New guidelines have been released by the Nigerian Electricity Regulatory Commission, NERC, on electricity tariff hikes within the country’s electricity supply industry.
NERC’s Sanusi Garba, in a recent order, explained that according to the 2023 Electricity Act, operators in the sector must ensure electricity companies can cover their reasonable costs, make enough money to keep operating, and earn a fair profit on their investments.
It stated that Section 116(1) of the Act provides that activities in generation, transmission, distribution, trading, supply, system operation, and electricity distribution franchising shall be subject to tariff regulation, noting that Section 116(2) further provides for the commission to develop a tariff methodology that allows licensees operating efficiently to recover the full efficient costs of their business activities, plus a reasonable return on investments by shareholders.
“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.”
Explaining further, the guideline stressed that the Multi-Year Tariff Order methodology provides for a major review of electricity tariffs every five years, during which all tariff assumptions are reviewed to ensure the industry’s viability and efficiency.
One year before the major tariff hike, the commission said it would issue a notice to all licensees about its intention, while requesting them to submit applications for the review of tariffs supported with the necessary documentation within 120 days of the notice.
“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 order reads in part.