Discos Apply For Review Of Electricity Tariff

Muhammed Abubakar, Reporting

THE Federal Government says 11 successor electricity companies have applied for a review of their respective electricity tariffs.

This was made known through a notice published by the Nigeria Electricity Regulatory Commission (NERC) on Friday.

The Federal Government said the request for rate review was premised on the need to incorporate changes in macroeconomic parameters and other factors affecting the quality of service, operations and sustainability of the companies.

NERC, in the notice, stated that Discos’ request for rate review is in pursuant to Section 116 (1) and 2(a&b) of the Electricity Act 2023 and other extant rules.

A recent attempt by some electricity distribution companies to hike tariff from July 1 had caused uproar and met strong resistance from Nigerians most are already economically incapacitated after the fuel subsidy removal.

The Nigerian Labour Congress (NLC) had asked the government to shelve plans aimed at increasing electricity tariffs in the country.

It said the plan was insensitive and callous to effect hike in power tariff when consumers are still grappling with the hardship caused by the removal of petrol subsidy.

Owing to the outrage, the Discos appeared to have shelved the planned tariff increase on July 1.

With the Thursday notice by NERC that the Discos have now officially applied for rate review, the increase may eventually materialise.

The regulatory body, however, disclosed that it will conduct a Rate Case Hearing on the applications before making a ruling as part of the rule-making process and in the exercise of the powers conferred by the Electricity Act.

“Accordingly, the Commission hereby invites the general public for comments on the rate review applications by the distribution licensees.

“Interested stakeholders are advised to review and take into consideration the excerpts of the Rate Review Applications filed with the Commission by the respective licensees,” NERC stated.

The commission called on all members of the public and stakeholders to send their comments or representations before the close of business on July 20, 2023.

Stonix News reports that the NERC tariff review process was designed with the intent of undertaking major reviews every five years.

In addition, an extraordinary tariff review is triggered when a Disco requires additional investment beyond the permitted capital expenditure, or when unforeseen operational, legal, or regulatory costs need to be reasonably passed on to consumers.

Also, minor reviews are scheduled every six months to adjust tariffs based on changes in gas prices, foreign exchange rates, generation output, and inflation.

In the rate review application of one of the Discos, Ikeja Electricity Distribution Company, it stated that the tariffs are consistently falling below cost-reflective levels because the parameters are not aligned with the current reality of the business, putting pressure on Discos and government to subsidize the tariff gaps.

This, it added, undermines the Discos’ ability to fulfill their obligations under the Performance Agreements and Vesting Contract and exacerbates the liquidity challenges in the electricity sector.

On its part, Abuja Electricity Distribution Company said it requested that the commission consider the amended end-user rate since it represents business realities for continuity and sustainability.

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