Govt begins unbundling of transmission company

By The Rainbow
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The Federal Government has decided to break up the Transmission Company of Nigeria (TCN) into two independent institutions, as part of the integrated efforts to achieve  greater efficiency in the power sector.

Under the arrangement, two key divisions of TCN, the Market Operator (MO) and the System Operator (SO), would be separated from the firm.

A report in THE GUARDIAN credited the Executive Director,,   Nigerian Electricity Market Operations/Market Operator, Jang Bagnall, with the information on the emerging development.

Bagnall was quoted as saying in  an interview in Abuja on Monday that the MO and SO would be separated legally from TCN to form the Nigerian Independent System Operator (NISO).

TCN was incorporated in November 2005. TCN emerged from the defunct National Electric Power Authority (NEPA) as a product of the merger of the Transmission and Operations sectors on April 1, 2004. Being one of the 18 unbundled Business Units under the Power Holding Company of Nigeria (PHCN), the company was issued a transmission Licence on July 1, 2006. TCN licensed activities include electricity transmission, system operation and electricity trading.

The TCN is responsible for evacuating generated electric power from generating companies and wheeling it to distribution companies.

Bagnall said:  'The next step is that we need to have some independence from the TCN. Before the unbundling comes, which is actually scheduled for December 31, 2015, we must have formed legal separation of the three entities in TCN. The Market Operator will be its own individual company, but the System Operator and the MO are going to be combined to make the NISO. They will now have an independent governing board and the only body they will probably be responsible to would be the Nigerian Electricity Regulatory Commission (NERC).

'That means that the SO and the MO would culminate in the NISO. That design is very much after the North American market, which is called the Independent System Operator (ISO). They would run the market (MO) and transmission (SO), but they do not build and maintain it. That is where the Transmission Service Provider (TSP) comes in. We would break first into the three entities, and then we are going to build them back into two entities, NISO and TSP.'

He expressed optimism that the declaration of the Temporary Electricity Market (TEM), scheduled now for March 1, 2014, would bring a momentum behind the reforms at the Transmission Company of Nigeria, noting that the firm would then be on the right path with more investors coming in.

Bagnall, who is one of the expatriates brought in by Manitoba Hydro International as part of the Canadian firm's management contract with Nigerian government for TCN, stressed how the new managers were already introducing global best practices into the management of TCN.

He said: 'In essence, TCN is being split into three entities, which are Transmission Service Provider (TSP) - responsible for building and maintaining the transmission system to supply the power to wherever it needs to go to.

The System Operator (SO) in the actual design is going to be tasked with operating the system reliably and dispatching generation at the least cost electricity supply. And the Market Operator (MO), which is my function, is in charge of managing the market by the market rules. The market rules are actually designed by the market participants and not the MO. That means it is designed by all the Generation companies (Gencos), Distribution companies (Discos) and anybody else who is a participant in this market place.'

'What we really need to do is to get outside investment into the generation sector and transmission and distribution segments. We need to grow this electric power sector so we can get power 24/7. To get there, we have to start with more distribution. The Discos have to be able to pay their bills too. We have to build more transmission, because we are having weak transmission system since they have not been maintained for years. All the generation system in the South with their weak system does not make it possible to get electricity up to the North.

'Now, the MO is going to be breaking up from the TCN. The first aspect of this as stated in the TCN blueprint is the Ring Fencing. It is when we would define what the projections are for the three entities to find out the number of personnel that are needed and we start filling those positions and responsibilities.'

On the Market Operator's relationship with other market participants, he stressed:  'Specifically, I know there have been questions about the Nigerian Bulk Electricity Trader (NBET) and how they play into this. NBET in my view is a market participant like any other Genco or Disco. It is a facilitator to give confidence to the investors that they are going to be paid till such time that the Discos can get on their feet, when they can pay their bills fully, then the real market can take off. NBET is not designed to be there for long term; the reason is that since the Federal Government (FG) backs it, investors do not want the FG to be necessarily involved. They want an open, honest and fair market place where everybody can make money.

'What will eventually happen is that people will rely more on the MO for payment when the market stabilises. The way ISO works in North America now is that 95 per cent of all payment transactions goes through the MO but right now in this bilateral market, it is not happening because the market is still new. Sooner when people get more confident about what they do, they are going to sell to the market even though the price goes up and down, knowing the Discos are going to buy from the market. It is then up to the MO to match up those two sides and everything will flow in and pass out through the MO. However, the key will have to be independent because we have to be seen as not having any outside influence and that is why the MO has to break up soonest, and get the TCN unbundled.

'The MO sends out bills to Discos of what they have consumed since it controls the meter readings. This settlement function is core for the MO but we can tell NBET the meter readings by giving them the data for the billings. It is extremely important that we monitor the data collectively so that there will be no hint of impropriety or manipulation.'

On the November remittances compliance level by Discos, he stressed that his office was still collating details of those that have complied.

He said:  'I do not think all of them have complied but I will say we have been working with them to confirm payments that have been made. Some of these payments may not have being credited to the bank account yet because it takes sometimes like seven days for the notification. We are actually working with them to confirm what they have paid and I cannot give you a list of that yet because we are still waiting for the data collation.

'The only ones we have confirmed is the same one we had last week (N2 billion payment) but we have heard and seen letters of significant amount being paid so we are awaiting confirmation from the banks.'

On the sudden drop in electricity, he stressed how generation capacity had gone down in the last one year.

He said: 'The truth is that supply is better in some areas than others. But the problem we are having on the system right now is that the generation capacity has gone down from a year ago to now. We have less generation now in the system and what is drying them up is the question. It is the lack of gas and mostly, its vandalism, damage to infrastructures and lack of the gas infrastructures; so the gas plants cannot run. I understand we have roughly 3,080mw on the system now, not even up to 4,000mw.

'So what we need now is that, all Nigerians will really need to participate and stop vandals from hurting other Nigerians by destroying gas and power infrastructures. They hurt transmission lines, and some people dig up sands from under our transmission towers and they fall down because there is no foundation for them anymore. We need a concerted effort as a whole to help move the power sector to where it needs to be, and if we get that, it will be better for everybody. It is hard to say when people do not realize what it is like to have power all round the clock in a week. When that is done, it is going to drive a whole lot of things including the cutting down in cost of goods and service.'