NERC lays commercial incentives for power supply improvement

• Assures sustainable market for meter producers

Sopuruchi Onwuka

Federal government has declared plans for sustainable capacity growth in the nation’s electric power sector through performance based incentives for players, especially the distribution companies that would stake significant investments in advancing their levels of service quality.

Under the arrangement, the Nigerian Electricity Regulatory Commission (NERC) has resumed its periodic tariff review to guarantee players in the full loop commercial relay sustainable revenue inflow that would enable them recover cost and make commercial margins that would aggregate into re-investment capital.

Commission Chairman, Mr Sanusi Garba, said the new tariff regime would address the crippling liquidity problem in the gas-to-power programme of the government by taking low tariff out of the books and enabling the electricity distribution companies earn enough revenue for debt clearance and generation of funds for capital expenditure.

He told journalists in Lagos that resumption of the tariff review would not produce uniform and equal results for all players in the industry as, according to him, they would be benchmarked against the performance level of each player in the industry. Hen clarified that whereas the outcomes of the tariff reviews would not necessarily entail increase in electricity bills in all cases, companies with compelling evidence of high service delivery would earn positive tariff reviews.

He made it clear that the service based tariff reviews for the electricity distribution companies come with a requirement that none of them would reject assigned load by the Transmission Company of Nigeria (TCN).

NERC stressed that the performance of the distribution companies remains critical to the commercial relay connecting gas suppliers, generation companies and transmission grid operators would now operate on viable commercial arrangements.  

Therefore to enhance efficiencies in the upstream sector of the industry where generating companies had earlier complained of plant redundancy due to unwillingness of the distribution companies to accept assigned volumes of generated electricity also called load, Mr Garba declared that a binding service level agreement now requires the marketing companies to accept or pay for rejected load.

In all, he said, metering of customers would form the key index of earning service based tariff by the distribution companies. He said NERC has required the distribution companies to bring forward their five year investment plans on how they would enhance efficiencies in their operations.

He pointed out that players in the downstream electricity industry must earn favourable tariff reviews purely based on their level of service quality as the government begins implementation of wide-ranging measures to enable players close supply gaps in the market.

He said a cost reflective tariff regime would be maintained in the industry to guarantee returns on investment and enable the companies muster adequate funds for capital expenditure

He added however that all increases in tariff would be marginal.

Mr Garba made it clear that the market is underway to full tariff regime, adding that templates used in the new reviews do not have subsidy components. He made it clear that special interventions from government are not also built into the tariff review methodology.

He however noted that the system could accommodate the provision of the government’s Power Consumers Assistance Fund to retain some level of low tariff for the underprivileged consumers.

The plans to resolve liquidity issues in the market, The Oracle Today reports, would also entail concerted interventions by federal government, funding agencies, multilateral development partners and sundry service providers. The target is to create a local market environment that supports viable commercial investments.

Significant part of the investment, it was learnt, would go into meter procurement and distribution to help resolve the high rate of billing disputes that lead to collection difficulties and massive commercial losses in the market.

In recognizing metering deficit as the main cause of billing disputes and associated commercial losses, Mr Garba said NERC was taking measures to curtail exploitation of unmetered consumers by service providers, saying that regulation has capped allowable rates for estimated billing.

To avail consumers of reprieve in the case of crazy bills, he said that NREC would soon create a digital portal for reporting billing issues. He said aggrieved consumers could still use existing resolution channels in bring their complaints to the attention of the commission.

In calling for big ticket investments in local meter production, Mr Garba pointed at significant 8.0 million meter deficit in the Nigerian electricity supply industry. He said while arrangements are running to directly procure some 1.0 million meters in the Phase 1 of the existing rollout programme, the Wold Bank would be assisting with funds for procurement of another 4.0 million meters under a separate arrangement.

He described meter rollout programme and deployment in the market as a continuous process, explaining that emerging demands and the need to replace old and malfunctioning meters would make demand and procurement of meters a continuous process.