NERC approves another increase in electricity tariff

The Nigerian Electricity Regulatory Commission (NERC) has approved an increase in electricity tariff across the country.

According to a directive issued on December 31, 2020, and signed by Sanusi Garba, NERC chairman, the new tariff will take effect from January 1.

The commission stated that the new tariff will be enforced until the issuance of another minor review order or an extraordinary tariff review order by the commission.

The NERC said some of the indices considered for the upward review include Nigeria’s inflation rate, exchange rate, US rate of inflation, available generation capacity, gas price, MDA losses and capex adjustment.

“This order supersedes ORDER/NERC/ 202B/2020 and shall take effect from January 1, 2021, and shall cease to have effect on the issuance of a new minor review order or an extraordinary tariff review order by the Nigerian Electricity Regulatory Commission (“NERC” or the “commission”),” the commission said.

“The actual average monthly inflation rate of 13.1% for the period January to November 2020 was used for review of the year 2020 tariffs, while, the November 2020 inflation rate of 14.9% as obtained from the NBS was adopted to project Nigerian inflation rates for the year 2021 and beyond.

“In line with the MYTO Methodology, the CBN official exchange rates plus a premium of 1% were used for the retroactive review of the year 2020. Accordingly, average NGN/USD exchange rate (+1%) for the period 1st January 2020 to December 15, 2020, of N360.8 was used to review the year 2020 tariffs. The NAFEX closing NGN/USD exchange rate (+1%) of N397.44 as at December 29, 2020, was adopted to project NGN/USD exchange rate for 2021 and beyond.

“The year 2020 projection on available generation is maintained for the first half (Jan-Jun) of 2021 to account for the impact of the delay in the implementation of MYTO-2020. No change was applied to generation projections from July 2021 and beyond.

<p class="has-drop-cap has-vivid-red-color has-text-color" value="<amp-fit-text layout="fixed-height" min-font-size="6" max-font-size="72" height="80">“A benchmark gas price of $2.50/MMBTU, gas transportation cost of $0.80/MMBTU and gas prices outside the regulated rates for GenCos with effective gas sale agreements (“GSAs”) were maintained.”“A benchmark gas price of $2.50/MMBTU, gas transportation cost of $0.80/MMBTU and gas prices outside the regulated rates for GenCos with effective gas sale agreements (“GSAs”) were maintained.”

In November 2020, the electricity distribution companies (DisCos) began implementation of a service-based reflective tariff (SRT) structure nationwide after receiving approval from President Muhammadu Buhari.

NERC to begin another electricity tariff review

The Nigerian Electricity Regulatory Commission (NERC) has notified the public of the second electricity tariff review this year as it called for comments within 21 days.

In a notice it published on Wednesday, the power sector regulator said the tariff review is for the Distribution Companies (DisCos), the Generation Companies (GenCos) and the Transmission Company of Nigeria (TCN).

Newsmen also report that the review notice issued by the Chairman, Prof. James Momoh, would not be superintended by him as he was due to leave office yesterday, November 26, having clocked 70 years, as specified by the Electric Power Sector Reform Act 2005.

The latest tariff order referred to as the Multi Year Tariff Order (MYTO) 2020 was re-implemented on November 1, 2020 with tariffs rising by over 50 per cent for most consumers.

While that tariff will elapse by December, NERC could implement this reviewed tariff by January 2021.

The Commission considers parameters during the review such as inflation, US Dollar exchange rate to Naira, natural gas price and available generation capacity. Higher inflation and forex especially, could trigger a rise in the tariff, our analysis shows.

NERC said although the current MYTO 2020 addresses some investment recovery issues of the DisCos, there is still a gap.

“The issues presented by the DisCos in their request were, however, not fully considered by the Commission considering that no additional Capital Expenditure (CAPEX) was approved for them to meet the periodic service level commitments required to deliver energy to customers on the different service bands.”

It was learnt that the 11 DisCos have submitted their extra-ordinary tariff review proposals to NERC for the agency to add the CAPEX fund to the tariff.

“The Commission therefore intends to continue with the ongoing extra-ordinary tariff review for the DisCos in addition to the mandatory periodic minor review,” NERC confirmed.