Nigeria: Nerc Plans Another Electricity Tariffs Review

27 November 2020

Abuja — Nigerians may experience another electricity tariffs increase by next month if the plan by the Nigerian Electricity Regulatory Commission (NERC) to carry out another review comes to fruition, THISDAY learnt last night.

On September 1, NERC approved the take-off of the Service-Reflective tariff regime which saw some Nigerians pay as much as an additional 50 per cent price for electricity, a move that was opposed by organised labour.

However, a source at the commission, who preferred to remain anonymous, told THISDAY that the review does not necessarily mean a higher payment by consumers.

The source noted that although a review has been scheduled, some other considerations might come into play, including political considerations as to the timing or the changes in the indices may be too minor to constitute any change in tariffs.

He said it may be deferred to the next round of minor review, which is done bi-annually.

"Government may say 'leave my people alone' or we will take responsibility for any increase. In another instance, if it's negligible, NERC can carry it over to the next circle of review. There's a margin. If it's not up to that level or margin it can't be rolled over to the next review," the source said.

But in the document obtained yesterday titled: "Notice of The Bi-Annual Review of the 2020 Tariff Orders for Determination of Charges and Tariffs for Electricity Generation, Transmission and Distribution," NERC noted that the review in December will take into consideration inflation rate, dollar exchange rate to naira as well as natural gas price.

Although the document indicated that it was signed by the chairman, it however did not name him apparently because the tenure of Prof. James Momoh expired on 26 November, having clocked the statutory 70 years.

This effectively cut short short his single term of five years by two years.

Momoh's replacement sent to the National Assembly for is yet to be confirmed.

NERC noted that the last review did not take into consideration the portion of the rules that deals with capital expenditure (CAPEX) for the Distribution Companies (Discos).

"This is pursuant to procedures set out in Section 76 of the Electric Power Sector Reform Act 2005, the Nigerian Electricity Regulatory Commission adopted the Multi-Year Tariff Order (MYTO) methodology for electricity pricing in Nigeria, which sets out the basis and pricing principles and procedures for effecting minor and major reviews of electricity tariffs in Nigeria.

"The MYTO provides a tariff path for the electricity industry, with biannual minor reviews to take into account the impact of changes in a limited number of parameters (specifically inflation, US dollar exchange rate to naira, natural gas price and available generation capacity) and major reviews every 5 years, when all other inputs are reviewed with stakeholders.

"Section 9 of the "Regulation on Procedures for Electricity Tariff Reviews in the Nigerian Electricity Supply Industry" allows for Extraordinary Tariff Review in instances where the utilities can demonstrate that industry parameters have changed from those used in the operating tariffs to such an extent that a review is required urgently in order to maintain industry viability.

"In light of the above, the Nigerian Electricity Regulatory Commission received Extraordinary Tariff Review Applications from the eleven (11) electricity distribution companies (Discos) last year," NERC said.

It added that in line with rule 24 (3) of the business rules of the commission, notice of applications for tariff review for electricity distribution companies and the Transmission Company of Nigeria (TCN) Plc and request for intervenors to participate in the proceeding were published across the country.

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