Months After Take-off, NERC Releases Documents Approving Tariff Adjustments for Discos *Power distributors get about N4 increase

Emmanuel Addeh in Abuja

The Nigerian Electricity Regulatory Commission (NERC), the power sector regulatory body, yesterday released documents approving tariff increases for Distribution Companies (Discos), about four months after the implementation of the new rates commenced.

In separate orders issued to the 11 Discos, NERC noted that the “minor” hike in tariffs was to compensate for market fundamentals outside the control of the electricity distributors.
It’s unclear why the regulatory agency surreptitiously took the decision in the documents signed at the end of December, but which took off in February, as the usual practice before now was to make the announcement before implementation.

But while a number of the Discos got roughly N4 increase, some of the bills paid by the numerous tariff band customers were kept constant, while a handful were also marginally reviewed downward.
Cited as the “Multi-Year Tariff Order (MYTO-2022)”,  specifically, NERC based the adjustments on the Performance Improvement Plans (PIPs) of the Discos as well as indices such as gas price, inflation, exchange rate, US inflation rate and available generation capacity.

“In line with the subsisting MYTO methodology, the following indices with potential impact on electricity rates were considered. These indices shall be reviewed every six months to update the tariffs with changes in the indices as applicable in line with the MYTO methodology,” NERC stated.
It stated that the Nigerian inflation rate for the month of November 2021 of 15.40 per cent as obtained from the website of the National Bureau of Statistics (NBS) was adopted to project the Nigerian inflation rates for the period 2022 – 2026.

“The actual average monthly inflation rate for the period January 2021 to November 2021 of 16.97 per cent was applied for the retroactive review of tariffs for 2021,” it noted.
On the adjustment for exchange rate,  it noted that the data was based on the “Investors and Exporters (I&E) FX-window” of the Central Bank of Nigeria (CBN).

In addition, it explained that the US inflation rate for the month of November 2021 of 6.8 per cent as obtained from the website of the US Bureau of Labour Statistics was adopted to project the rates for the period 2022-2026.
For generation capacity, NERC stated that it considered the periodic reports from the System Operator, with a projection of average sent-out generation of 5267MWh/h adopted for the period.

It pointed out that the gas pricing was benchmarked on the $2.18/MMBTU, gas transportation cost of $0.80/MMBTU, and contracted gas prices outside Domestic Gas Supply Obligation (DOMGAS).
Nigerians had noticed a general increase in their electricity bills at the beginning of the year, although it was kept under wraps by the regulator.

Pressed recently by journalists on the development, the NERC Chairman, Mr Sanusi Garba,  hinted that the adjustment was made in February this year following some economic fundamentals considered by the commission.
“What happened on February 1, 2022, is a minor review of tariff. It is very clear on our website that every six months we will adjust rates to take care of the foreign exchange component of cost and also inflation,” he stated.
Garba described the tariff adjustment as straightforward, stressing that the distribution companies were meant to inform their customers of the changes.

However, a THISDAY review yesterday showed that the commission’s orders to the Discos were jointly signed by Garba and the Vice Chairman, NERC, Musiliu Oseni  on 29th December, 2021.
The document which showed the minor increases will run between now and 2026 on a biannual basis, indicated that for instance, the Port Harcourt Disco customers on (A-Non MD) who paid N56.16/kwh in January 2022 will now (February to December 2022) pay N60.67/kwh).

For (B Non-MD) customers who paid N56.64/kwh in January 2022, they will now expend N59.64/kwh for the same purpose, while the E- MD2 customers who for example paid N50.72/kwh in January 2022, have been from February 2022 paying N54.22/kwh .

But for Abuja Disco, while for instance, A-non-MD increased from N51.75 to N56.28, B-non MD was hiked from N49.72 to N54.13 , C non-MD was increased from N45.65 to N50.65 and C-MD1 from N58.03 to N62.05.
Despite recent hikes , Nigeria remains a nation mostly in darkness with incessant power outages as well as national grid collapses which the managers of the sector have attributed to vandalism of gas supply assets.

The country currently generates less than 4,500MW on a daily basis, a quantum which is grossly inadequate for a nation with an estimated population of over 200 million people.

Despite the introduction of the service-based tariff system, hinged on the number of hours of electricity received by customers, the Discos have continued to arbitrarily determine what band to assign consumers as NERC does not currently have the capacity to monitor compliance.