass on collection losses to their customers, and in the event that they wish to do so, they must make a case and provide evidence to the Commission during their tariff application process. The order took effect March 1, The Commission has written to the Central Bank of Nigeria to act on the outcome of a reconciliatory line of debts owed to the NIPP plants for power supplied and not paid for over time. N57,968,045,790 is being owed to seven plants by TCN. N30,388,365,072 is legacy debt on energy supplied from January 1, 2011 to 31 October, 2013, as well as N27,379,680,072 for debts incurred after the privatization exercise. 35

36 Orders, Guidelines Legal and Other Regulatory Frameworks... A public hearing has been held 11 th August on a draft regulation for smart metering, feed-in-tariffs and capping on estimated billing. The regulation is aimed at encouraging the deployment of smart meters in distribution networks, protect the revenue of DISCOs and help customers manage their electricity consumption. Fixed Charge Review - The Commission has equally issued an Order to the effect that, customers who do not receive electricity supply for a minimum of 15 days continuously should not pay the fixed charge component of their electricity bills. NERC has also issued an order penalizing DISCOs for rejecting electricity allocated them by the System Operator. The order on Imbalance Application Mechanism during TEM was issued on account of the high incidence of non-compliance with the load allocation formula by DISCOs. 36

37 Orders, Guidelines Legal and Other Regulatory Frameworks... NERC has signed an MoU with the Standards Organization of Nigeria (SON) to ensure strict adherence to safety and reliability standards in the sector. Abuja DISCO, based on an enforcement action issued by the Commission, has refunded over 32,000 customers who were overbilled between October 2014 and May 2015 to the tune of over N50m. The Safety Code, Grid Code, Metering Code, Distribution Code Review Panels have been constituted to ensure high standards in the industry. The panels are responsible for reviews and improvements of the Codes. 37

38 Compliance Monitoring and Enforcement Further to its monitoring and enforcement roles, the Commission receives and reviews updates from licensees regarding compliance with the timelines in the License terms and conditions. The Commission also maintains an update on milestones attained by existing licensees. Development of Key performance Indicators (KPIs) and Performance Evaluation Model (tool) for monitoring performance of licensees. The Commission analyses KPI data collated from Licensees and daily operations report from the System Operator (SO) for further intervention, if required. 38

39 Enforcement Regulations Section 96 of the EPSR Act 2005 empowers the Commission to make regulations which are necessary or convenient to be prescribed for carrying out or giving effect to Act. The success of any regulatory body to a large extent is predicated on its ability to enhance the growth of the sector by inducing entities to comply with laid down rules developed through a participatory consultation process. The antecedents of the sector necessitated the establishment of an enforcement regulatory tool. Consequently, the Commission approved the Electricity Industry (Enforcement) Regulations 2014 on 2nd May,

40 Funding of the Power Sector The Commission is working with some multinational institutions such as the World Bank to support the power sector with cheap funds. Just recently week the Commission met with World Bank team from US and Nigeria and deliberated on windows for supporting the transmission development with at least $500m and $350m for distribution support. Additional $100m will be spent on clean energy. Other institutions supporting the power sector include ADB, AFD, GIZ, NIAF, USAID/USTDA, etc. 40

41 Initial Stakeholder Advisory Panel(iSAP) and The Transition Steering Group (TSG): Establishment & Operation of the Initial Stakeholder Advisory Panel (isap): isap provides timely policy level advice directly to NERC and the Electricity Market Operator on material matters relating to the Nigerian Electricity Market, the future evolution of the markets, NERCs plans and any other matter of concern to Stakeholders. Members of isap are drawn from each sub-sector of the NESI i.e. electricity generation, transmission, distribution and the bulk trader (NBET). The secretariat of isap is domiciled in NERC; The Transition Steering Group (TSG): TSG was set up to facilitate the commencement of the Transitional Stage Electricity Market development, several meetings were held by the TSG. The meetings focused on the Market Operator s readiness for the commencement of the TEM in terms of metering, registration of participants, meters and contracts, enterprise settlement statement as well as the provision of data to the Nigerian Bulk Electricity Trading Company (NBET) for shadow trading, Gas issues, Industry agreements, etc; 41

