11 November 2012

Nigeria: UK Group Plans Training in Economic Regulation On NERC

ESL Economics & Management Associates UK presents an evidence-based training course in economic regulation which the Nigerian Electricity Regulatory Commission (NERC) has endorsed. This course reflects the findings from a detailed assessment of the skills required for grappling effectively with the challenges the industry may face as it evolves.

A press statement signed by Mr Ben Iheanacho, the press officer of the group, said this course is designed to expose the participants to the approach NERC will follow to approving the revenue electricity transportation companies across the country will collect from their customers through the rates they pay for their electricity demand.

The release added that "Approving revenue and designing the way the rate is divided between energy, capacity and fixed charge are important elements of the regulatory landscape. A clear understanding of the pertinent issues revenue and rates involves are crucial in determining the long term financial viability and sustainability of the restructured and soon to be fully privatized Nigerian electricity sector.

"The course will focus on the type of incentive regulation mechanism (IRM) the sector regulator has adopted for regulating the Transmission Company of Nigeria (TCN) and the 11 Distribution Companies ('the DISCOs'). The course is designed to allow participants' to learn how NERC may determine the forecast of Capital Expenditure (CAPEX) and Operations & Maintenance Costs (OM&A) it will allow TCN and the DISCOs to earn over the 5 years price control period of 2012 to 2017. Also, to give them an insight into how NERC may go about determining the 'reasonable' profit it will allow investors to earn on their investments. Furthermore, participants will understand how NERC may go about recompensing shareholders for prudential costs they incur to restore supply when challenges such as acts of god occur. This aspect is particularly relevant at this time, given the impact of the recent flooding across the country that has seen portions of electricity infrastructure submerged under water. Finally, participants will learn about some of the current issues in regulation and rates that regulators in other jurisdictions face that may happen in Nigeria.

"Primarily, this course will allow the participants to gain a better understanding of the Second Generation Incentive Regulation Mechanism (2GIRM) that NERC implemented on 1st June, 2012. The way NERC resolved to go about determining the revenue from 1st of June, 2012 and which will subsist until the end of the current price cap period in 2017, is different from what obtained previously. One crucial difference is the emergence of location and DISCO specific rates. That is, customers now pay different rates depending on where they are located in country. The underlining ideology is the inherent features of each DISCO that sees the cost of meeting reasonable demands for electricity being significantly different between locations. Ensuring that the cost of serving each location is correctly reflected in the price a customer pays is one way of making sure that Nigerians are encourage to begin to think of the things they can do to reduce wasting of the limited electricity we currently generate. In doing this, more Nigerians are able to share in what we can generate from our heritage assets.

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