New owners of electricity generation firms seek tariff raise

The companies have rejected the tariffs proposed in the draft rules
The new owners of the recently privatised Power Holding Company of Nigeria, PHCN, electricity generation companies, GENCOs, have demanded a review of the provisions of the Multi-Year Tariff Order, MYTO, which will see new electricity price in place.

The companies are concerned that stipulated tariffs in the draft of interim rules and regulations spelt out by the Nigeria Electricity Regulatory Commission, NERC, prior to their take-over of the plants, were inadequate to guarantee a healthy return on investment.
In a joint petition to NERC, the companies rejected the tariffs proposed in the draft rules, accused the commission and the Bureau of Public Enterprises, BPE, of reneging on the terms of the power sales/purchase agreement they collectively signed.

They threatened to seek legal redress if their grievances were not addressed by the regulatory authorities.

NERC General Manager, Marketing and Rates, Abdukadir Shetimma, said the commission and the BPE would not renege on the terms of agreement reached with the new owners of the GENCOs prior to their take-over. He explained that the interim rules were proposed since the transitional electricity market was yet to take off," he said.

"The Transitional Electricity Market (TEM) is a market where trading is done by contract. There will be rules, which would be enforced along with all the contracts that would be in force," he said.
He added that the new rules would not be in force as the conditions precedent to the Electricity Transition Market were yet to be met.

He said the fear expressed by the new owners about possible losses in the proposed tariff structure were unfounded, pointing out that the baseline losses and the population in the tariff need to determine so as to ensure that there was sufficient revenue in the entire value chain.

"We have to have a set of rules to guide the industry within this transition period when the losses will be validated. The tariff will be adjusted and the remaining few issues will be concluded," he said, adding that NERC has already proposed to commence the interim period between November 1, 2013 and February 28, 2014.

After all the conditions, include the ongoing settlement of PHCN workers' benefits, had been concluded, Mr. Shetimma, said the Federal Government could declare the Electricity Transition Market on March 1, 2014. He added that if the commencement of the interim period was from November 1, it might coincide with the physical handover of the plants to their new owners on February 28.

Mr Shetimma said during the transition period, the DISCOs would be earning their revenue from the monthly N20billion collections, while the provision for MYTO in the 2013 budget was about N19.5 billion, adding that from the provision in the MYTO 2, each DISCO would earn 100 per cent for salaries, fixed and valuable costs of 20 per cent, return on capital 50 per cent and depreciation 10 per cent.