Nigeria electricity regulator plans to ‘reset’ tariffs

The Nigerian Electricity Regulatory Commission (NERC) is set to ‘reset’ its tariffs to provide needed revenue for better performance of the Transmission Company of Nigeria (TCN) and the Distribution Companies (DisCos).

The regulatory body disclosed this in its quarterly report published on its website, Wednesday.

Details in the report also indicated that during the first quarter of 2018, the total electricity generated was 8,511,481 Megawatts hour (MWh). This was two per cent less than the electricity generated in the previous quarter despite an increase in available generation units.

Also, the quarterly industry’s daily generation peak of 5,047MW recorded on the February 14 was less than that of the preceding quarter.

Factors, it said are responsible for the stranded capacity that led to the decline in generation include gas constraint majorly, limited distribution network, water management and transmission line limitation.

According to the report, with the decrease in generation, the average utilisation rate of the total available generation capacity declined by 1.1 per cent from 54.4 per cent recorded in the last quarter of 2017.

The commission reiterated its commitment to resolving the aforementioned constraints adding it has started executing actionable items identified in its 2017-2020 Strategic Plan towards addressing constraints in transmission and distribution networks.

Such plans include thorough technical assessment of DisCos utilisation of capital expenditure allowances, tariff increment and implementation of gas payment assurance facility for power generation.

“The Commission has initiated a process for thorough technical assessment of DisCos’ utilisation of capital expenditure allowances for relevance and cost efficiency.

“The Commission is also planning a tariff reset that adequately provides for revenue requirement necessary for TCN and DisCos’ optimal performance.

“Similarly, to resolve the issue related to a gas supply shortage, the government has started the implementation of gas payment assurance facility for power generation to enable GenCos to fulfil their payment obligations to gas suppliers,” the report showed.

Another challenge faced in the industry is the total system collapse, as it worsened in the first quarter of the year.

Although no partial system collapse was recorded for the quarter under review, total system collapse worsened, increasing from one in the last quarter of 2017 to six in the second quarter of the year.

“Five of the system collapse incidents occurred in January while one occurred in February. The system collapse was attributed to lack of generation by Egbin, Olorunsogo and Omotosho power plants, among others, due to gas constraints which resulted from the breakdown in the Escravos gas pipeline.”

Financial liquidity, the report indicated, remains the most significant challenge affecting the industry’s sustainability.

“This serious liquidity challenge is partly attributed to non-cost-reflective tariffs, and high technical and commercial losses aggravated by consumers’ apathy to payment arising from estimated billing and poor quality of supply in most load centres. Out of the ₦171.1 billion billed to customers in the first quarter of the year, only ₦106.6 billion was recovered, representing 62.3 per cent collection efficiency.

“Therefore, out of every ₦10 worth of electricity sold during the quarter under review, ₦3.8 is uncollected. The liquidity challenge in the Nigerian Electricity Supply Industry (NESI) was further reflected in the DisCos’ remittances relative to Nigerian Bulk Electricity Trader’s (NBET) and Market Operators (MO) invoices.

“In the first quarter of 2018, whereas DisCos were issued a total invoice of ₦163.1 billion for energy received from NBET and for the service charge by MOs, only ₦51.2 billion (31.4 per cent) was settled by DisCos, creating a huge shortfall of ₦112.0billion,” the report revealed.