NERC at the weekend released guidelines for heavy electricity consumers who wish to exit the services of Distribution Companies (Discos) to get supply directly from the Generation Companies (Gencos).
Signed by the Chairman of the commission, Prof. James Momoh, and Commissioner for Legal, Licensing and Compliance, Dr. Dafe Akpeneye, NERC said the new guide for the target group, expected to pay Discos a certain amount tagged: “Competition Transition Charge” was arrived at after findings from public hearings conducted by the commission last year.
In June 2019 the regulatory agency notified the public of a 21-day period in which it was soliciting contributions to a consultation paper on the CTC before the final rule was made.
It noted that the CTC shall enable the 11 Discos recover permitted revenue and returns on invested assets arising from the exit of eligible customers from their networks.
The regulation enables electricity users and Industrial consumers who are not satisfied with the services of the Discos to opt to buy power directly from the Gencos and have the energy transported to them by the Transmission Company of Nigeria (TCN).
The major target groups are members of the Manufacturers Association of Nigeria (MAN), who have needs for such bulk electricity and are now expected to pay the TCN or the Discos, depending on the ownership of the line used in delivering power.
Although some operators had already announced commencement, stakeholders had complained about the lack of clarity of the rules of engagement and how operators will file for claims of loss of revenue with the commission.
But in its latest guidelines, obtained by THISDAY, the commission clarified that the CTC is the additional revenue a distribution licensee is eligible to collect outside its normal tariff as compensation for loss of revenue to cover its “committed prudent expenditure and/or its inability to earn permitted rates of return on assets.”
It said that the exit of a customer from a network may lead to stranded costs and loss of revenue arising from stranded infrastructure, long term contractual commitments, deferred expenses, cross-subsidy to other customer classes and overhead transition costs.
On how the CTC shall be arrived at, NERC said that it shall be computed based on the stranded costs attributable to the eligible customer’s exit of Disco’s network by unbundling the Disco’s costs and determining the actual revenue loss per each cost item.
NERC listed the cost items as long term power purchase agreements and vesting contracts, regulatory assets and revenue shortfalls as well as legacy costs that are sector-wide or Disco specific.
It noted that the costs that may have been created by virtue of the privatisation transaction or other power sector reform agenda initiatives, including repayment of the Central Bank of Nigeria’s (CBN) N213 billion loan.
It also includes unamortised investments in networks and overhead transition costs, where the impact of a prospective customer would result in the restructuring of the business of the Disco.
It said: “A Disco shall file an application with the commission for applicable CTC clearly justifying that, despite its efficient management; the utility would be unable to meet its revenue requirement arising from the impact of an EC switching supplier.
“Such claim by Discos shall be made within 30 days of the receipt of the prospective EC’s notice of intention to exit network by the Disco. The commission shall accordingly process the application as follows:
“Commission shall review the claim of the Disco including further consultations on the matter with relevant stakeholders involved in the EC transaction.
“Where the Disco’s claim for loss of revenue is satisfactorily justified, the commission shall approve the charge through an open-book review process and issue an order for the payment of CTC by the EC.
“The CTC shall be invoiced by the Disco on the basis of the actual meter reading or fixed monthly charge derived from the current/long-run annualised capacity (kWh/h) and/or energy consumed by the EC”
NERC also disclosed that the CTC may be paid periodically over time or vide a single lump sum by the customer, adding that payments arising from cross-subsidies between tariff classes shall be capped at the rate of contribution paid by the customer at exit date and shall cease when tariffs are rebalanced.
Source: This Day