By Capital Watch Media
The Nigerian Electricity Regulatory Commission, NERC, has issued new regulations outlining the procedures for electricity tariff reviews in the country.
The guidelines, signed by NERC Chairman Sanusi Garba, aim to ensure fair pricing while allowing electricity providers to recover investment costs.
The commission stated that, under the Electricity Act 2023, it is required to regulate tariffs for activities such as electricity generation, transmission, and distribution.
The new framework ensures that licensees recover their costs while maintaining reasonable returns on investments.
“In exercise of the powers conferred in Section 116 of the Act, the commission has developed and adopted the Multi-Year Tariff Order Methodology as an incentive-based price regulation framework for the determination and projection of tariffs payable in the Nigerian Electricity Supply Industry,” NERC stated.
The Multi-Year Tariff Order, MYTO, methodology provides for a major tariff review every five years.
During this period, all tariff assumptions will be re-evaluated to ensure that the power sector remains financially viable.
NERC clarified that one year before a major tariff review, it would notify all electricity distribution companies, DisCos, and request them to submit applications for tariff adjustments.
These applications must be supported with financial records and investment plans.
“The commission shall, one year before the expiration of the major tariff review order, issue a notice to all licensees about its intention to commence the process for a major review of the existing tariff,” the regulation stated.
The notice will be published in at least three national newspapers and on NERC’s website.
It will request DisCos to submit supporting documents, including audited financial statements, investment plans, and evidence of consultations with customers.
After receiving applications, NERC will conduct an initial review and publish a consultation paper within 90 days.
This paper will outline proposed tariff changes, investment plans, and potential impacts on customers.
The public will have 21 days to submit comments on the consultation paper. After this period, NERC will conduct a Rate Case Hearing, considering feedback from stakeholders before approving a new tariff structure.
“All comments and observations from the public will be examined and considered in the development of a draft tariff order for the commission’s approval,” NERC stated.
Within 30 days of the Rate Case Hearing, NERC will approve and issue a new Major Tariff Review Order.
Electricity providers will then be required to inform customers about the changes through their websites and other communication channels.
The commission also announced that minor tariff reviews would be conducted monthly to adjust for inflation, fuel costs, foreign exchange rates, and electricity generation levels.
“Monthly reviews will account for changes in generation fuel costs, Nigerian and United States inflation rates, Naira to US Dollar exchange rates, and average generation availability,” the regulation added.
NERC may also conduct minor tariff reviews at other intervals, but such reviews will not exceed six months.
The Special Adviser to President Bola Tinubu on Energy, Olu Verheijen, confirmed that an electricity tariff review would take place in the coming months.
Verheijen stated that the government plans to introduce a targeted subsidy system to support low-income households.
“Today, the Federal Government spends over N200bn per month on electricity subsidies, but much of this support benefits the wealthiest 25 per cent of Nigerians,” she said.
