NERC meets stakeholders on rules to liquidate DisCos, review electricity tariff
From September 13, the Nigerian Electricity Regulatory Commission (NERC), will commence stakeholder engagement over review of the drafts of the Multi Year Tariff Methodology (MYTO), Business Continuity regulation for the Nigerian Electricity Supply Industry (NESI) and Eligible Customer declaration regulations.
The engagements will start in Lagos on September 13, proceed to Abuja on the 18th, then move Enugu and Yola on September 20. It will further proceed to Jos and Port Harcourt from September 26, before concluding in Kano on October 4.
The commission has proposed a final stakeholders’ consultation to be held in all the six geo-political zones and the FCT “to enable the larger public make their inputs and express opinion before the Commission makes final decision on the proposed regulations,” said a public notice from NERC.
The Commission in 2008 established the Multi-Year Tariff Order (MYTO) as framework to determine electricity pricing structure. It provides a 15 year tariff path with major reviews every five years, and minor reviews every six months to consider changes in inflation, exchange rate, gas price, system planning output generated by Transmission Company of Nigeria, available generation capacity and capital expenditure requirement required to evacuate and distribute available generation capacity.
But an attempt to review electricity tariff last year, led to protests from civil society and labour groups because DisCos who have performed poorly were perceived to become beneficiaries of an increase in tariff. Without cost reflective service, the argument for cost reflective tariff became hollow. A Lagos lawyer, took the matter to court and won a judgement barring the review.
However on June 7, NERC served a public notice where it proposed changes to the MYTO methodology including time frame for conducting reviews, frequency of updating end-user tariffs, and the structure of the MYTO including compensating TCN and DisCos for net changes in actual generation capacity in relation to assumed projections.
Through the ‘Business Continuity for the Nigerian Electricity Supply Industry (NESI) regulation, NERC developed new rules that could lead to the liquidation of DisCos who failed to meet performance agreement targets, licensing, finance and compliance obligations.
According to the draft regulation, performance agreements failures occur when targets are not met. Compliance obligation failure occurs where a licensee continuously fails to obtain adequate insurance. License obligation failure events, are those related to contravention of a licensees terms and conditions.
Financial obligations failure occurs when a DisCo fail to provide or maintain its financial security in favour of the Market Operator and/or the Nigerian Bulk Electricity Trader (NBET). The DisCos have met barely 30 percent of their payment obligations to NBET, raising questions about when they could be liquidated as recommended by the regulation.
Babatunde Fashola, minister of power, works and housing had on May 19 invoked the declaration of Eligible Customer in accordance with the provisions of Electric Power Sector Reform Act (2005). This paved the way for customers who consume up to 2MW of power to buy directly from the GenCos.
The rules proposed by NERC in the draft regulation is that an eligible customer will be supplied power only from new generation and DisCos will get at least 20 percent of new generation at a tariff that is no more than the average wholesale price in the industry.
“In view of the above, industry stakeholders, consumer groups, the general public and other affected or interested parties are kindly invited to participate in the consultation,” states the public notice from NERC.
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