Govt releases power tariff hike guidelines for Discos
NERC Chairman, Sanusi Garba
As controversies trailed the purported electricity tariff hike by the Federal Government, the Nigerian Electricity Regulatory Commission has issued regulations on the procedure for tariff reviews.
The latest order, signed by NERC Chairman, Sanusi Garba, stated that pursuant to the provisions of the Electricity Act 2023, the commission is obligated to review and approve a fair tariff to allow licensees to recover prudent costs and a reasonable return on capital invested in the business for the provision of electricity services.
It stated that Section 116(1) of the Act provides that activities in the generation, transmission, distribution, trading, supply, system operation, and electricity distribution franchising shall be subject to tariff regulation, saying Section 116(2) further provides for the commission to develop a tariff methodology that allows licensees operating efficiently to recover the full efficient costs of their business activities, plus a reasonable return on investments by shareholders.
“In exercise of the powers conferred in Section 116 of the Act, the commission has developed and adopted the Multi-Year Tariff Order Methodology as an incentive-based price regulation framework for the determination and projection of tariffs payable in the Nigerian Electricity Supply Industry,”
NERC stressed that the Multi-Year Tariff Order methodology provides for a major review of electricity tariffs every five years, during which all tariff assumptions are reviewed to ensure the industry’s viability and efficiency.
One year before the major tariff hike, the commission said it would issue a notice to all licensees about its intention while requesting them to submit applications for the review of tariffs supported with necessary documentation within 120 days of the notice.
“The commission shall, one year before the expiration of the major tariff review order in force or as may be considered necessary, issue a notice to all licensees about its intention to commence the process for a major review of the existing tariff. The notice shall be published in three national dailies and on the website of the commission.
“The Notice shall request for submission of applications for the review of tariffs supported with documentation that includes but not limited to audited financial statements, budgets, investment plans (in line with prevailing guidelines on Performance Improvement Plans), and proof of wide consultation with customers in the licensees’ service area concerning the proposed filing of the application for tariff review and any other information as deemed necessary by the commission,” the regulation stated.
The regulator said an initial review of the applications shall be completed and a consultation paper developed no later than 90 days after the deadline for the submission of the applications.
“The consultation paper developed by the commission shall outline the basis for the tariff review applications by the licensees including their proposals on capital investments, service improvements, new connections, loss reductions, reset of tariff assumptions if any, and possible impact on rates payable by the affected customers.
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