13 November 2012

Nigeria: NERC Seeks Transparency in Estimated Billing Methodology

The Nigerian Electricity Regulatory Commission (NERC) has asked successor Power Holding Company of Nigeria (PHCN) distribution companies to ensure sustained transparency in its calculation of estimated electricity tariff dished out to customers without metering facilities.

NERC in a reaction to deluge of complaints on excessive estimated billing brought against PHCN distribution companies by customers has directed the discos to immediately initiate technical workshops aimed at educating their staff on processes involved in calculating and arriving at accurate estimated electricity tariff.

According to a statement from the commission in Abuja, the workshop is expected to bridge the gap between regulations and effective implementation of contents of the Multi Year Tariff Order 2 (MYTO 2), which came into effect in June 2012 following discovery by NERC that PHCN discos have opted to neglect rigorous application of transparent methodology in the estimation of electricity bills of customers.

NERC had enacted the methodology on estimated billing to regulate the practice of arriving at electricity bills for customers who do not have prepaid meters. PHCN discos are required by the process to scientifically calculate electricity consumption of consumers with accuracy such that customers pay for only what they consume.

But investigations by NERC revealed that the staff of PHCN discos do not understand how to apply this methodology.

The commission stated in the statement that this had significant linkage to many of the complaints lodged by customers and has in this regard asked the discos to equip their officials responsible for billing with the necessary information and skills needed to estimate electricity bills in a scientific, fair and transparent manner.

Chairman of NERC, Dr. Sam Amadi, said in the statement: "We have mandated the discos to organise a sensitisation workshop for the business managers in the discos to ensure compliance with the regulation. The workshops must take place before the end of November, 2012. Areas to be dealt with during the sensitisation exercise will include metering plans and targets, and the regulation on connection charges."

Meanwhile, NERC has also endorsed an evidence-based training course in economic regulation aimed at exposing players in Nigeria's power sector of approaches it intends to adopt in improving its regulation of and operation within the country's emerging power sector.

The course, which will be undertaken by UK based ESL Economics and Management Associates, will focus on types of incentive regulation mechanism (IRM) the sector regulator has adopted for regulating the Transmission Company of Nigeria (TCN) and the 11 distribution companies of PHCN.

Accordingly, the course is designed to allow top players in the power sector learn processes through which NERC may determine the forecast of Capital Expenditure (CAPEX) as well as Operations and Maintenance Costs it will allow TCN and the discos to earn over the five years price control period of 2012 to 2017.

It will also give an insight into how NERC may go about determining the 'reasonable' profit it will allow investors to earn on their investments as well as sustainable measures to manage other challenge expected to come up in the power sector reform exercise.

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