The Nigerian Electricity Regulatory Commission (NERC) is set to change the frequency at which the Multi-Year Tariff Order (MYTO) is revisited.
As it stands the Multi-Year Tariff Order (MYTO) is revisited every six months and this is apparently insufficient for a proper tariff structure. The new plan is to allow the MYTO scheme be revisited every month or quarterly.
In a paper endorsed by the NERC’s Acting Chairman, Mr. Sanusi Garba, the Commission revealed that reducing the review period would provide incentives for continued improvement in services as shortfalls would be promptly recognized and computed into tariffs.
However, it said raising the review frequency, “may deliver higher tariffs to consumers in the long run resulting from associated finance costs where retail tariffs are not adjusted immediately.”
NERC is also considering changing the period of adjusting the tariff from every six months after the minor review.
The commission said changing the tariff update period to monthly or quarterly would allow operators to recover their efficient cost promptly without delay thereby boosting market liquidity.
“Electricity consumers will immediately bear the full brunt of risks associated with macro-economic changes in the economy,” it stated.
NERC also seeks to include the Revenue Decoupling Mechanism (RDM) to help compensate customers or the utility firms for any charge in line with the actual generation as against the projection that has been made in the MYTO.
Stakeholders are expected to be at the public hearing which will be held on June 30 by the commission before the final outcome on the MYTO change is approved.
The reviews the MYTO will be made by considering changes in parameters like inflation, exchange rate, gas price, power generation capacity, transmission capacity and the operators’ Capital Expenditure (CAPEX) requirement to adjust the tariff.