In this particular article, we will be looking at the topics of 2 Electric Power Sector Business Licenses – the Electric Power Transmission System Operator (SO) license and the Electric Power Trading license.
The focus topics will be :-
– What Transmission System Operators and Power Trading companies do.
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– The licensing requirements for Transmission System Operators and Power Trading companies.
– The post-licensing Regulatory requirements for Transmission System Operators and Power Trading companies.
What does a Power Transmission System Operator( or “SO”) do?
A Power Transmission SO is a company independent of the Transmission Company of Nigeria (TCN) in:-
– Dispatching generated power in accordance with the grid code at least cost on the basis of nomination by generators.
– Handling power system emergencies & power system restorations.
– Performs demand forecasts, incorporating Power distribution company (DISCO) load nomination.
– Procuring ancillary services & recovering the cost for procuring those services.
– Designing, installing & maintaining SCADA & Communications facilities for effective grid operations.
– Maintaining & enhancing systems reliability, stability & security.
– Facilitating the operation of the power market through bilateral exchange.
– Enforcing the grid code & the electric power market rules.
What does an Electric power trading company do?
An Electric Power Trading company is simply one that has been licensed to purchase and sell power between participants in the electric power sector through the use of short-term to long-term Power Purchase Agreements (PPAs) & Resale Agreements.
What is the Regulatory Framework governing Transmission SOs and Power Trading companies in Nigeria?
Transmission SOs and Power are regulated by the Electric Power Sector Reform Act, the Nigerian Electricity Regulatory Commission (NERC) through its various regulations (among them being the 2010 NERC Licensing Regulations), the Nigerian Bulk Electricity Trading Company PLC (NBET) & the Federal Ministry of Power.
How are applications for SO and Power Trading licences commenced?
Applications for SO and Power Trading licenses are to be made via legal representation to the Chairman, NERC and these applications are to be made in 3 paper copies and an electronic version in MS Office software format.
Applications must be acknowledged and such an acknowledgement communicated to the applicant. NERC might require of the applicant further information within 1 month of receiving the application.
Just as previously explained regarding DISCOs, are applications required to be published in 2 daily newspapers as a licensing pre –condition for the purpose of receiving any possible objections to be determined?
Yes, they are.
How long will it take for SO and Trading license applications to be processed?
SO and Power Trading license applications shall be processed in not more than 6 months from the date of license receipt application receipt/acknowledgement.
What are the requirements for Power Transmission SO and Power Trading licenses?
The requirements for a Transmission System Operator (SO) license are :-
– A completed application form.
– A Certificate of Incorporation and MEMART (Memorandum/ Articles of Association) of the applicant company.
– A registered Title deed to site, or Deed of Assignment/ Gift, or evidence of submission of a title deed to a relevant land processing agency.
– A Tax Clearance Certificate for the last 3 years.
– A 10-year business plan (please consult your lawyer to find out the required contents of a business plan under NERC regulations).
– Network configuration.
– Line voltage level (132V & above).
– Interconnection points.
– Ownership of main, supplementary and regional control centers.
– Communication center facilities (VOIP, Radio links, Fibre Optic).
– System planning and operation capability.
– System operators training & certification facility or alternatives.
– Ability to procure & pay for ancillary services.
– Functional energy management system equipment & facilities.
– Operational procedures for dispatch operators if available.
– A Health & Safety policy.
For a Power Trading license application, the requirements are:-
– A completed application form.
– A Certificate of Incorporation of the applicant company and its MEMART (Memorandum Articles of Association)
– A registered Title deed to site or sale agreement or a Deed of Assignment/Gift or evidence of submission of a title deed to a relevant land processing agency
– A Tax Clearance Certificate for the immediate past 3 years.
– A 10-year business plan (please consult your lawyer on the required contents of a business plan under NERC regulations).
– A Financing Agreement or letter from a Financial Institution.
– A Power Purchase Agreement with a licensed Power Generation Company (GENCO) .
– A network agreement with a licensed Transmission company.
– A Retail Agreement with End-users for the supply of power or a Resale agreement with a licenced Distribution Company (DISCO).
What are the validity periods of SO and Power Trading licenses in Nigeria?
SO & Power Trading licenses both carry a validity period of 10 years and like DISCO licenses can be extended, amended, suspended or cancelled.
What are the fees associated with procuring SO and Power Trading licenses in Nigeria?
Transmission System Operator licenses come with the following fee implications :-
Processing fees – 1 Million Naira
Licence fees – $300,000.00(Three Hundred Thousand US Dollars)
Licence renewal/Tenure extension Processing fees – 500,000.00 Naira
Annual Operating Fees – 1.5% of SO charges per Kwh.
Power Trading licences come with the following fee implications:-
Processing fees – 1 Million Naira
Licensing fees – $75,000.00(Seventy-Five Thousand US Dollars)
Processing fees for License renewal/ Tenure extension – 500 Thousand Naira.
Annual Operating Fees – 1.5% of Trading Company’s charges per Kwh net the cost of generation and transmission.
Conclusion :- Gaining a deeper insight into the total Regulatory Framework governing these 2 Power Sector Business Licenses will require a further consultation with your lawyer for those interested in venturing into either of these businesses. The next article will be looking at another type of Power Sector Business licence – the Power Transmission License.