Nigeria Electricity Supply Industry: Transitioning into a service-reflective tariff market

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On September 1st 2020, the Nigeria Electricity sector officially witnessed the implementation of a cost-reflective tariff for end-users, following presidential approval. Recall that the Multi-Year Tariff Order (MYTO) 2020 which was due for implementation in April and then July, was pushed forward due to the COVID-19 pandemic.
Nigeria Electricity Supply Industry: Transitioning into a service-reflective tariff market - Brand Spur
Sources: NERC, United Capital Research

According to the NERC, the new rate will align charges paid by end-users with quality of service provided – measured by average availability of power supply over a one-month period. Hence, users having a power supply below an average of 12-hours per day over a period of one month will not be liable to tariff increase.

Also, unmetered customers within service band A, B, and C, benefitting from average power supply above 12-hours per day shall be protected by the “order on capping of estimated billing”. Lastly, the less privileged members of the society, measured by all users consuming less than 50kWhrs of energy per month, are also protected via a lifeline tariff of N4/kWhr.

Notably, the order seeks to ensure fair pricing for both customers and Discos, in a way that charges are sufficient to recover the cost of operation as well as a reasonable return on investment. Ultimately, the new order is expected to provide a path to transitioning to fully service-based cost-reflective tariffs by July 2021.

Additionally, the order attempt to align tariffs to quality of service, availability of supply, guarantee improvement and reliability of service by incentivizing Discos to off-take energy in accordance to vesting contracts and MYTO load allocation. And lastly, provide a framework for the settlement of the imbalances between TCN and Discos on delivery and off-take of available energy in accordance with market rules and vesting contracts.

United Capital Plc Research

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