Legality Of Competition Transition Charges In NESI

By Idowu Oyebanjo

The declaration of Eligible Customers (EC) in the Nigerian Electricity Supply Industry (NESI) in 2017 has sent the right signals to investors that the NESI is progressing towards retail competition. However, it seems the Nigerian Electricity Regulatory Commission (NERC) is yet again trying to walk before it crawls by introducing competition transition charges (CTC) that may discourage potential eligible customers (PEC) and investors from taking advantage of the business opportunities presented by the recent declaration.

This is not the first time we have seen how the timing and implementation of policy directives can make or mar the chances of the power sector surviving turbulent and stormy periods. It is against this backdrop that we analyse the current plans of NERC to introduce CTC in the NESI as it can potentially lead to an increase in the cost of electricity supply (tariffs) to all consumers.

A Swot Analysis Of The Meter Asset Provider Regulation (Part 1)

By Idowu Oyebanjo

The recently released Meter Asset Provider (MAP) Regulation by the Nigerian Electricity Regulatory Commission (NERC) in attempting to close the metering gap in the power sector has become inevitable because DisCos have failed to provide meters to consumers within the Nigerian Electricity Supply Industry (NESI) as anticipated by metering targets set in the performance agreements between Federal Government and Distribution Companies (DisCos).

As a result of this failure, estimated billing, electricity theft, meter bypass, illiquidity in the power sector, increased aggregate technical, commercial and collection losses (ATC&C) and consumer apathy towards the power sector reform have been some of the undesirable consequences. Lately, the National Assembly has determined to criminalise estimated billing in response to the cries of consumers nationwide who have in the last five (5) years remained unmetered, let-down and unprotected in the current regulatory environment. By this regulation, NERC aims to achieve revenue assurance within the NESI, reduce illiquidity, close the current metering gap of over 4.7 million meters within the next three years and eliminate estimated billing. It is therefore imperative to consider the Strengths, Weaknesses, Opportunities and Threats associated with the implementation of the MAP regulation.

Customer Eligibility: Business Opportunities In The Nigerian Power Sector

By Idowu Oyebanjo

The eligible customer criteria declared by the Minister of Power is a clear business opportunity. Generally speaking, it means qualified customers can get electricity directly from GenCos and other Suppliers. This brings a number of opportunities for investors and fund managers as enumerated below.

Opportunity for Independent Electricity Distribution Network Owners – IEDNOs.

A person or group of individuals can invest in a dedicated electricity network and supply power to housing estates, manufacturers, and heavy electricity consumers throughout Nigeria. This will be according to the Independent Electricity Distribution Network [IEDN] regulations set by the Nigerian Electricity Regulatory Commission (NERC).

Nigeria: On FG’s Planned Demand For Transparency From Discos

By Idowu Oyebanjo

The Federal Government has announced plans to escrow and beam its searchlight into the revenue accounts of the operations of the DisCos due to poor monthly remittances. Although DisCos have condemned the move, this is a good step in the right direction. To address the problems of NESI, a holistic view of every aspect of the multi-faceted problems plaguing it is required with a view to solving them in a coordinated manner. 

One of the major problems in the Nigerian Electricity Supply Industry (NESI) today is the potential for illiquidity. In simple terms, this arises when DisCos declare, whether truthfully or otherwise, that they have not collected enough money from consumers of electricity and so are unable to make full payments to the bulk electricity trader, NBET, for electricity received.

This has the potential to always create illiquidity in NESI because their remittances should have been used to pay all key stake holders in the industry including but not limited to GenCos, TCN, Gas providers, market operator, NERC, NBET etc. The solutions to address this anomaly include a massive investment in customer metering, reduction in network losses, preventing electricity theft and collusion of staff of electricity companies with consumers to defraud the industry, discontinuation of estimated billing, and ensuring that revenues collected by DisCos in behalf of NESI is transparent to all key stakeholders, and not least the Federal Government which still owns 40% of DisCos. The government has chosen to implement the last of the afore-mentioned solutions but the DisCos have frowned at the move. Thus a critical review of the position of DisCos is in order.

As NERC Introduces New Electricity Tariffs In Nigeria

By Idowu Oyebanjo

The much talked about increase in electricity tariffs became operational with effect from 1st of February 2016. As consumers brace up for the new tariff regime, there are issues worth noting which will determine the sustainability of the power reform process.

The main focus on the issue of cost reflectivity has been the Distribution Companies (Discos) because they act as the conduit pipe for the collection of monies to be shared by all the stakeholders involved in the provision of energy for the generation, transmission and distribution of electricity to consumers. In effect, they are the cash boxes of the entire electricity value chain. Although 25% of collected revenue is theirs to keep, 60% goes to the generating companies (Gencos), 11% to the Transmission Company of Nigeria (TCN), while the remaining 4% goes to other stakeholders like NERC, NBET etc.

One of the main issue is that the cost reflective tariff is hinged on a recent performance agreement reached between Discos and NERC. Given that the new Commissioners for NERC have not been appointed, albeit a care-taker committee of career officers have been running the show, it is clear that the enforcement of the service level agreements (SLAs) in the performance as agreed will lag behind. There should be a tracking of performance right from the word Go!

But the Discos cannot perform any miracles at all. The investment to be made is huge and will take many years before the overall impact can be felt. They cannot fix the technical losses in the wires and transformers from the monthly bills collected from unimpressed consumers who are likely to display a recalcitrant attitude towards the payment of their bills. At the moment, Discos have huge debts to finance as many of the technical partners have left for lack of liquidity in the sector even after two years. The current 187 billion naira deficit is a case in point. This deficit has the potential to be recurrent year after year if power system engineers are not allowed to lead the privatisation process. Economists and Lawyers will never have a clue. Technically speaking, the contract between a Disco with the federal government is no longer valid once the technical partner has abandoned the partnership. Don't forget the sale of government's asset was based, in part, on the technical capability of the so call "technical partner". Nigeria needs to get it right this time having wasted so much resources on the power sector reform of which time is the most invaluable.

Nigeria: Electricity Tariff Increased, Fixed Charges Removed

PRESS RELEASE

New Tariff Regime Removes Fixed Charges

The new electricity tariff regime approved over the weekend by the Nigerian Electricity Regulatory Commission (NERC) has removed fixed charges for all classes of electricity consumers. Henceforth, from the next billing period, distribution companies will no longer charge their customers monthly fixed charges. Fixed charge is that component of the tariff that commits electricity consumers to paying an approved amount of money not minding whether electricity is consumed during the billing period.

*Amadi 

Under the new tariff regime, electricity consumers will now only pay for what they consume from month to month. According to the Chairman/CEO of NERC, Dr. Sam Amadi, "This is good news for electricity consumers who have long asked for a more just and fair pricing of electricity. The regulatory commission had promised to address all the complaints against fixed charges through a regulatory process that promotes investments in the electricity industry without unfairly burdening electricity consumers. This is in line with NERC's mandate to be fair in all its regulatory interventions".

Although, the new tariff regime comes with an increase in energy charges, all electricity consumers (residential as well as commercial) will no longer pay fixed charges. Their total bills will depend on the electricity they actually consume and may be reduced when they conserve electricity. Consumers will no longer be spending money every month to pay for fixed charges even when they do not receive electricity in their homes and business.

According to the chairman of NERC, "The objective of the new tariff is to enable prudent consumers to save money on electricity bill as they can now control their consumption and not pay monthly fixed charges".