1. Introduction
On the 20th of September, 2024, the Nigerian Electricity Regulatory Commission (NERC) issued the Regulations on the Procedure for Electricity Tariff Reviews 2024 ("the NERC guidelines") or ("the guidelines") as empowered by Sections 34 and 226 of the Electricity Act, 2023. Given the economic realities triggered by several realities, from the fuel subsidy to the depreciation of the naira, there has been a corresponding need for every sector, business, and service provider to review their prices. In the electricity sector, stakeholders are regulated by the Nigerian Electricity Regulatory Commission and, as such, can only review their rates of services upwards by their regulator and the Electoral Act. Following similar complaints by eleven discos, the NERC discussed addressing the call for a possible tariff increase.1 Hence, this new guideline will serve as the regulatory guideline in considering applications for electricity tariff hikes within the country's electricity supply industry.
2. Objectives of the Guidelines
In line with Rule 2 of the NERC tariff guidelines, the objectives of the regulations include:
- To provide detailed rules and procedures for reviewing Nigerian electricity supply industry tariffs.
- To harmonise the provisions of the MYTO2 Methodology and the Electricity Act 2023 with the current requirements.
- To delineate the procedure affecting relevant stakeholders and parties in the tariff review process.
3. Key Highlights
1. Provision of time-bound review periods
The NERC regulations for tariff review provide for the major and minor types of electricity tariff reviews. Chapter three introduces the minor review, which considers changes in the macroeconomic conditions of the industry for short periods, not longer than six months.3 The data to be considered are from institutions, as stated in the regulations, that determine indices on generation fuel cost, Nigerian and the United States inflation rate, foreign exchange rate between the United States dollar and the naira and average generation availability of the previous months. A licensee could also bring up newer issues/ indices not provided for in the guideline. After consideration by the Commission and found satisfactory, the new tariff schedule will be published.
The other form of review is the central review of tariffs, which reviews tariffs every five (5) years in the industry. Before the hearing, the Commission is to send a notice, one month prior, to all licensees of an impending central review. The licensees would then be allowed to send applications with supporting documents, one hundred and twenty (120) days after the notice is issued. One of the key supporting documents to note is proof of wide and broad consultation with customers of the licensee's service area. After sending acknowledgements to the licensees, the Commission will develop a consultation paper no later than 90 days based on the review and publish it on the website and in public notices for comments from relevant stakeholders within 21 days. The commission is to hold a rate case hearing and review all the comments from the public and stakeholders within 90 days. The outcome of all the considerations by the Commission and the rate case hearing will be approved within 30 days of the hearing. The commission and the licensees involved are charged with publishing it on their websites.
Based on short and long-term reviews in the electricity supply industry, this development is pivotal in light of economic and global realities. The electricity and energy sector has witnessed great turmoil and fluctuations, based on wars, economic shifts, and global shifts.
The tariff review process also factors in consideration from the customers, who bear the ultimate burden of the review. Factoring comments and consultation from customers and stakeholders aligns with globally acceptable standards.
2. Extraordinary tariff review as a panacea to changing realities
The NERC guidelines stipulate the situations under which the tariff review becomes applicable. These include:4
- Significant changes in the industry
- Additional capital investments not captured in the tariff
- Unforeseen operational, legal, or regulatory costs
However, just as there is an exception to every rule, this guideline is not without one. The guidelines allow a licensee to seek extraordinary tariff review in situations other than the above. This can only be made under revenue requirement, tariff design, and generation cost.
This provision is a noteworthy step by the guideline to ensure the applications for tariff reviews are not arbitrary and unconscionable. Licensees can only seek reviews under these provided blankets, which must be reasonable.
3. Procedure for accepting, reviewing, and accepting applications
An application to be made by the licensee must come in three hard copies and one electronic copy (PDF or Excel).5 The application must include the basis for the evaluation, key data in the NERC MYTO's financial model, and other key information and supporting documentation in the guidelines.6
The applicant must pay a non-refundable fee of N5,000,000 (five million naira) or any other amount determined by the commission. In an instance where the application is granted, the application fee becomes recoverable as an expenditure. The guideline does not detail the process of recovering it and who bears the responsibility- the commission or the customers; however, based on the wording, it may be assumed to be the commission.
The commission is to review the application for completeness for five working days; if it is incomplete, 10 working days will be granted.7
A person, termed an intervenor, who may wish to participate in the application review, will need to register within twenty-one days from the date of publication of the Notice, and the Commission is to deliver its decision within 7 days from the date of the request.8 Upon approving, the commission shall notify the applicants and publish the list on the Commission's website.9 Upon acceptance commission approval, an applicant may be represented in the rate hearing.10
The rate hearing panel will consist of four commissioners, one of whom will serve as the chairman, and its decision will be based on a simple majority. The panel is not bound by the Evidence Act but by the timeline as stated in the guideline.11 The burden of proof is on the applicant to prove that the application is just and reasonable. The panel's decision shall be issued in writing within 30 days after hearing both sides, including where there is an expert witness, intervenor or even from the Commission.
