11 DisCos apply for tariff review, raising possibility of electricity price hike

Eleven electricity distribution companies (DisCos) have submitted applications for a review of their respective electricity tariffs. The disclosure came through a notice published by the Nigeria Electricity Regulatory Commission (NERC) on Friday.

The Federal Government explained that the request for rate review is driven by the need to incorporate changes in macroeconomic parameters and other factors that impact the quality of service, operations, and sustainability of these companies.

According to the notice obtained by Technext, NERC clarified that the DisCos’ request for rate review is in accordance with Section 116 (1) and 2(a&b) of the Electricity Act 2023, along with other relevant rules. The primary objective behind this review is to ensure that the electricity rates align with the current macroeconomic dynamics.

The statement reads “Pursuant to Section 116 (1) and 2(a&b) of the Electricity Act 2023 and other extant rules, the eleven (11) successor electricity distribution companies (“DisCos”) have filed an application for rate review with the Nigerian Electricity Regulatory Commission (“NERC” or the “Commission”). “

“The request for rate review is 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

Previously, there was a contentious attempt by some electricity distribution companies to increase tariffs starting from July 1. This move faced widespread backlash and strong resistance from Nigerians. The Nigerian Labour Congress (NLC) voiced its opposition, urging the government to abandon its plans to raise electricity tariffs, as it was deemed insensitive and callous to impose such an increase while consumers were already grappling with the hardships caused by the removal of petrol subsidy.

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As a result of the public outcry, the DisCos postponed the planned tariff increase on July 1. However, with the recent notice from NERC on Thursday revealing that the DisCos have now applied for a rate review, there is a possibility that the increase may still occur.

NERC stated that it will conduct a Rate Case Hearing to evaluate the applications before making a ruling.

“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 licenses,” NERC stated.

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NERC seeks comments from public on price review

This activity is part of the rule-making process and falls within the powers conferred by the Electricity Act. As part of the hearing, NERC has invited the general public and stakeholders to submit their comments or representations on the rate review applications. Interested parties are encouraged to review the excerpts of the Rate Review Applications filed by the respective licensees with the Commission. The deadline for submitting comments or representations is July 20, 2023.

It should be noted that the NERC tariff review process is designed to undertake major reviews every five years. However, an extraordinary tariff review can be 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.

The rate review applications have sparked concerns among the public, who fear the potential impact on electricity prices. People are closely monitoring the proceedings of the Rate Case Hearing and eagerly awaiting its outcome to ensure that their concerns are adequately addressed.

With the deadline for public comments approaching, the NERC faces the challenge of balancing the interests of the DisCos and the consumers while determining the future electricity tariffs in Nigeria.