NERC Adapts Subsidy Framework and Service Enhancement in NESI
In accordance with the Electricity Act of 2023, the Nigerian Electricity Regulatory Commission (NERC) holds the responsibility of enabling licensees within the Nigerian Electricity Supply Industry (NESI) to set rates that recover operational costs efficiently while ensuring a reasonable return on invested capital. This task necessitates thorough reviews to balance customer protection with investor incentives for continual service improvement.
The Federal Government of Nigeria has signaled a shift in policy towards implementing a more targeted subsidy approach. This aims to buffer the effects of macroeconomic fluctuations while safeguarding vulnerable consumers and promoting investments for improved service delivery within the NESI.
NERC recently completed a comprehensive review of tariff applications from the eleven successor electricity distribution companies, following established regulatory processes and Business Rules. This evaluation, which included a public hearing involving stakeholders and intervenors, was guided by the goal of fostering a financially sustainable electricity market capable of driving Nigeria’s economic growth.
After meticulous assessment, NERC has approved revised rates specifically impacting customers classified under Band A service category, constituting approximately 15% of the customer base. These customers, supported by empirical service data, have consistently received the committed level of service. Under the revised tariff Order, DisCos are mandated to ensure a minimum average supply of 20 hours per day to Band A customers over a one-week period.
However, customers categorized under Band B to E service categories, comprising 85% of the customer population, remain unaffected by the tariff review. DisCos are tasked with meeting set targets for investments and transitioning more customers to the Band A service category. With the newly approved tariffs, subsidies for the 2024 fiscal year are expected to decrease by approximately NGN1.14 trillion, aligning with the Federal Government’s subsidy realignment objectives.
To enhance oversight and accountability, NERC has implemented a robust monitoring framework utilizing technology, ensuring transparency in service agreements between consumers and providers. Additionally, an enforcement and compensation mechanism has been established to address instances of service failure.
NERC reassures Nigerians of its commitment, in collaboration with policymakers, to deliver adequate and reliable electricity to all citizens. The Commission remains dedicated to working alongside state governments to realize the objectives outlined in the Electricity Act of 2023.
Source: NERC
