The Nigerian Electricity Regulatory Commission (NERC) has released detailed guidelines outlining the procedures for electricity tariff reviews, following speculation about an imminent tariff increase.
In a new directive signed by NERC Chairman, Sanusi Garba, the commission clarified that electricity tariffs in Nigeria would be subject to review every five years, in line with the established Multi-Year Tariff Order (MYTO) methodology.
This review will ensure that tariff assumptions are periodically updated to maintain the industry’s financial health, efficiency, and sustainability.
The NERC emphasized that, before any major tariff hike, a year-long notice would be issued to all electricity Distribution Companies (DisCos) notifying them of the impending review.
The notice will request that DisCos submit their applications for tariff adjustments, accompanied by necessary supporting documentation, within 120 days.
This documentation will include audited financial statements, investment plans aligned with the Performance Improvement Plans (PIPs), customer consultation records, and any other relevant information the commission deems necessary.
“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 directive partly read.
90-Day Consultation Period for Stakeholders’ Input
Once the applications are submitted, the NERC has outlined a 90-day consultation period. During this time, the commission will develop a consultation paper detailing the basis of the tariff reviews.
The paper will encompass the DisCos’ proposed investments, service improvements, loss reductions, potential impacts on electricity rates, and any recalibrations of the tariff assumptions.
This consultation paper will be published on the NERC website, with a public notice issued for stakeholders to submit their feedback within 21 days.
The commission stressed that all submissions would be carefully reviewed before the Rate Case Hearing, which will occur no later than 90 days after the consultation paper is made available.
Final Approval Process and Communication to Customers
Following the Rate Case Hearing, the NERC is committed to approving any major tariff adjustments within 30 days.
The commission will ensure a thorough review of stakeholder responses before finalizing the tariff hike order.
DisCos whose tariffs have been adjusted are required to communicate the outcome of the review to their customers through multiple communication channels, including their websites.
“Any licensee whose tariffs have been reviewed shall communicate the outcome of the tariff review to its customers via its website and other communication channels,” NERC added.
Earlier this year, on April 3, 2024, NERC approved a significant threefold increase in electricity tariffs for customers classified under Band A, signaling the continuation of its focus on ensuring that tariffs reflect the financial realities of the sector while promoting industry improvements.