Nigeria

UPDATE: NERC halts plan to effect transition to cost-reflective tariff

Barely 24 hours to transition into the new electricity tariff regime, the Nigerian Electricity Regulatory Commission (NERC) has halted its plans to effect its initial order on the cost-reflective tariff in the Nigerian Electricity Supply Industry (NESI).

Tribune Online reports that the order was expected to kick off on April 1, 2020.

Earlier in the year, the Commission had issued the December 2019 Minor Review of Multi-Year Tariff Order 2015 and Minimum Remittance Order for the Year 2020.

According to the Commission, the order was issued considering the various macro-economic indices but had noted that there would be no immediate increase in the tariff until appropriate consultations were made with stakeholders in the sector.

The Commission also in an archive of documents for each of the 11 DisCos, titled: Minor Review Of MYTO 2015 and Minimum Remittance Order for the Year 2019, which was uploaded on the commission’s website in December 2019 also stressed that the Power Sector Recovery Plan (PSRP)does not “envisage” an immediate increase in end-users tariff until April 1, 2020, assuring a partial subsidy for electricity consumers.

It read: “The Federal Government’s (FG)updated PSRP does not envisage an immediate increase in end-user tariff until 1st April 2020 and transition to full cost reflective tariff by end of 2021.

“In the interim, the FG has committed to full d the revenue gap arising from the difference between the cost reflective tariff determined by the commission and actual end-user tariffs payable by customers.”

However, in a new document titled: Order On Transition To Cost-Reflective Tariff In The Electricity Supply Industry,” uploaded on its website on Monday, the Commission stated that there would not be an increase in end-users tariff on April 1, 2020.

It said: “There shall be no increase in tariff of end-use customers on 1st April 2020.”

The new order which was jointly signed by the Commission’s Chairman, James Momoh and Commissioner, Legal, Licensing and Compliance, Dafe Akpeneye said the decision was informed by the outcomes of the various public consultations held on the proposed tariff review.

It also said that the decision was due to the COVID-19 which was beginning to take its toll on the country’s economy and the average Nigerians.

“The Commission acknowledges the adverse effect of the COVID-19 pandemic on the global economy and consequential impact on the average Nigerian,” it said.

It said that a public hearing was recently conducted on the application filed by the 11 electricity distribution companies for a review of their respective end-users tariff.

While giving a summary of its findings, NERC explained that end-use electricity customers were against tariff increase as a result of poor service delivery, quality of power supply and inadequate metering.

“End-Use customers of the 11 DisCos are willing to pay appropriate rates for services rendered by the DisCos, but this willingness is conditioned on guaranteed hours of service, quality of power, and adequate metering,” the document read.

It also noted that the wide metering gap in the NESI was a major impediment to both the immediate tariff review and revenue protection for DisCos.

“The consideration of customer complaints was not placed on the agenda as the hearing was forbade defined purpose, the commission, however, observed that end-use customers used the opportunity to provide feedback on their dissatisfaction with the quality of service provided by DisCos and bitter feedback was also provided on the practice of estimated and sometimes arbitrary billing,” the document read.

The document further revealed that the current global COVID-19 pandemic has impacted on the availability of imported components for the local assemblage of meters for supply to customers under the Meter Asset Providers (MAPs) regulations.

However, it said: “The Commission is currently in discussions with DisCos and MAPs on the revision of the standards/expectations prescribed in the MAPs regulations and the service level agreements executed between the contracting parties.”

While also directing the DisCos to submit a detailed plan for the full recovery of prudent costs and allowed return on capital by 30, June 2020, it maintained that its Orders titled: “December 2019 Minor Review Of Multi-Year Tariff Order (MYTO)2015 and Minimum Remittance Order For The Year 2020” will remain in force until 30th, June 2020, when a new Order would be issued.

Also, it stressed that all future tariff reviews would be based on consultations between DisCos and customers clusters with firm commitment on rates and quality service.

“All DisCos are hereby directed to no later than 30th June 2020, provide smart meters at 11kV and 33kV feeders level with the capability of sending real-time or near real-time data to the Commission.

“The FG shall provide tariff support during the transitional period to full revenue recovery ending on June 30th, 2021 based on the under-recovery of the revenue requirement determined by the Commission but only within the context of funding available under the PSRP financing plan.

“For the purpose of transition to full revenue recovery and application for tariff support, the Commission shall consider a DisCo to have earned its revenue target on the basis of the approved roll-out plans. The FG is committed to resolving the encumbrances on the financial records of all DisCos arising from the tariff-related deficits as represented by payables to the Nigerian Bulk Electricity Trading Plc (NBET) and market operator.

“In the short /medium term, all DisCos are expected to raise finances for the associated investment required to improve service by leveraging on, among several options, escrow of the revenues for the ring fenced-service areas and opportunities of sub franchising and embedded generation,” the document read.

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