42 Valuation of Assets Valuation of Regulated Assets of PHCN Successor Companies for MYTO Major Review Exercise and BPE Privatization Transactions: NERC is actively involved in the valuation of regulated assets base of PHCN successor companies with a view to determining the return on capital to be included in arriving at the end-user tariffs. 42

43 Diversification of Generation Fuel Mix The Commission is working with stakeholders to diversify generation fuel mix with focus on the development of clean coal, renewable energy technologies in a sustainable and environmentally responsible manner. Similarly, clean coal technologies are encouraged by the Commission through special coal tariffs. 43

44 Some Ongoing Initiatives To ensure the sustainability of improvements and growth attained in the NESI, the Following issues are being addressed by the Commission: Tariff reforms to ensure recovery of costs and adequate returns on investment to remove financial risks. Addressing the Risks being faced by generating companies and other market participants as a result of the inability of the DisCos to fully pay for energy supplied to them. Ensure the stability of the electricity market, the need to give clarity and confidence to private investors. The Federal Ministry of Power and NERC are working together on this. 44

45 Some Ongoing Initiatives... Development of Regulatory Framework that will promote the exploration and exploitation of Renewable Energy options and Energy Efficiency in Nigeria. Development of small and mini grid schemes and Mini Grid Regulations to support the fast development of Mini Grid for industrial clusters and other customers. This initiative is being supported by the GIZ and FMoP. Working with NNPC/NGC to ensure sustained natural gas supply to the thermal power plants. NERC working to ensure strict implementation of Performance Agreements signed by Generation Companies for capacities recovery and Distribution Companies for loss reduction, metering, new connections, networks enhancements, etc. 45

46 Some Ongoing Initiatives... It is worthy of note that, to strengthen the understanding of the power sector, the Commission conducts biannual conferences and seminars for Nigerian Judges. Furthermore, the Commission holds monthly meetings with the CEOs of Utilities and other major Stakeholders to discuss issues affecting the power sector and proffer the way forward. 46

47 Distinguished Visitors Programme (DVP) and NERC Fellowship Program (NFP): Distinguished Visitors Programme (DVP): The Commission on a quarterly basis invites a distinguished personality who has experience in Leadership, Management or Energy Policy and related issues to share his/her knowledge with staff and management of NERC; NERC Fellowship Program (NFP): The Commission has embarked on a 47

48 ACTIVITIES FOR THE YEAR OF 2015 The Commission intends to carry out the following activities in addition to other day to day regulator activities: Commissioning of Forum Offices in some State capitals; Engagement of consultants for the determination of benchmark cost for TCN and electricity distribution companies; Commence the 5 th minor review of MYTO-2; Review TCN tariff application request, develop a consultation Paper on TCN tariff application and publish an Order for the TCN tariff; 48

49 ACTIVITIES FOR THE YEAR OF Review and finalization of audited financial statements for the years ended 2012, 2013 and 2014 respectively; Approval and implementation of the Uniform System of Accounts (USOA) for the Nigerian Electricity Supply industry (NESI); Submission of a report on valuation of State Governments investments in the networks of electricity distribution companies (Discos) to the National Economic Council; Development of a strategy and operational methodology for the effective implementation of the Power Consumer Assistance Fund which is being established to ensure that indigent members of the society have access to electricity. 49

50 ACTIVITIES FOR THE YEAR OF Develop a TOR for power affordability study; Develop a consultation paper to determine the tariff for Combined cycle gas turbines; Verification and valuation of electricity distribution and transmission assets procured through the National Integrated Power Projects (NIPP) managed by the Niger Delta Power Holding Company (NDPHC); Conclude on DISCOs responses to NERC s resolution on the open book review of the financial/accounting records; Enterprise Resource Planning Solution: A technological solution for managing and organising organisational resources and process it comprises the following: Finance and account, Human Resource Management, Procurement Management, Store and Inventory Management, Vehicle Management and Project Management. Finalisation of a five year strategic plan for the years for the Commission. 50

