To boost revenue in the power sector, the Transmission Company of Nigeria saddled with the responsibility of transmitting power to the Distribution Companies has been given a projection of N244,844,000,000, a requirement by the Nigerian Electricity Regulatory Commission (NERC).
It also forecast a N109,389,000,000 allowed recovery for the period, while it estimated a tariff shortfall of N135,455,000.
The commission, however, noted that in 2019, the revenue requirement was N209,740,000,000; allowed recovery was N107,551,000,000, while the tariff shortfall was N102,000,000.
The review indicated a 16.74 per cent increase in revenue requirement, 17.09 per cent increase in allowed revenue requirement, and 32 per cent tariff shortfall.
According to the NERC, the Federal Government will in the interim subsidise the excess of the cost-reflective tariff and the actual payment from the end-users.
It was contained in the order No. NERC/GL/195/2019, that was titled “Before the NERC in the matter of the 2019 minor review of Multi-Year Tariff Order 2015, and minimum remittance on Market Operator’s invoice, for the year 2020, for the Transmission Company of Nigeria Plc.”
The NERC noted that: “The federal government’s updated Power Sector Recovery Programme (PSRP) does not envisage an immediate increase in end-user tariffs until April 1, 2020, and a transition to full cost reflectivity by the end of 2021. In the interim, the federal government has committed to fund the revenue gap arising from the difference between cost reflective tariffs determined by the commission, and the actual end-user tariffs payable by customers in line with the following.
Part of the obligations are:
All DisCos are obligated to settle their market invoices in full as adjusted, and netted off by applicable tariff shortfall.
The commission shall hold the TCN financially responsible for deviations from the economic dispatch order that adversely impact on the base weighted average cost of wholesale of energy as invoiced by NBET.
The order insisted that the order supersedes other orders issued on the subject matter, and shall take effect from 1 January 2020 and shall cease to have effect on the issuance of a new Minor Review Order or an Extraordinary Tariff Review Order by the commission.
The NERC based its estimate in the review on the relevant minor review variables that were obtained from the Central Bank of Nigeria (CBN), National Bureau of Statistics (NBS), System Operator Division of TCN, and NBET for the update of the MYTO – 2015 Financial Model:
It also predicated the inflation forecast on the actual average monthly inflation rate of 11.3% for the period January to October 2019 was used for this review in line with the MYTO.
It noted that the exchange rate was in line with the provisions of the Regulations on Rate Review for Nigerian Electricity Supply Industry (NESI), CBN official exchange rates were used in this review.