NERC: Transition to cost reflective tariff by 2021

NERC: Transition to cost reflective tariff by 2021

Admist controversies trailing the purported increase in electricity tariff, the Nigerian Electricity Regulatory Commission (NERC) has stated that the transition to cost-reflective tariff will take effect by the of 2021


This is even as the commission allayed fears on the increase in electricity tariff, a report that has continued to generate mixed reactions on the part of consumers who believed that the move was a step in the wrong direction.

Speaking at a news conference in Abuja on Monday, the Commission’s (NERC)  Chairman, Prof. James Momoh in Company of the Head of Engineering Division of the Commission, Prof. Frank Okafor, explained that there is no immediate increase for electricity end-users.

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While urging a careful study of the attributed document on its Website, he said tariff review is part of its mandate as a regulator stressing that the review is such that is done every six months, with considerations to macro-economic variables.


These are Inflation, Exchange rate, US inflation rate, Gas price.

His words: “There is no immediate tariff increase for customers, no further discussions on the tariff. Go back and read the documents. The proposed tariff review is what we are mandated to do as a regulator. We are to do it twice a year. We did one in June 2019, January is here and we have no option than to do our job. We have done the review and it is subjected to public consultation. In the next three months, we will be engaging stakeholders for consultation. We have done our review and given a report card of what we saw based on all the indices for doing a review. We have not said it is binding tomorrow morning.


“The order is a Communication of what we have done as a regulator looking at what it entails to increase tariff if, at the end of our meeting back and forth, we saw no increase, then no increase! And if there is going to increase it is going to be based on our engagement at the public forum. On increase, we will talk to all the relevant stakeholders, MAN, and others. Don’t forget, the service must also improve.”

Meanwhile, an archive of documents for each of the 11 DisCos, titled: Minor Review Of MYTO 2015 and Minimum Remittance Order for the Year 2019, which was uploaded on the (NERC)  commission’s website also stated that the Power Sector Recovery Plan (PSRP)does not “envisage” an immediate increase in end-users tariff until Ist April, the increase will not totally be on electricity consumers.


It stated that DisCos are, despite the increment, not allowed to collect the actual cost from customers adding that the Federal Government (FG) would fund the revenue gap arising as a result of this.


It reads: “The Federal Government’s (FG) updated PSRP does not envisage an immediate increase in end-user tariff until 1st April 2020 and transition to the full cost-reflective tariff by end of 2021.

“In the interim, the FG has committed to full d the revenue gap arising from the difference between the cost-reflective tariff determined by the commission and actual end-user tariffs payable by customers.”


Newsmen had earlier in August 2019, reported FG`s plan to subsidize electricity tariff for Nigerians between Jan1st to July 2020.


This was contained in a document title: 2016-2018 MYTO 2015 and Minimum Remittance Order for the year 2019, uploaded on the commission’s website in August 2019 and jointly signed by the Prof·Momoh and Commissioner, Legal, Licensing and Compliance, Dafe Akpeneye.

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However, the Commission (NERC) gave conditions for tariff subsidy some of which are that: “DisCos ensure full settlement of their market invoices as adjusted by and netted off by applicable tariff shortfall.

“That is the determination with compliance to the Minimum remittance threshold in the Order, the commission shall consider verifiable receivables from MDAs for the settlement period and DisCos historical collection efficiency for MDAs.


“That the commission shall hold the Transmission Company of Nigeria (TCN) responsible for deviations from the economic despatch order that adversely impact on the base weighted average cost of wholesale energy.”


The commission further stressed that all interventions from the financing plan of the PSRP for funding tariff shortfall will be applied through the Nigerian Bulk Electricity Trading (NBET) and Market Operators (MO) to ensure 100 per cent settlement of invoices.


On his part, the Executive Director, Research and Advocacy, Association of Nigerian Electricity Distributors (ANED), Barr. Sunday Oduntan maintained that there is currently no tariff increase.

He said what is being proposed is a slight increase, adding that this would also be a gradual transition.


He said: “There is no tariff increase as at this morning so there is no need for hysteria on tariff increase. First, NERC is empowered by law to review tariff in this industry and as at today, there is no tariff increase. What they are proposing is the slight increase that will occur….it is even planned to be a gradual thing.


“We will not have what should be the appropriate pricing of the product this year. The plan is that by the end of 2021 there will be a way to ensure that the appropriate things are done so there will not be baggage of shortfalls.”

Oduntan who stated this on Monday when he featured on the Arise TV morning show, however, stressed the importance of costing in the electricity market.


According to him, for the stability of the electricity market, there is a need for constant review of the tariff adding that only with this will there be improved service delivery.

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Temi Badmus is a Food scientist and an Art enthusiast. She is an health freelancer, and media Manager. She is a humorous and controversial writer, who believes all form of writing is audible if it's done well. Temi Badmus specializes on indigenous food nutrient research and values. She believes in reaching out to people with health decline through articles and giving advice on good eating habit.

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