In view of consistent fluctuation in parameters used in the computation of electricity tariff in the country, which include forex exchange rate, Gas prices, inflation, power generation capacity, transmission capacity and the operators’ Capital Expenditure (CAPEX). The Nigerian Electricity Regulatory Commission (NERC) is set to cut the minor review period of Multi Year Tariff Order (MYTO) methodology from six months to either monthly or quarterly.
This is to ensure a timely reflection of the economic indicators of the Power Sector in the electricity tariff hence ensurely a cost effective tariff.
The paper endorsed by the acting Chairman, Mr Sanusi Garba, said reducing the review period wiould provide incentives for continued improvement in services as shortfalls would be promptly recognised and computed into tariffs.
However, it said raising the review frequency, “may deliver higher tariffs to consumers in the long run resulting from associated finance costs where retail tariffs are not adjusted immediately.”
NERC is also considering changing the period of adjusting the tariff from every six months after the minor review.
The commission said changing the tariff update period to monthly or quarterly would allow operators to recover their efficient cost promptly without delay thereby boosting market liquidity.
“Electricity consumers will immediately bear the full brunt of risks associated with macro-economic changes in the economy,” it stated.
NERC also seeks to include the Revenue Decoupling Mechanism (RDM) to help compensate customers or the utility firms for any charge in line with the actual generation as against the projection that has been made in the MYTO.
Stakeholders are expected to be at the public hearing which will be held after June 30 by the commission before the final outcome on the MYTO change is approved.