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Power ministry gives conditions for electricity tariff hike

Power ministry gives conditions for electricity tariff hike

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The Ministry of Power, Works and Housing has said an increase in electricity tariff can only be justified by widespread provision of meters and improved service delivery to customers.

The ministry said this in a new document called ‘Power Sector Policy Directives and Timelines,’ which was obtained by our correspondent on Tuesday.

It directed the Nigerian Electricity Regulatory Commission to clearly convey the need for tariff review consistent with provisions of Section 76 of the Electric Power Sector Reform Act 2005, and abide by the requirement for periodic major and minor reviews and processing of valid claims for deficits in tariff as provided for in the rules for tariff regulation.

The document, which was dated June 2019, said, “Government policy recognises that the current consumer tariff must rise to cover all costs of gas, transmission and distribution. This is necessary for distribution companies to raise capital, and for the industry to be self-sustaining without government financial support.

“But this can only be justified after meters are more widely installed and services improve so that consumers pay for what they consume and not for the inefficiencies of operators. In the meantime, NERC (Nigerian Electricity Regulatory Commission) should enforce regulatory processes already in place for operators to make claims for verified deficits in their tariff.”

According to the ministry, there is substantial circumstantial evidence that higher electricity tariffs may result in reduced collection by distribution companies because of low meter penetration and poor service.

It, therefore, directed NERC to set and enforce targets for Discos and meter asset providers to roll out meters.

Another immediate task for the commission is to encourage and facilitate willing-buyer willing-seller transactions with Competition Transition Charge compensation, where applicable, to the distribution company for a defined period.

The commission was asked to withdraw existing orders against willing-buyer willing-seller transactions like the recent Cummins and Viathan (PIPP LVI Disco) orders but compel compliance with a clearly defined and easy-to-apply CTC Regulation.

The ministry directed NERC to issue an order, within four weeks, to explicitly permit all customers supplied at 132kV and 330kV to contract as an ‘eligible customer’ for their power, directly with a generation company, and for their transmission requirements directly with the Transmission Company of Nigeria.

It said the commission should “license mini-grid applicants expeditiously, according to the timelines stated in the regulation, especially where consumers and developers have agreed terms; and license eligible customer applicants expeditiously, starting within two weeks, with the four that applied in July 2018 and were still operating without permits.

NERC was asked to set and enforce targets for Discos to apply the Franchising Regulation to contract capable investors, agents and partners of the Discos to expand and operate, as franchisees, 33kV and 11kV feeders and areas “that consumer petitions confirm are underserved or for which collection losses do not meet set licence targets.”

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