The Nigerian Electricity Regulatory Commission (NERC) has unveiled new guidelines for power tariff hikes, providing a framework for electricity distribution companies (DisCos) to follow.
The latest order, signed by NERC Chairman, Sanusi Garba, stated that pursuant to the provisions of the Electricity Act 2023, the commission is obligated to review and approve a fair tariff to allow licensees to recover prudent costs and a reasonable return on capital invested in the business for the provision of electricity services.
According to him, the guidelines are designed to ensure that DisCos operate efficiently and recover their costs while also providing affordable electricity to consumers. The guidelines are also aimed at promoting transparency and accountability in the tariff-setting process also protecting consumers from arbitrary price increases. It stated,
“In exercise of the powers conferred in Section 116 of the Act, the commission has developed and adopted the Multi-Year Tariff Order Methodology as an incentive-based price regulation framework for the determination and projection of tariffs payable in the Nigerian Electricity Supply Industry.”
According to the order, NERC will conduct a major review of electricity tariffs every five years, with a one-year notice period for DisCos to submit their applications for tariff increases.
Also, DisCos must provide detailed financial records, plans, and proof of consultation with customers to support their tariff increase applications.
“The commission shall, one year before the expiration of the major tariff review order in force or as may be considered necessary, issue a notice to all licensees about its intention to commence the process for a major review of the existing tariff. The notice shall be published in three national dailies and on the website of the commission.
“The Notice shall request for submission of applications for the review of tariffs supported with documentation that includes but not limited to audited financial statements, budgets, investment plans (in line with prevailing guidelines on Performance Improvement Plans), and proof of wide consultation with customers in the licensees’ service area concerning the proposed filing of the application for tariff review and any other information as deemed necessary by the commission,” the regulation stated.
It also revealed that NERC will review these applications within 90 days and publish a consultation paper for public comment and hold a public hearing to gather feedback from stakeholders and consider comments received during the consultation period. It stated,
“The consultation paper developed by the commission shall outline the basis for the tariff review applications by the licensees including their proposals on capital investments, service improvements, new connections, loss reductions, reset of tariff assumptions if any, and possible impact on rates payable by the affected customers.
“The consultation paper shall be published on the commission’s website and public notices issued soliciting comments with a timeline of 21 days for submission by stakeholders. The commission shall within 90 days from the publication of the consultation paper review all comments and schedule and conclude a Rate Case Hearing, having regard to the stakeholders’ responses to the consultation paper,”
Furthermore, NERC may adjust tariffs monthly or quarterly to reflect changes in fuel costs, inflation rates, exchange rates, and generation availability.
The guidelines may lead to increased electricity tariffs, but NERC aims to ensure that any increases are reasonable and justified. The commission is also working to implement a targeted subsidy system to support low-income households and make electricity more affordable and accessible for millions of hardworking families across the country.
