21 June 2019

Nigeria: NERC Seeks Performance Improvement Plans for DISCOs

Abuja — The Nigerian Electricity Regulatory Commission (NERC) has indicated it will grant new electricity rates to electricity distribution companies (Discos) in Nigeria provided they submit Performance Improvement Plans (PIPs), with which all stakeholders in the sector would hold them accountable for service level efficiency.

In a document titled: "performance improvement plan guideline," which THISDAY obtained from the commission in Abuja, the regulator disclosed its demand was in line with the intentions of the Power Sector Recovery Programme (PSRP) Nigeria initiated with the World Bank.

It explained that in pursuit of the PSRP, "the Commission is implementing a more robust tariff review process aiming at improving the performance of the Nigerian Electricity Supply Industry (NESI).

"The process will involve a review of the application of the capital expenditure allowances in the MYTO (Multi Year Tariff Order) model for compliance with Performance Improvement Plans (PIPs) to be prepared by the distribution companies (Discos) and approved by the commission.

"The implementation of the Performance Improvement Plan is to be strictly monitored by the commission," said the document.

According to the regulator, future tariff review would prioritise expenditure by the Discos and reflect changes in the operational environment that have occurred since the last tariff review.

"It is noteworthy that one of the overarching objectives of the PSRP is the elimination of tariff shortfalls and the enforcement of market obligations.

"The PIP developed by Discos shall cover the period 2020 - 2024 tariff period but subject to the contractual provisions of the performance agreements executed between the core investors and the Bureau of Public Enterprises in respect of the allowances for capital and operating expenditure in the remaining term of the agreement," it explained.

The document equally stated that upon approval of the PIPs by NERC, it will then form the basis of prioritising and monitoring the capital investment initiatives of the Discos with revenue adjustment for non-implemented projects.

It stated thus: "The approved PIPs will also be the basis for the defining performance standards/KPIs for the next five-year tariff period by the commission with emphasis on improvement in energy throughput and delivery by Discos, reduction in aggregate technical/commercial losses and overall improvement in service delivery to customers."

Further on its expectations in the PIPs to be submitted by Discos, NERC said: "Revenue requirement should cover the investment and operating costs of efficiently providing electricity services to consumers.

"Discos operating in the Nigerian electricity market are to produce PIPs which will form the basis for revenue requirement projections and also serve as the companies' service charter with the consumers to which they will be held accountable by the commission. The PIPs should therefore be realistic and well thought-out."

It added that: "The preparation of the PIP is an opportunity for Discos to set out what they intend to deliver to consumers over the five-year tariff period as well as the associated costs, in line with the MYTO methodology. "The Disco's PIP is expected to draw from the vision of the Electric Power Sector Reform Act, existing NERC rules and regulations, and the PSRP."

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