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Tuesday, 14 May 2019

The Nigerian Electricity Regulatory Commission (NERC) has begun a process of reviewing the Multi Year Tariff Order (MYTO) 2015 after it implemented it and did not review it for 41 months. The guidelines document published by NERC on the preparation of Performance Improvement Plans (PIP) for the 11 Distribution Companies (DisCos) last Friday shows that the tariff review could be implemented from 2020 and would last till 2024. 

“The PIP developed by DisCos shall cover the period 2020-2024 tariff period but subject to the contractual provisions of the performance agreements executed between the core investors and the Bureau of Public Enterprises (BPE) in respect of the allowances for capital and operating expenditure in the remaining terms of the agreement,” the guideline read in part.

Daily Trust reports that the MYTO 2015 had a 10-year span and was expected to last till 2024 with a minor review done every six months. While some operators in the DisCos, the Generation Companies (GenCos) and the Transmission Company of Nigeria (TCN) said they had submitted several inputs for tariff review calls, NERC has not implemented any of the supposed six reviews in the last 41 months. 

The operators have decried a non-cost recovery tariff with the DisCos raising the alarm over deficit operation. Spokesman of the Association of Nigerian Electricity Distributors (ANED), Mr. Sunday Oduntan, in March 2019, put the revenue shortfall in the power sector at over N1.3tn. He also said the DisCos were operating at about N50 per kilowatts (kwh) less than the MYTO allowed them while they were mandated to pay the increased cost energy to the GenCos.

The GenCos on their part had said gas supply price component of power generation and even spare parts investment were domiciled in the US dollar denomination which was affected by foreign exchange rate since 2016. Respite as DisCos asked to set tariff The PIP guideline document obtained by Daily Trust shows that NERC has asked the DisCos to set their tariffs which would include their Capital Expenditure (CAPEX) and Operational Expenditure allowances.

“The process will involve a review of the application of the capital expenditure allowance in the  MYTO  model for compliance with PIPs to be prepared by  the  DisCos,” the commission noted. While NERC said it would strictly monitor the implementation of the PIP, the review itself will prioritise expenditure by the DisCos and reflect changes in the operational environment that have occurred since the last tariff review (December 2015, but effective February 2016).

Although the commission has not stated when it will approve the PIP to be submitted by the 11 DisCos, it said once they were approved, those PIPs “shall form the basis of prioritising and monitoring the  capital  investment  initiatives  of  the  DisCos  with  revenue  adjustment  for  non- implemented projects.” The DisCos in the PIP are expected to again commit to observing Key Performance Indices (KPI) that existed during the privatisation exercise in 2013. The KPIs include the reduction of Aggregate Technical, Commercial and Collection (ATC&C) losses, reliability and availability of services and metering. The others are, improvement in service delivery to their customers, new connection/network expansion, safety priority and their social responsibility level.

About IWIN

The Independent Energy Watch Initiative (I-WIN), an enterprise of Energy ConServ and the Roundtable for the Growth and Development of Power (RODEP), is an online/web based power sector portal that strives to engage stakeholders and the Nigerian public on topical issues in the power sector.

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