By Energy Worth
The Nigerian Electricity Regulatory Commission on Tuesday said it had no plan to dump the Multi-Year Tariff Order framework used in determining the tariff payable by electricity consumers in the country.
NERC denied reports that it was planning to quit the MYTO framework, but stated that it planned to review the financial model of the tariff order.
The commission said these in a statement issued in Abuja, adding, “NERC hereby reaffirms that there are no plans to dump the MYTO framework used in determining end-user tariffs based on revenue requirement of the electricity industry.
“As part of the periodic evaluation of software models utilised by the commission, NERC plans to review the MYTO financial model to ensure its integrity and consistency of the platform with approved tariff principles pursuant to the numerous updates undertaken since the inception of the methodology in 2008.”
NERC said the holistic review of the MYTO model also included aligning the basic assumptions and parameters with the underlying principles of the tariff methodology and ascertaining the full workability of the macros and other formulae.
“This is an important initiative of the commission as we prepare to commence the review of performance improvement plans to be submitted by utilities for the tariff period 2019-2023,” it added.
NERC said it would continue to use the MYTO as the framework for determining tariffs.
The commission also stated that in line with the provisions of the Electric Power Sector Reform Act, 2005, it would ensure that prices charged by licensees were fair to consumers and sufficient to allow the licensees to recover the cost of their business activities, while earning a reasonable return on the capital they invested.
Meanwhile, the 11 power distribution companies operating in the country on Tuesday stated that they needed about N300bn to meter the four million unmetered electricity consumers across the country.
According to the Association of Nigerian Electricity Distributors, an umbrella body for all the Discos, although most banks are not willing to give out loans to the power firms, the companies are still seeking funds to meter their customers.
ANED stated that when investors in the Discos took over the assets on November 1, 2013, there was no true estimate of the metering gap in Nigeria.
“Indeed, the Discos, under their performance agreement, were only obligated to meter 1.7 million customers over a five-year period. The estimate of the metering gap, at that time, was significantly less than the currently identified four million gap,” the Executive Director, Research and Advocacy, ANED, Sunday Oduntan, told our correspondent in Abuja.
Oduntan said the metering gap in the power sector was a commercial challenge, adding that the cost of the meters were incorporated in the tariff, which customers were paying.
“So, the cost of the meter has an upward impact on the tariff. For instance, the 1.7 million meters that the Discos are obligated to provide will cost N124bn, assuming that they are three-phase meters at a cost of N73,000 each. To address the four million metering gap will cost N299bn,” he stated.
The power distributors’ spokesperson, however, noted that the tariff set by NERC only allowed a total of N305bn for the 11 Discos over a five-year period to provide for capital investments such as metering, installation of transformers, distribution network expansion, building of injection substations, etc.
Oduntan said, “If you look at it in another way, metering the 1.7 million customers, as contained in the performance agreement when the Discos came along, will amount to 40 per cent of the money that was provided for every capital investment under the tariff.
“Meeting the four million metering gap will require 98 per cent of the money provided for capital investment under the tariff. Therefore, it is more important to explain that for us to be able to address all the other critical capital investments and achieve comprehensive metering, the tariff would have to go up significantly.”
On possible ways to address the challenge, ANED stated that the optimal installation of meters on a monthly basis was 20,000 meters per firm.
It, however, stressed that a comprehensive metering exercise would not be accomplished in the near term considering the humongous funds needed for the scheme and the liquidity crisis in the Nigerian power sector.
Oduntan said, “This is consistent with other countries that have been in a similar situation. It takes five to 10 years or more to fix, because a significant component of the meters are imported. And so, it will require ready access to foreign exchange, with the cost being impacted by the diminished value of the naira.
“Also, the liquidity constraint of the sector adversely affects the ability of meter manufacturers and Discos to access debt financing for the provision of meters that will cover a metering gap that is as huge as four million.”