Sam-AmadiConsumers will not be subjected to increases in electricity tariff twice a year, according to the Nigeria Electricity Regulatory Commission (NERC).

This came just as the Minister of Power, Prof Chinedu Nebo called for patience and support in government’s quest to ensure reliable and efficient electricity supply.

The Minister through his Special Adviser (Media), Kande Daniel, urged greater collaboration among consumers, industry experts and the Power Holding Company of Nigeria (PHCN) to resolve issues around service delivery.

She told The Guardian: “ On private purchase of transformers by either groups or individuals, the Minister commends self-help efforts in the face of huge challenge of providing sufficient electricity for a steadily growing population.  He observes that most times, these transformers get abandoned and are never activated or energised.

“In view of this, he advises that people should liaise with industry experts and the PHCN to get expertise advise on materials to purchase, as well as the know-how to energise and activate these transformers, to ensure that the communities enjoy the benefits.”

Chairman of NERC, Dr. Sam Amadi stressed that ‘minor’ reviews would be conducted twice a year, but that these would not result in unnecessary price increases. Instead, the reviews could actually lead to a reduction in tariff, he said.

“It is not true at all that consumers will be subjected to price increase twice every year. This is complete falsehood. There is a set tariff for 2012, 2013 till 2017. Though there are minor reviews in June and December of each year, these reviews will not always result in any increase. In fact, the review will not result in an increase because our financial and technical assumptions are accurate.

He described the Multi Year Tariff Year Order (MYTO) as a methodology to ensure that consumers have access to adequate and reliable electricity, stressing that It is a tariff plan that sets the prices of electricity over a period of five years.

According to him, “ MYTO allows for minor and major reviews at certain intervals. Major reviews are conducted every five years, while minor reviews are conducted on a twice-yearly bases. The reviews are done to assess whether the changes of macro-economic indices such as interest rates, gas prices and inflation are significant enough to warrant a change in the tariff (MYTO year commences in July).”

He explained the rationale behind gradual increase in tariffs as contained in the MYTO.

“The revenue requirement for the sector,” he said, “was determined after due consultation with critical stakeholders. Based on this, the generation, transmission, distribution and end user or retail tariffs were set. We, at the Commission, came to the realisation that if these new cost reflective tariffs were imposed on customers, it would cause shocks and unnecessary hardships. Therefore to forestall this adverse effect on customers, the approach taken by the Commission was to gradually bring up the tariffs over a period of time and to include subsidy for most of the consumer. This is a clear indication of what NERC is doing to protect the interest of the electricity customers in Nigeria.”

He spoke on measures that the Commission is putting place to strengthen its regulation of the sector.

He assured that NERC would address the issue to restore balance and equity in electricity distribution.

On the transitional electricity market, he stressed how rule-based industry is critical to its sustainability and growth, noting that as a regulator, it would diligently protect consumers, whom he said are the primary concern of the Commission.

“When operators fail to follow rules, it creates serious problems. The flouting of the load allocation formula is an example. An industry that is weak on rules also sends the wrong signals to investors thereby stalling the development of new projects. To this end, NERC has been meeting with critical stakeholders – generation and distribution companies, Transmission Company of Nigeria, Nigerian Bulk Electricity Trading Plc to ensure that the necessary conditions for the commencement of the rule based Transitional Electricity Market are met.

The commencement of the Transitional Electricity Market will ensure more discipline, with all entities adhering to their contractual obligations as well as all rules and regulations, thereby translating to improved service delivery to electricity customers.”

He went on: “We must add that the main work of the regulator in an emergent electricity market like ours is to instill confidence of investors and operators in the market.  It is such confidence that leads to the sort of investment that will ultimately improve the network and ensure reliable supply of electricity in medium to long- term period. Without enforcing rules of competitive electricity market the reform will fail.”

NERC, he stressed, is committed to ensuring adequacy of electricity.

He noted:  “We know that this is a big challenge. One of major challenges of providing adequate electricity is the huge technical loss associated with the radial nature of our transmission network and the lopsided location of power plant.

To overcome this technical challenge, NERC has developed the Embedded Generation Regulation for allow IPP embed small modular power inside a distribution network without going through the transmission. Flowing from above, a sanitised electricity market will see to the rapid entry of additional generation. Investors can derive the needed confidence to drive their projects.

A case in point is the 10megawatt power in Lagos by NEGRIS, to be embedded within the Ikeja distribution zone. The company has completed their Power Purchase Agreement, and is poised to inject the power within a matter of days.

“This will mean an almost instant improvement in the power supply for residents in the Ikeja zone. Embedded Generation is based on a regulation developed by NERC which enables electricity Distribution Companies (DISCOs) procure power delivered to them directly from a local independent power plants, thereby bypassing technical difficulties associated with the national grid. “

According to him, “The Commission is mindful of the fact that electricity customers expect better power, better services especially in light of tariffs that are to increase over the years as set in the MYTO.   We are, therefore, working within our ambit, to ensure the attainment of these. Without rules, investors will not come in. Without investment, electricity will not improve. Without a tariff that is cost reflective, investors cannot sink in the huge amounts of money required to set up.


Information from Guardian was used in this report.