4. Willing buyer-seller tariff agreement
The provisions of this guideline give flexibility to parties who want to bilaterally negotiate the tariff rate for their transaction, on a willing-buyer, willing-seller basis.12
5. Assets exempted from tariff determination
All assets are recognised in the regulatory asset base of the licensee except assets obtained from customer contributions unless the costs are being refunded; assets financed through drafts provided by the federal and state governments with no obligation to repay; and assets that are not prudently procured or do not contribute to the services offered to customers.
4. Key Analysis
The regulations provide significant legal issues regarding delegated legislation, procedural fairness, and the burden of proof from an administrative law standpoint. The notion of audi alteram partem, mandating a fair hearing, has been largely integrated by public consultation and rate hearing protocols. Nonetheless, uncertainties persist regarding whether all impacted consumers, particularly marginalised populations, possess substantial access to these processes. Although the Evidence Act does not obligate the Commission; applicants must prove that their proposed tariff modifications are equitable and rational. The lack of a well-defined appeal or redress system for denied applications or dissatisfied consumers may raise concerns regarding access to justice under Section 36 of the Nigerian Constitution.
Consequently, although the legal foundations of the rules are sound, a more comprehensive adjudicatory framework or tribunal review procedure would augment credibility and enforcement. The involvement of stakeholders in the tariff review process is essential for guaranteeing openness, accountability, and equity. The NERC standards mandate that licensees provide evidence of extensive consumer engagement. Although this is praiseworthy, these conversations' type, depth, and comprehensiveness are yet uncertain. There is less evidence about the collection and incorporation of feedback from marginalised groups, including low-income households, rural residents, and small-scale enterprises, into final decisions.
Several public consultations are often formalistic and inadequately attended due to insufficient knowledge, digital exclusion, or a lack of faith in regulatory bodies. Additionally, linguistic obstacles and geographic dispersion frequently impede successful engagement, particularly in marginalised areas. Electricity tariff assessments are significantly affected by macroeconomic factors like inflation, currency rate fluctuations, and fuel prices. The devaluation of the naira, the elimination of fuel subsidies, and pervasive cost-push inflation in Nigeria have rendered the maintenance of stable and reasonable rates extremely challenging. The NERC's provision for minor and extraordinary reviews seeks to address these demands in real time.
Nonetheless, a conflict exists between attaining cost-reflectivity and maintaining affordability. Although cost-reflective tariffs are essential for attracting investment and maintaining operations, they may be prohibitively expensive for significant population segments. This scenario presents a policy conundrum: regular evaluations may guarantee financial viability for service providers while exacerbating energy poverty and economic distress among users. Moreover, volatile macroeconomic data might undermine the benefits of even the most well-meaning evaluations. A tariff sanctioned during a steady era may become untenable within weeks owing to abrupt currency depreciation or surges in international energy costs. The economic model behind MYTO must become more adaptable and anticipatory.
Notwithstanding, the 2024 tariff rules encounters several practical constraints. A primary problem is the institutional capability of NERC. The regulator frequently has challenges with timeliness and transparency due to recurrent delays in processing applications and issuing conclusions. Bureaucratic obstacles and insufficient resources might impede the assessment process, placing customers and licensees in uncertainty.
Political intervention constitutes a considerable threat. Tariff escalations are frequently politically delicate, particularly during election periods when administrations may postpone or defer approval procedures to evade public dissent. Moreover, established interests from distribution corporations, government ministries, or civil society may seek to influence review conclusions for non-economic motives. The issue of data dependability also exists. MYTO's financial model depends on data provided by licensees, although concerns over the accuracy of this information remain. The absence of independent verification processes preclude liminating the possibility of inflated or manipulated input data.
Moreover, the existing framework for stakeholder participation is predominantly analogue. The inability to integrate electronic filing, automated consultations, and digital public dashboards in an increasingly digitised environment would bolster public confidence and accessibility.
5. Conclusion
The NERC regulations are a welcome development for the administration of the Nigerian electricity supply industry as they accommodate a wholesome process of tariff review panels. This considers changing realities in the energy sector while ensuring the licensees have a commensurate tariff for their cost of production and services. NERC's 2024 Regulation offers an organised and regular tariff review mechanism with robust transparency elements. However, constant implementation is necessary for its efficacy, particular to safeguarding consumers, controlling economic volatility, and encouraging sincere public participation.
Footnotes
1. https://www.thecable.ng/electricity-tariff-may-rise-as-11-discos-apply-for-tariff-review/ accessed June 25, 2025.
2. Multi-Year Tariff Order
3. NERC Regulations on the Procedure for Electricity Tariff Reviews in the Nigerian Electricity Supply Industry, 2024.
4. Guideline 12
5. Guideline 13
6. Guideline 14 & 15
7. Guideline 17
8. Guideline 19
9. Guideline 20
10. Guideline 21
11. Guideline 23
12. Guideline 29
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
