Electricity Act: NERC Sets New Rules for Mini-grids Operations, Pegs Technical Losses at 4%

*ICAN tasks FG on power sector policies, explains opposition to tariff hike

Emmanuel Addeh in Abuja and Dike Onwuamaeze in Lagos

The Nigerian Electricity Regulatory Commission (NERC) has published new guidelines for the operators in the Nigerian mini-grids space, setting their allowable technical losses at 4 per cent in the extant rules.
A mini-grid is any electricity supply system with its own generation capacity, supplying electricity to more than one customer and which can operate in isolation from or be connected to a distribution licensee’s network.

In the regulation, NERC stated that the mini-grid should have between 0kW and 1MW of generation capacity per site.
Technical losses, which usually occur within the power distribution network, are a major source of concern in the power sector in Nigeria, which may have prompted the industry regulator to peg the technical loss limit for mini-grid at 4 per cent.
The regulation under the new Electricity Act (EA) signed by NERC’s Chairman, Sanusi Garba, also stated that allowable non-technical losses for the mini-grid operators, mostly interconnected solar plants, shall not exceed 3 per cent.

According to the new guidelines, interconnected mini-grid permit holders shall pay the Distribution Companies (Discos) a Distribution Use of System (DUOS) charge which shall be agreed upon between the interconnected mini-grid permit holder and the Disco and approved by the commission.
“Where the interconnected mini-grid permit holder and the Disco are unable to agree on the usage charges, the methodology prescribed in schedule 8 of these regulations shall be applied.
“The MYTO methodology included in schedule 14 of these regulations and approved by the commission shall be used to determine the retail tariffs and other charges for a mini-grid permit, subject to a limitation that allowable technical losses shall not exceed 4 per cent and allowable non-technical losses shall not exceed 3 per cent,” it stated.

 A mini-grid permit holder, NERC said, may decide to determine retail tariffs and other charges by the use of the MYTO calculation tool or an agreement between the mini-grid operator and the community, represented by customers consuming not less than 60 per cent of the electrical output of the mini-grid.
However , it stated that this is subject to the commission’s right to intervene and review the tariff that has been agreed with the communities’ equity and fairness.
Where a mini-grid is interconnected, the duly authorised representatives of the connected community, the mini-grid developer and Disco, NERC said, shall sign a tripartite contract covering the transaction, and the tripartite contract.
“Where an application has been filed for an intended area, the commission may register the tripartite contract and grant the mini-grid permit, where the proposed retail tariff is calculated using the MYTO methodology and agreed by the mini-grid developer, the distribution licensee and connected community, and approved by the commission.

“The tripartite agreement shall cover the following arrangements: Right to access the Disco’s network infrastructure for the purposes of interconnection.
“Construction and ownership right for additional infrastructure, where applicable. Tariff for electricity generated by the mini-grid and fed into the distribution licensee’s network where applicable.

“Availability of stable nominal voltage and effective system protection at the connection point of the generator with the Disco’s network, where applicable and tariff for the purchase of electricity from the distribution licensee’s network, where applicable,” it added.
The tripartite agreement, it said, shall also involve the consent of the connected community to purchase electricity from the mini-grid at the defined tariffs.
It added that where an area has been identified either by a connected community or mini-grid developer, and a notification is made to the commission to consider the development of an interconnected mini-grid, a mini-grid developer shall submit a technical and investment proposal to the Disco.
On safety, NERC stated that all mini-grid operators shall apply the established safety guidelines for the design, construction, commissioning, operation and maintenance of their generation and distribution assets.

“A mini-grid operator shall comply with the environmental laws affecting their  operations and any compliance breach would be treated as an infraction, leading to the suspension or termination of their permit,” NERC added.
Meanwhile, the 59th President of the Institute of Chartered Accountants of Nigeria (ICAN), Dr. Innocent Okwuosa, has explained that the institute opposed an attempt in 2023 by electricity Distribution Companies (Discos) to increase electricity tariff in order to enable Nigerians to have access affordable energy as provided in  Sustainable Development Goal (SDG) 7.

Okwuosa gave the explanation when the council members of ICAN paid a courtesy visit on the Managing Director of Eko Electricity Distribution Company (EKEDC), Dr. Tinuade Sanda.
He also acknowledged that the power distribution sector in Nigeria is faced with multifaceted problems that include outdated transmission and distribution networks.
He called on the government to establish and implement clear and consistent policies that would create conducive environment for investment in the sector.
“When in July 2023, the Discos moved to increase electricity tariff, the institute advised against this move not because we are not aware of the challenges facing the Discos’.

“It was because of our public mandate interest as we are aware that the goal of SDG 7 is about ensuring access to clean and affordable energy by all citizens. There is no way SDG 7 can be achieved with the proposed hike in electricity tariff which came at the same time that government removed fuel subsidy and unified exchange rate that was a massive devaluation in the value of Naira.
“We are of the view that President Bola Ahmed Tinubu’s administration should implement policies that would enable Nigeria to achieve the SDG goals, especially SDGs 1 to 10,” he said.
He referred to a World Bank’s report that 85 million Nigerians do not have access to grid electricity, which made Nigeria the largest energy access deficit country in the world.

“The lack of reliable power is a significant constraint for citizens and businesses, resulting on annual economic losses estimated at $26.2 billion or N10.1 trillion.
“As an institute, we will continue to advocate for greater accountability and transparency in the power sector, given that it holds the key to production and service activities that will boost the economic growth in Nigeria,” Okwuosa said.
He said it was essential to create a conducive environment that will attract investment to the sector by establishing and implementing clear and consistent policies as well as creating the right incentives.
“To this end, we commend the recent power sector stakeholders’ engagement organised by the Minister of Power, Mr. Adebayo Adelabu, as a step in the right direction. However, we advise that in future, invitation should be extended to professional bodies like ICAN which has a technical committee on power sector,” he said.

He listed the challenges facing the power distribution sector to include outdated transmission and distribution networks, resulting in energy distribution losses as well as inconsistent and sometimes conflicting regulatory policies, bureaucratic hurdles and difficulties in enforcing regulatory policies.

According to him, other constraints include equipment vandalism, illegal connections and theft of electricity, non-payment of electricity bills by some consumers especially government Ministries, Departments and Agencies (MDAs), the challenge with Aggregate Technical, Commercial and Collection (ATC&C) losses methodology, among others.

“Also, there is consumer dissatisfaction with the quality of service provided by Discos, including billing accuracy and responsiveness to complaints. Consumers see frequent power outages and load shedding.

“Many complain of estimated billings which they see as exorbitant and a fraud on the part of the Discos, given that the Federal House of Representatives at one point declared it illegal,” he added.

The president of ICAN, however, commended the EKEDC for its improved performances despite the challenges in the sector.

In her remarks, Sanda said that the distribution company believes in using innovative ways to ensure that its customers are metered.

Sanda, however, called for urgent resetting of electricity tariff to avoid illiquidity problem in the energy sector. “We need to match up our tariff with the rising price of gas,” Sanda said.