NERC Outlines Tariff Review Process
Following controversies over a possible electricity tariff hike, the Nigerian Electricity Regulatory Commission (NERC) has issued new regulations detailing the process for reviewing power tariffs across the country.
According to the latest order signed by NERC Chairman, Sanusi Garba, the commission is legally bound under the Electricity Act 2023 to establish a tariff framework that balances affordability for consumers with profitability for electricity providers.
Key Highlights of the Tariff Review Process
1. Tariff Regulation:
Under Section 116(1) of the Electricity Act, power generation, transmission, and distribution activities must follow regulated tariffs.
Section 116(2) mandates NERC to create a pricing system that allows Discos and other electricity providers to recover operational costs while ensuring fair rates for consumers.
2. Multi-Year Tariff Order (MYTO) Methodology:
NERC has adopted the MYTO framework, an incentive-based pricing model that determines electricity tariffs.
The framework provides for a major tariff review every five years to reassess industry costs and projections.
3. Review Procedure:
One year before a major tariff review, NERC will notify all electricity licensees.
Licensees must submit tariff review applications with audited financial statements, investment plans, and proof of customer consultations within 120 days of the notice.
A consultation paper summarizing proposed tariff changes will be published for public feedback.
4. Stakeholder Engagement:
NERC will hold public consultations on the proposed tariff adjustments, allowing consumers and industry stakeholders to submit comments within 21 days.
After reviewing all feedback, a Rate Case Hearing will be conducted before final approval of the new tariff structure.
5. Implementation Timeline:
Once stakeholder input is reviewed, NERC will finalize and approve the new tariff order within 30 days.
Affected electricity providers (Discos) must publicly announce the tariff changes through their websites and official communication channels.
Minor Tariff Adjustments
Apart from the five-year major tariff reviews, NERC reserves the right to conduct monthly or minor tariff adjustments. These reviews will account for:
Changes in fuel prices for power generation.
Inflation rates in Nigeria and the U.S.
Exchange rate fluctuations between the Naira and the U.S. dollar.
Variations in electricity supply levels.
NERC may also initiate shorter-term tariff reviews at intervals of up to six months if market conditions require adjustments.
Presidency Speaks on Electricity Tariffs
Meanwhile, Olu Verheijen, Special Adviser to President Bola Tinubu on Energy, confirmed that a new electricity tariff structure is expected within a few months.
She highlighted concerns that Nigeria’s ₦200 billion monthly electricity subsidy disproportionately benefits wealthy citizens, leaving low-income households underserved.
The government aims to introduce a targeted subsidy system to ensure affordability for vulnerable Nigerians.
> “Much of the current electricity subsidy benefits the wealthiest 25% of Nigerians rather than those who truly need assistance.
The Federal Government is working towards a more efficient subsidy system that ensures affordable electricity for the masses.”
What This Means for Nigerians
With the upcoming tariff review, consumers should expect potential adjustments in electricity pricing.
While the government aims to balance affordability with industry sustainability, stakeholders—including businesses and households—should stay informed on policy changes.
For more updates on Nigeria’s power sector, visit NIGPOST.
Leave a Reply