Again, NERC Plans Review of Discos’ Tariffs, Capital Expenditure

By Emmanuel Addeh

The Nigerian Electricity Regulatory Commission (NERC) is to review tariffs paid to the 11 Distribution Companies (Discos) and revise the approved capital expenditure for the power distributors.

The capital expenditure allowance approved by NERC has always been a source of disagreement between the regulator and the distributors who insist that it is too low and has limited the capacity for network expansion.

Going by the Multi Year Tariff Order (MYTO) 2015, the approved average capital expenditure allowance to Discos remains $12 million, about N5 billion per Disco annually.

But MYTO is a framework that guides the pricing of electricity and by the rules is supposed to be adjusted twice a year.

NERC, in a release posted on its website yesterday, tagged: “Notice of Minor and Extraordinary Review of Tariffs for Electricity Transmission Distribution Companies,” stated that the latest move was pursuant to the provisions of the Electric Power Sector Reform Act (EPSRA), which sets out the methodology and procedures for reviewing electricity tariffs in Nigeria.

“The MYTO provides for minor reviews every six months, major reviews every five years and extraordinary tariff reviews in instances where industry parameters have changed from those used in the operating tariffs to such an extent that a review is urgently required to maintain the viability of the industry,” it said.

The commission stated that it held a series of public hearings and consulted stakeholders in the first quarter of 2020 on the extraordinary tariff review applications of the 11 electricity Discos to consider their respective five-year Performance Improvement Plans (PIPs).

However, NERC said the evaluation of the Discos’ requests for review of the capital expenditure proposed in their improvement plans could not be concluded for the consideration of the commission during the minor reviews undertaken in 2020.

The commission added that section 21 of the MYTO, 2020 order, provides for consideration of Discos’ capital expenditure application upon further scrutiny and evaluation of the investment proposals. It said the latest notice was issued to inform the general public and industry stakeholders of the commission’s intention to conclude the extraordinary tariff review process for the 11 Discos.

In addition, NERC stated that it was also to commence the processes for the July 2021 minor review of MYTO – 2020 to consider changes in inflation, foreign exchange, gas prices, available generation capacity, and capital expenditure.

It added that this is required to evacuate and distribute available generation capacity in accordance with the extant laws and other existing industry rules.

“This notice is hereby issued in compliance with the provisions of EPSRA, the business rules of the commission and the regulations on procedures for electricity tariff reviews in the Nigerian Electricity Supply Industry (NESI) to solicit for comments from the general public on the proposed reviews.

“Stakeholders and the general public are invited to send their comments to the commission within 21 days from the date of this publication,” NERC added.