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NERC proposes monthly electricity tariff review

By on June 8, 2017

The Nigerian Electricity Regulatory Commission (NERC) is set to cut the minor review period of Multi Year Tariff Order (MYTO) methodology from six months to either monthly or quarterly.

The commission stated the intent in a consultation paper it issued on May 30, 2017, to stakeholders in the power sector, calling for suggestions. The MYTO was first reviewed in 2012 and spans a 15 years period with major review every five years, and a minor review every six months.

Every six months, NERC reviews the MYTO by considering changes in parametres like inflation, exchange rate, gas price, power generation capacity, transmission capacity and the operators’ Capital Expenditure (CAPEX) requirement to adjust the tariff.

The paper endorsed by the acting Chairman, Mr Sanusi Garba, said reducing the review period wiould provide incentives for continued improvement in services as shortfalls would be promptly recognised and computed into tariffs.

However, it said raising the review frequency, “may deliver higher tariffs to consumers in the long run resulting from associated finance costs where retail tariffs are not adjusted immediately.”

NERC is also considering changing the period of adjusting the tariff from every six months after the minor review.

The commission said changing the tariff update period to monthly or quarterly would allow operators to recover their efficient cost promptly without delay thereby boosting market liquidity.

“Electricity consumers will immediately bear the full brunt of risks associated with macro-economic changes in the economy,” it stated.

NERC also seeks to include the Revenue Decoupling Mechanism (RDM) to help compensate customers or the utility firms for any charge in line with the actual generation as against the projection that has been made in the MYTO.

Stakeholders are expected to be at the public hearing which will be held after June 30 by the commission before the final outcome on the MYTO change is approved.

 

[Daily Trust]