Plans are underway for the Nigerian Electricity Regulatory Commission (NERC) to review tariffs that customers pay to the 11 Distribution Companies (Discos) and to also approve a new capital expenditure (capex) for the energy distributors.
The source of discord between the regulator and the DisCos has always been the capital expenditure allowance approved by NERC since the distributors insist that it is too low and has limited their capacity for network expansion.
Going by the Multi Year Tariff Order (MYTO) 2015, the approved average capital expenditure allowance to DisCos remains $12million or roughly N5 billion per DiCco annually.
On the other hand, MYTO, is a framework that guides the pricing of electricity in the country and by the rules is supposed to be adjusted twice a year.
The commission expressed the readiness for the review on its website yesterday in its notice that it titled “Notice of Minor and Extraordinary Review of Tariffs for Electricity Transmission Distribution Companies”.
NERC stated that the latest move was pursuant to the provisions of the Electric Power Sector Reform Act (EPSRA) which sets out the methodology and procedures for reviewing electricity tariffs in Nigeria.
The notice: “The MYTO provides for minor reviews every six months, major reviews every five 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 this, the commission noted that it held series of public hearings and stakeholder consultations in the first quarter of 2020 on the extraordinary tariff review applications of the 11 electricity Discos to consider their respective five-year Performance Improvement Plans (PIPs).
NERC, however, said that the evaluation of the Discos’ requests for review of the capital expenditure proposed in their improvement plans could not be concluded for the consideration of the commission during the minor reviews undertaken in 2020.
The commission specifically noted that section 21 of the MYTO, 2020 order, provides for consideration of DisCos’ capital expenditure application upon further scrutiny and evaluation of the investment proposals.
It explained that the latest notice was issued to inform the general public and industry stakeholders of the commission’s intention to conclude the extraordinary tariff review process for the 11 Discos.
In addition, NERC stated that it was also to 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 capital expenditure.
It stressed that this is required to evacuate and distribute the said available generation capacity in accordance with the extant laws and other existing industry rules.
The Commission said: “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 (NESI) 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.”