REVIEW OF NERC’S ORDER ON MIGRATION OF CUSTOMERS AND COMPENSATION FOR SERVICE FAILURE UNDER SERVICE-BASED TARIFF FRAMEWORK 2023

The Nigerian Electricity Regulatory Commission (NERC) introduced the service-based tariff (SBT) regime in the Multi-Year Tariff Order 2020 (MYTO 2020), a form of incentive-based regulation, permitting distribution companies (DisCos) to receive higher revenue based on the incremental supply of electricity to feeders within load clusters in DisCos’ franchise areas. MYTO 2020 introduced six (6) categories of service bands including Band R1; Band A; Band B; Band C; Band D; and Band E (collectively, the Service Bands). Each of the Service Bands represents the total number of hours per day, over the course of a month, a DisCo is required to supply electricity to customers within load clusters. However, the MYTO 2020 did not provide a framework for DisCos to migrate between the Service Bands, nor did it include a detailed compensatory regime for customers when DisCos failed to meet the service levels set in MYTO 2020. To address the foregoing issues, NERC recently issued the Order on Migration of Customers and Compensation for Service Failure under Service-Based Tariff Framework 2023 (Migration and Compensation Order). In this newsletter, we consider NERC’s attempts to fill these gaps under the SBT regime through the Migration and Compensation Order.

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