• Thursday, March 28, 2024
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NERC says MYTO implementation begins Q1, 2020

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The Nigerian Electricity Regulatory Commission (NERC) has confirmed that it is already working out a model as it embarks on wider stakeholder consultations to enable it effect the much awaited Multi Year Tariff Order (MYTO) early next year.

The regulator says this has become necessary as a way of urgently addressing concerns of technical losses in power distribution to consumers as well as liquidity issues that have been the bane of the power sector value chain of generation, transmission and distribution.

The purpose of the MYTO is to set cost-reflective tariffs that will allow the power sector to be properly funded and functional.

Adequate, cost-reflective‎ electricity supply is seen as the backbone of industrialisation, but has been a major constraint of the NERC, having missed implementation of the policy six times post privatisation, resulting to some liquidity losses put at N1.4 trillion in the sector.

Read Also: Tariff suspension: Kaduna Electric complies with NERC directive

BusinessDay understands that the NERC has commenced the review of Performance Improvement Plans (PIP) to be submitted by the Discos for the tariff period of 2019-2023. This comes as those who know warn that the cost review must be done in a way that poor consumers are not hurt.

“We have embarked on an open-book review with the Discos. The open-book review enables us address concerns of technical losses on distributed power. You can also see that the Meter Asset Provider Regulations is currently ongoing with various Discos embarking on metering consumers. We are also monitoring improvement of collection by Discos, as metering concerns is being addressed,” James Momoh, executive chairman of NERC, told BusinessDay exclusively.

He also confirmed that the Discos ‎had been directed to submit their Performance Improvement Plan, and currently ongoing alongside minor tariff review.

“I can reliably tell you that these processes we are embarking upon would enable us effect the Multi-Year Tariff Order Implementation latest by first quarter of next year,” Momoh assured.
According to the MYTO Rules, there would be a 15-year tariff path for the Nigerian Electricity Supply Industry (NESI) with limited minor reviews each year in light of changes in a limited number of parameters (such as inflation, interest rates, exchange rates and generation capacity) and major reviews every five years, when all of the inputs are reviewed with stakeholders, but this has not been done since 2016.

Although MYTO would entail an upward review of electricity costs, industry watchers say current pricing does not benefit the customers since they cannot enjoy quality service because they are compelled to pay a tariff that is less than the cost of production.

It also threatens the capacity of the sector to benefit from loans from international institutions such as the World Bank.

Chuks Nwani, an energy lawyer, told BusinessDay that the commission needed to factor in various variables in the open-book review of Discos performance and minor review being embarked on by the commission to ensure it arrives at a fair and balanced cost.

“The open-book review required Discos to submit their data – collections, remittances, technical losses and billing efficiencies submitted to NERC.

“I understand they are still doing more consultations on that, however, they should be able to factor in all the necessary variables to ensure inflation rates, foreign exchange concerns are properly addressed to enable us get the appropriate pricing that would open the sector for more investments,” he said.

Eze Onyekpere, lead partner, Centre for Social Justice, warns that a cost-reflective tariff that does not punish consumers must be prioritised as the regulator progresses with the MYTO plan.

“It is simply a cost-reflective tariff model but which does not punish customers for technical and commercial losses occasioned by the failure of the Transmission Company of Nigeria and Discos to invest to minimise transmission and distribution losses. The equivalent of the polluter pays principle should be introduced in this sector to the effect that anyone who occasions losses pays for it, and not the hapless consumer,” Onyekpere said.

He also suggests a tariff model that allows anyone who produces electricity from renewable sources and in a way acceptable to the network to feed back into the system and get paid so that we could increase generation and access to electricity from rooftops.

Experts believe that beyond the tariff review, there is need to make the entire power sector value chain functional.

For Emeka Okpukpara, partner, NEXIER Power Dialogue, the transmission, distribution and generation value chains in the power sector are not properly re-aligned.

“40% is lost in the sector due to transmission, distribution and collection losses, which is largely due to dis-alignment of the sectoral value chains,” he told BusinessDay.

He adds that the various government interventions in the power sector, including the latest Federal Executive Council’s approval of N600 billion power sector intervention is not the solution.