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Nigeria Electricity Supply Industry: Why We Effected Tariff Review, NERC

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The Nigerian Electricity Regulatory Commission (NERC), has advanced reasons why it embarked on minor review of the Multi Year Tariff Order (MYTO) which determines final tariffs payable by electricity consumers.

Even though, it said that the review has no immediate application on consumers, the Commission said it took into consideration “the impact of inflation, rate of foreign exchange, gas prices and energy available to consumers.”

In a statement, Dr. Usman Abba Arabi, NERC’s General Manager, Public Affairs Department, also said that in conformity with the Electric Power Sector Reform Act, it was done to determine “electricity tariffs charged by the electricity distribution companies (DisCos) and to provide an opportunity for utilities to recover efficient costs of operation and a reasonable return on investment.”

The full text of the statement entitled “Minor Review Of The Multi Year Tariff Order For The Nigerian Electricity Supply Industry”, reads:

The attention of the Nigerian Electricity Regulatory Commission (the “Commission”) has been drawn to reports in the media that an immediate increase in end-user electricity tariffs has been approved by NERC.

The Electric Power Sector Reform Act provides that the Commission shall determine and periodically review electricity tariffs charged by the electricity distribution companies (DisCos) and to provide an opportunity for utilities to recover efficient costs of operation and a reasonable return on investment.

The current tariff methodology adopted by the Commission provides for a determination of a tariff trajectory over a 5-year planning horizon and biannual minor tariff reviews taking into account the impact of inflation, rate of foreign exchange, gas prices and energy available to consumers.

The minor review Order released by the Commission on January 3, 2020 has no immediate impact on end-user tariffs payable by all classes of electricity customers in the country.

The order is to establish the impact of the exogenous macroeconomic parameters and costs outside the control of the utilities in the year 2019 and projections for 2020.

The macroeconomic indices taken into consideration to conclude this exercise include rate of inflation, foreign exchange, gas price and volume of available electricity.

The Order has further prescribed minimum market remittance threshold payable by the eleven electricity distribution companies and the projected tariff path until 2021.

However, where actual end-user tariffs are likely to be impacted by the review, the required public and stakeholder consultations shall be implemented in line with requirements of the Electric Power Sector Reform Act and Business Rules of the Commission.

-Dr. Usman Abba Arabi – GM Public Affairs Department

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