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SEP 2019 NEWS OLUDARE SENBORE AND CEPHAS CALEB

Prior to the enactment of the Electric Power Sector Reform Act, 2005 (“EPSRA” or the “Act”), the methodology for setting electricity prices in Nigeria had been vague and uncertain. One of the primary reforms that the Act introduced was to empower the Nigerian Electricity Regulatory Commission (“NERC”) to develop a cost-reflective tariff regime for the Nigerian Electricity Supply Industry (“NESI”) which is central to attracting long-term investments into the electricity supply market.

Section 76 of the EPSRA provides that NERC should adopt methodologies for regulating electricity prices that:

  • allow a licensee that operates efficiently to recover the full costs of its business activities, including a reasonable return on the capital invested;
  • provide incentives for the continued improvement of the technical and economic efficiency with which the services are provided; and
  • provide incentives for the continued improvement of quality of services.

Further to the above provisions of the Act, NERC introduced the Multi-Year Tariff Order (“MYTO 1”) methodology in July 2008 as the framework for determining the industry’s pricing structure. MYTO 1 provided a fifteen-year tariff path with minor and major reviews bi-annually and every five years respectively. Following a major review of MYTO 1 in 2012, NERC issued MYTO 2 effective 1 June 2012 to 2017.

Please note that the details of the new energy charges and category of customers for each DisCo are available on NERC’s website: www.nerc.gov.ng.

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