This Day (Lagos)

21 December 2012

Nigeria: NERC Plans Review of Licences, Fixed Charge for SMEs

Abuja — The Nigerian Electricity Regulatory Commission (NERC) has said that it plans to review the status of all licences it has so far issued to operators in the Nigeria Electricity Supply Industry (NESI) as well as the electricity fixed charge for Small and Medium Enterprises (SMEs).

This, according to the Chairman of the commission, Dr. Sam Amadi, became necessary following concerns raised by the SMEs sector that the high fixed cost component might run them out of business if unreviewed as the charge outweighs the volume of their business.

Amadi, however, pointed out that reviewing the complaints of high fixed cost charge by the SMEs may not necessarily affect the projected revenues for the electricity distribution companies.

Also, the commission said it was set to review all issued licences and take firm decision on the non-performing ones in line with the provisions of the law.

Amadi, who spoke at a press briefing in Abuja yesterday, said the cost of electricity in the country will remain the same at least for the next six months following a negative need to adjust the tariff.

He explained that a minor review of the new Multi-Year Tariff Order (MYTO) which came into effect on June 1, showed that all the factors remained largely the same with zero need for tariff increase.

He disclosed that the review which has been approved by the commission is based on some assumptions mostly financial and commercial in the tariff order, including exchange and inflation rates as well as the cost of gas and the available capacity.

He said: "We conducted rigorous reviews; we got verification of data from the Central Bank of Nigeria (CBN) on the exchange rate and inflation rate and the system operator's daily report as to capacity that is available in the market and the cost of gas. Our projections in June about how the year will end in terms of the financial assumptions were verified and confirmed by the figures from the CBN.

"For example, the gas price remained $1.80 which we projected for both supply and transportation. There were very little changes with regards to inflation. The National Bureau of Statistics gave us a figure of 11.3 per cent while MYTO 2 was based on 13 per cent inflation rate. The rule in MYTO is that if it is not more than five per cent inflation rate increase there is no need for review.

"The CBN data shows exchange rate of N159 to the dollar as at September while MYTO was bench marked at N161 to the dollar. Essentially the difference is insignificant and we ended up as projected."

Explaining further on the planned licence review, the commission's General Manager, Legal, Licences and Enforcement, Mrs. Funke Dinneh, said the need to review the licences was informed by the fact that so far the commission has issued 78 licences which are supposed to be delivering 14,000MW but noted that the reality on ground was a foul cry as most of the licences are not performing.

She stated that the electricity bulk trader had been established and licences with Power Purchase Agreement issues would be referred to the bulk trader, while those without sufficient reason for non-performance, would be addressed in line with the provisions of the law.

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