NERC Ratifies Fresh Increase in Electricity Tariff

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NERC Ratifies Fresh Increase in Electricity Tariff
Nwolu Obiajulu

The Nigerian Electricity Regulatory Commission, NERC, has ratified an increase in electricity tariff across the country, effective from January 1, 2021.

This was contained in a directive issued on December 31, 2020, signed by NERCC chairman, Sanusi Garba.

The regulatory commission disclosed that the new tariff will remain valid until the issuance of another minor review order or an extraordinary tariff review order by the commission, The Cable reports.

It said the upward review was informed by factors such as Nigeria’s inflation rate, exchange rate, US rate of inflation, available generation capacity, gas price, MDA losses and capex adjustment.

The NERC said, “This order supersedes ORDER/NERC/ 202B/2020 and shall take effect from January 1, 2021, and shall cease to have an effect on the issuance of a new minor review order or an extraordinary tariff review order by the Nigerian Electricity Regulatory Commission (“NERC” or the “commission”).”

“The actual average monthly inflation rate of 13.1% for the period January to November 2020 was used for review of the year 2020 tariffs, while, the November 2020 inflation rate of 14.9% as obtained from the NBS was adopted to project Nigerian inflation rates for the year 2021 and beyond.

“In line with the MYTO Methodology, the CBN official exchange rates plus a premium of 1% were used for the retroactive review of the year 2020. Accordingly, average NGN/USD exchange rate (+1%) for the period 1st January 2020 to December 15, 2020, of N360.8 was used to review the year 2020 tariffs. The NAFEX closing NGN/USD exchange rate (+1%) of N397.44 as at December 29, 2020, was adopted to project NGN/USD exchange rate for 2021 and beyond.

“The year 200 projection on available generation is maintained for the first half (Jan-Jun) of 2021 to account for the impact of the delay in the implementation of MYTO-2020. No change was applied to generation projections from July 2021 and beyond.

Recall that President Muhammadu Buhari had approved the implementation of a service-based reflective tariff (SRT) structure nationwide in November, 2020.

This post was written by Nwolu Obiajulu.

The views expressed here belong to the author and do not necessarily reflect our views and opinions.

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