Electricity commission gives distribution companies power to fix tariffs

NERC talks tough

The Nigerian Electricity Regulatory Commission says electricity distribution companies would henceforth determine the tariffs for their customers.

With this new arrangement, the Commission appears to have ceded to the distribution companies part of its responsibility as the sole authority in charge of all issues concerning the regulation of electricity tariffs in the country.

The Chairman of the Commission, Sam Amadi, told reporters at the end of the monthly review meeting with electricity distribution companies and other operators that the tariffs would be determined taking into consideration each company’s peculiar operating cost in their various locations.

Mr. Amadi assured that whatever tariffs would be proposed by the distribution companies would be subject to the final approval of the Commission.

This, he said, would be in line with the exercise of its mandate to monitor and regulate the industry to ensure that consumers were protected at all times from undue exploitation, while the operators would be guaranteed prospects of breaking even from the business.

The chairman stressed the need for the power distribution companies to dialogue regularly with the customers in their areas of operation to reach a consensus before presenting their recommendations for tariff reviews for approval by the Commission.

The new arrangement, where distribution companies would be allowed to fix their tariffs, Mr. Amadi explained, would not commence until July when the Multi Year Tariff Order, MYTO, would take off.

In spite of the latest arrangement, the NERC Chairman said the tariff structure under MYTO would continue to provide the regulatory framework to guide all tariffs to be announced in the industry.

“MYTO will remain the framework for all tariffs in the industry,” Mr. Amadi stated. “The only thing that has changed is that DISCOs (distribution companies) will be required to consult their customers and other stakeholders and agree on the tariff to present to NERC for approval.”

According to the Commission Chairman, the new arrangement would ensure stability in the industry, as the DISCOs are the only ones who know their actual operational costs, their customers’ profiles and how they interface with them to determine how the costs would be distributed.

The new method, he explained, would afford each DISCO to factor all operational costs and business challenges before arriving at acceptable tariffs for customers in their areas of operation.

“The beauty of the methodology is that it will ensure transparency in the sector, as no increase in tariff would be made without approval by NERC,” Mr. Amadi said.


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