The Market Rules is a regulatory instrument designed to establish and govern an efficient, competitive, transparent and reliable market for the sale and purchase of wholesale electricity and Ancillary Services in Nigeria and to ensure that the Grid Code and the Market Rules work together to secure efficient co-ordination and adequate participation in the Nigerian Electricity Market.

Specifically, these rules:

a.    provide a framework for an efficient, competitive, transparent and reliable Wholesale Electricity Market;

b.    set out the responsibilities of Participants, the TSP, the System Operator and the Market Operator in relation to trading, co-ordination, dispatch and contract nomination, pricing of imbalances and Ancillary Services, metering, settlement and payments;

c.    set out the operation and pricing system of the Balancing Market;

d.    ensure an efficient, transparent and predictable settlement system and set out the payment obligations;

e.    establish a governance mechanism and a market monitoring system;

f.     provide a framework for resolution of disputes amongst Participants or between Participants on one hand and the System Operator or the Market Operator on the other, on matters relating to the Market Rules and the Grid Code; and

g.    provide an efficient and transparent process for amending the Market Rules and the Grid Code.

Nigerian Electricity Market

An overview of the stages of Nigerian Electricity Market as outlined in the Electric Power Sector Reform Act 2005.

Introduction

Historically, the entire electricity supply chain in Nigeria was under the umbrella of a vertically integrated national utility company, NEPA, which was a monopoly. The power sector reform programme guided by the EPSR Act 2005 outlined a process for the separation of potentially competitive functions from the monopoly entity and establishing competitive industry structure for commercial operations of those competitive functions. The Act pushes the concept of separating the contestable functions of generation and retail from the natural monopoly functions of transmission and distribution and ultimately establishing competitive wholesale and retail electricity markets.

The Commission is charged with the responsibility of seeing to the establishment, promotion and monitoring of a competitive Nigerian electricity market where the private sector will be the key driver, with no single or multiple group of players exercising undue market power.

The Electricity Market

An electricity market is a system for effecting the purchase and sale of electricity using supply and demand to set the price. The EPSR Act 2005 envisages the development of an efficient electricity market where resources are allocated efficiently and manged in such a way that wastages and leakages in the value chain are reduced to the barest minimum with consumers getting the best value for their money.

The Market Rules that govern the operations of the electricity market in Nigeria was signed by the President and approved for use in 2010.

Click Here to Download the NERC Market Rules.

The development of the electricity market in Nigeria was designed to be in 2 phases: Pre-privatisation and Post – Privatisation. In addition, it was planned to undergo four (stages); Pre-transitional stage, Transitional stage, Medium Term stage and finally Long term stage where there is competition in generation and retail of electricity.

An additional stage, Interim Market Period, was introduced because the necessary conditions precedents for the Transition Stage were not fully met after the unbundling and subsequent privatisation of the vertically integrated utility company.

i.    Pre-Transitional

a.    vertically integrated service structure
b.    unbundling of state owned utility
c.    privatisation of Generation and distribution assets of state owned utility

ii.     Transitional

a.    Unbundled service structure
b.    More formalised market
c.    Contracts based transactions

 
iii.    Medium

a.    More competition in generation
b.    Centrally administered balancing mechanism for the market
c.    Limited retail competition

iv.    Long term

a.    Full competitive generation electricity market
b.    Full competitive retail electricity market

Wholesale Electricity Market
Wholesale electricity market allows trading between electricity generators, retailers and other financial intermediaries both for short-term delivery or for future delivery periods. Wholesale transactions in electricity are typically cleared and settled by the grid operator or a special-purpose independent entity charged with that function.

Retail Electricity Market
A retail electricity market exists when end customers can choose their electricity supplier from competing electricity retailers.