51 Challenges Securitization of PPA between the GenCos and NBET as the Envisaged World Bank PRG has not fully materialized. Till date only a few major PPAs were signed based on project financing. Unable to attract more private funds. Inability of the new owners of the GenCos and Discos to invest in the system and increase capacities. Several transmission bottlenecks. Huge market revenue shortfalls. Consumers still facing serious outages and unsatisfactory performance of the DisCos. GenCos are not incentivized enough to provide Ancillary Services to improve Reliability and Quality of power supply. Fuel supply to thermal power plants is still under serious threat; inability of the Gas Suppliers to make available gas to the power plants despite the upward review of the gas tariffs. This challenge has recently resurfaced

52 Challenges... Generally, Slow pace of development of power infrastructure. Although the electricity market is in TEM since February 1 st 2015, some Distribution Companies and the NBET are still unable to post LCs as required by the Market Rules to enable them participate in the market. Inadequate metering of consumers. Audit of CAPMI is ongoing! Compliance Monitoring and Enforcement is still ineffective and inefficient largely due to paucity of funds. Inadequate Skilled Manpower in the Sector. High accident rates reflecting insufficient investment in networks and poor work practices. The challenge of managing customers expectations. Political interference and duplication of functions of the Regulator (NEMSA Act

53 Way Forward 1 Ensure effective commercial framework for supply of gas to power plants. This includes the review of the Gas Supply Agreement, Gas Transportation Agreement, cost reflective tariffs for gas supply and transportation etc. Urgent Intervention in transmission. The Government has been advised to prevail on the TCN board to ensure that the Manitoba Management Contract is fully implemented. This includes, sourcing of funds to strengthen and expand the transmission network. Another solution is through government interventions, private sector participation and the use of NIPP power plants sales proceeds. Approval of Cost Reflective Tariffs. DISCOS should be encouraged to procure embedded generation to boost supply to their numerous customers.

54 Way Forward 2 CAPMI (METERING INTERVENTION): With the aim of facilitating and supporting the Operators on one hand and protecting the Consumer on the other, the Commission introduced a Voluntary Scheme known as Credited Advance Program for Metering Implementation (CAPMI) to assist in dealing with the metering gap; Strong Enforcement of the commitment made by the Discos on closing the metering gap as contained in their business plans during the privatisation of the entities. Appropriate financial penalties will be imposed on the Discos once the AT&C losses are adjusted and cost- reflective tariff released. Strict monitoring of the sector is necessary in order to ensure the implementation of these commitments to the benefit of the customers.

55 Way Forward 3 It is recommended that urgent action be taken for all outstanding MYTO-2 subsidies are released to the Market Operator in order to ameliorate the effect of the revenue shortfalls on GENCOS. All regulatory mandates contained in the NEMSA Act 2015 which duplicate the NERC functions be removed in order to avoid disharmony in the sector.

56 Conclusion Although there are still very serious challenges in the NESI, there is a promising future prospect. The Commission from inception has carried out its functions in line with its strategic goals of Uninterrupted Electricity Supply, Private Sector Participation, Consumer Protection and Fair Regulation, as clearly defined in the Electric Power Sector Reform Act, With the Electricity Market in TEM, the Commission is focusing more on compliance monitoring and enforcement to ensure maximum benefits to customers. Furthermore, as the market develops and becomes more competitive, more stringent reliability and quality standards will be introduced and enforced

57 Conclusion... The Commission has recently approved metering deployment plans of the DisCos to address the issue of customer bill estimation. The Commission is working closely with key stakeholders such as FMOP, NNPC/NGC, TCN, NIPP, DisCos, GenCos etc. to address the challenges militating against power sector. The Commission is also working to ensure cost reflective tariffs for investors and 57

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