Power Sector Recorded N1.7trn Tariff Shortfall in four years Says NERC

Power Sector Recorded N1.7trn Tariff Shortfall in four years Says NERC

The Nigerian Electricity Regulatory Commission (NERC) says the power sector recorded N1.72 trillion tariff-related revenue shortfall from 2015 to 2019.

The commission said this in a newly released consultation paper on the proposed extra-ordinary tariff review of the MYTO-2015 tariff order for the Nigerian Electricity Supply Industry (NESI).

NERC said the proposed tariff review in the sector is to ensure that electricity companies recover their full efficient costs with reasonable return on the assets invested in the business and allow DisCos meet their revenue requirements.

In January, the regulator announced a review of the multi-year tariff order (MYTO) 2015 and the minimum remittance order (MRO). The 11 electricity distribution companies (DisCos) will adjust their tariffs upwards from April.

“The expected efficiency gains from privatization were not fully achieved with the sector still facing significant infrastructural, liquidity and governance challenges. Arising from series of complaints and dissatisfaction of the sector’s performance by the citizens, the FGN realized the need for its specific strategic and regulatory intervention to reset the market,” NERC said.

“In developing the sector recovery plan, one of the significant challenges identified was the lack of sufficient revenues to cover the requirements of the sector arising from suppressed end user tariffs that are below rates approved by the industry regulator.

“With allowed tariffs charged by DisCos consistently lower than prudent cost reflective levels since takeover by core investors, the GenCos have over the years been significantly underpaid in the settlement of their invoices. This remained the situation until the FGN provided a loan to NBET (“Payment Assurance Facility”) to enable the electricity trader honour its invoices for energy and capacity, pursuant to the Power Purchase Agreements executed with the GenCos.

“In this respect, the FGN had provided a sum of N701bn for the period 2017-2018 and a further sum of ₦600 billion approved to cover the period January 2019 – March 2020. While the intervention so far represents an unsustainable fiscal burden on the Nigerian treasury, the total tariff-related revenue shortfall for all market participants for the period 2015 – 2019 is in the sum of N1.72 trillion.”

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