Electricity tariff to increase again as NERC seeks to conclude extraordinary review
Electricity tariff will likely go up soon as the Nigerian Electricity Regulatory Commission (NERC) announced plans to conclude the Extraordinary Tariff Review process for the country’s 11 electricity distribution companies.
The review, which is a minor one, began in the first quarter of 2020 and has remained inconclusive.
This disclosure is contained in a notice which was issued by the Chairman of NERC on Monday, April 26, 2021, and seen on its website.
The Commission expressed its readiness to commence the processes for a minor review of the tariff in July, based on changes in inflation, foreign exchange, gas prices, and available generation capacity, among other factors.
NERC states that the reviews can also be carried out whenever industry parameters have changed from those used in the operating tariffs to such an extent that a review is urgently required to maintain the viability of the industry.
The commission is, however, soliciting comments from the general public and industry stakeholders on the proposed reviews.
NERC is mandated, under the provisions of the Electric Power Sector Reform Act (EPSRA) to review electricity tariffs in Nigeria every six months (minor) and five years (major).
The notice from NERC reads:
“Pursuant to the provisions of the Electric Power Sector Reform Act (EPSRA), the Nigerian Electricity Regulatory Commission (“NERC” or “the Commission”) adopted the Multi-Year Tariff Order (MYTO) Methodology in setting out the basis and procedures for reviewing electricity tariffs in Nigeria. The MYTO provides for Minor Reviews (every 6 Months), Major Reviews (every 5 years), and Extraordinary Tariff Reviews in instances where industry parameters have changed from those used in the operating tariffs to such an extent that a review is urgently required to maintain the viability of the industry.
Further to the above, the Commission held series of Public Hearings and stakeholder consultations in the first quarter of 2020 on the Extraordinary Tariff Review Applications of the eleven (11) electricity distribution companies (“DisCos”) to consider their respective 5-year Performance Improvement Plans (“PIPs”). However, the evaluation of the DisCos’ requests for review of the Capital Expenditure (“CAPEX”) proposed in their PIPs could not be concluded for the consideration of the Commission during the Minor Reviews undertaken in 2020. Specifically, Section 21 of the MYTO – 2020 Order provides for consideration of DisCos’ CAPEX application upon further scrutiny and evaluation of the investment proposals. Accordingly, this notice is issued to inform the general public and industry stakeholders of the Commission’s intention to:
Conclude the Extraordinary Tariff Review process for the eleven DisCos;
Commence the processes for the July 2021 Minor Review of MYTO – 2020 to consider changes in inflation, foreign exchange, gas prices, available generation capacity, and CAPEX required to evacuate and distribute the said available generation capacity in accordance with EPSRA and other extant industry rules.
This notice is hereby issued in compliance with the provisions of EPSRA, the Business Rules of the Commission and the Regulations on Procedures for Electricity Tariff Reviews in the Nigerian Electricity Supply Industry to solicit for comments from the general public on the proposed reviews.
Stakeholders and the general public are invited to send their comments to the Commission within 21 days from the date of this publication. All comments or representations should be addressed to:
What you should know
- It can be recalled that in October 2020, the Federal Government announced the suspension of a new electricity tariff for two weeks, following its meeting with organized labour, after the threat by labour to embark on strike over the increase in electricity tariff and petrol pump price.
- The suspension of the new electricity tariff was later extended by another one week to enable the committee to review and work out modalities for the implementation of the agreement reached on electricity tariff structure.
- NERC later directed electricity distribution companies (Discos) to start the implementation of a further increase in electricity tariff with effect from January 1, 2021.