Electricity market may get reprieve as NERC complies with pricing rules

The Nigerian Electricity Regulatory Commission (NERC) has signified a willingness to comply with the Multi-Year Tariff Order (MYTO) pricing methodology, which recommends a biannual review of tariffs to keep pace with economic realities.

“In compliance with the provisions of the EPSR Act and the nation’s tariff methodology for biannual minor review, the rates for service bands A, B, C, D, and E have been adjusted by NGN2.00 to NGN4.00 per kWhr to reflect the partial impact of inflation & movement in forex,” the Commission said in a post on social media.

It was debunking news by some segments of the media that it had increased electricity tariff by 50 percent from January for all customer classes under the Service-Based tariff.

Analysts have long blamed NERC’s refusal to comply with the provisions of the MYTO which provides for biannual review of electricity pricing to reflect economic realities. Successive regulators have bowed to political pressure to keep electricity cheap to prevent a strike action or popular unrest.

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But this hurts the market as DisCos are unable to recover the cost of power sent to them by other market players.

A reconciliation of the monthly invoices and payments between the Nigerian Bulk Electricity Trader (NBET) and operators show that the eleven DisCos owe a combined sum of N622.4billion and interest accrued on this debt has risen to N308.2billion bringing their cumulative debt to N930.6billion.

“The erosion of capital in the power sector due to the absence of a credible market and poor tariffs, are some of its biggest challenges,” said Eyo Ekpo, CEO of Excerdite Consulting Limited, said at a BusinessDay conference last year.

Some analysts believe that adhering to the provisions of the MYTO will improve the liquidity in the sector.

“This is what the regulator should be doing as it is the only way to bring respite to the market,” says Chuks Nwani.

In determining the tariff, NERC relies on a number of assumptions made up of key economic indicators such as inflation rate, foreign exchange, available generation capacity, US inflation rate, and the Capital Expenditure (CAPEX) of the power firms to raise the tariff.

However many Nigerians have condemned the purported tariff increase on social media citing the harsh economic situation of the country.

NERC’s quick denial of information may help stave off another round of labour agitations which could further worsen the ability of the DisCos to pay for the power they receive.