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Discos can’t increase tariff to repay N213bn – NERC

By BusinessNews Staff on October 9, 2014

Power distribution companies will not be allowed to increase electricity tariff as they work to repay the Central Bank of Nigeria’s N213bn facility earmarked for operators in the power sector.

This was disclosed by the Nigerian Electricity Regulatory Commission in an emailed response to an enquiry by our correspondent on Tuesday.

The Federal Government recently announced a N213bn facility to assist operators in the sector offset the huge legacy gas debts and redress their revenue shortfall in order to improve investment in the industry.

The Chairman, NERC, Dr. Sam Amadi, said the regulator was never focused on increasing tariff.

He said, “If anything, the regulator wants to keep the tariff lower than it could be. That is why we are a consumer protector. Our mandate in the law is to ensure that the operators are efficient, and when they are efficient, we allow them to charge the price that enables them to recover the reasonable and prudent cost of serving the customer.

“So, from this perspective, our commitment is to make sure that this sector continues to attract the right kind of investment that will lead to more availability and reliability. Apart from having the right price, you need a transparent and reliable regulatory framework to attract investment.

“This means that we must religiously follow our price methodology, except where it will work gross injustice or distress to consumers. The methodology requires us to review the pricing of electricity upon the occurrence of certain events.”

Amadi said this was demonstrated when the commission carried out minor reviews and its outcome showed that the value of some core indicators had changed by more than five per cent.

He explained that the CBN fund would help to provide quick money that the power companies would pay with a longer tenor.

The NERC boss said, “So, instead of consumers paying the shortfall immediately and within five years, the fund helps power consumers not to pay immediately and to pay for 10 years.

“For the Discos, the fund helps them to get immediate money to settle their debts and repay for 10 years as they collect tariff from consumers. So, this fund is a relief. It is a like a debt-buy-back such that the CBN takes the debt but does not discount it.

“We still pay in full but for 10 years with a one-year moratorium. What this does is to provide the power sector with some needed liquidity and finance that will enable the industry to thrive and to quickly deliver more electricity to more Nigerian homes.”

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