The Nigerian Electricity Regulatory Commission (NERC) has introduced a new regulatory framework aimed at bolstering the performance of electricity distribution companies (Discos) and improving electricity supply across the country. This framework, termed “Addendum 1 to the Order on Performance Monitoring Framework for Distribution Companies,” introduces stricter penalties for Discos that fail to meet specific performance targets. The core of the addendum revolves around three Key Performance Indicators (KPIs): energy offtake, financial reporting, and complaint resolution. The overarching goal is to enhance accountability, operational efficiency, and customer satisfaction within the Nigerian electricity supply industry.
A crucial aspect of the new regulation focuses on the Discos’ energy uptake. Previously, penalties were levied for failing to collect at least 95% of the available nominated energy for a single month. The revised framework now mandates that Discos maintain this 95% uptake for two out of three months per quarter. Failure to do so will result in a 5% reduction in the Disco’s administrative operational expenditure for the subsequent quarter. This adjustment aims to incentivize Discos to improve their energy distribution infrastructure and processes, ensuring that the electricity generated reaches consumers efficiently and minimizes waste within the system.
Another key area addressed by Addendum 1 is financial reporting. Discos are required to adhere to the Uniform System of Accounts (USA) for their financial reporting to ensure transparency and consistency. Under the new regulation, the consequences for failing to meet the USA compliance targets for two months in a quarter are significantly stricter. NERC will take enforcement actions against defaulting Discos, including potentially revoking the “fit and proper” approval of the Disco’s Chief Financial Officer (CFO). This measure emphasizes the importance of accurate and timely financial reporting in maintaining accountability and ensuring the financial stability of the Discos. The “fit and proper” assessment ensures that individuals holding key financial positions within the Discos possess the necessary competence and integrity.
Furthermore, Addendum 1 strengthens the framework for customer complaint resolution. While the previous framework emphasized timely resolution, the addendum sets a specific target of a 75% resolution rate for all complaints within a quarter. This underscores NERC’s commitment to improving customer service within the electricity distribution sector. The framework leverages the NERC Contact Centre and NERC headquarters as channels for customers to lodge complaints, streamlining the process and enhancing NERC’s oversight of the Discos’ responsiveness to customer issues.
The implementation of these new regulations will be phased in. While rectification directives will be issued for any compliance issues related to the three KPIs during the third and fourth quarters of 2024, the full enforcement of the updated framework, including penalties, will commence from the first quarter of 2025. This phased approach allows Discos to adapt to the new requirements and ensures a smoother transition. It also provides NERC with the opportunity to monitor the effectiveness of the new regulations and make any necessary adjustments before full implementation.
NERC’s introduction of Addendum 1 represents a significant step towards strengthening the regulatory oversight of the Nigerian electricity distribution sector. By focusing on key performance indicators related to energy uptake, financial reporting, and customer service, the commission aims to drive improved operational efficiency, enhance accountability within the Discos, and ultimately deliver a more reliable and customer-centric electricity supply to Nigerian consumers. The stricter penalties and emphasis on “fit and proper” approval for key financial personnel signal a move towards greater regulatory enforcement and a commitment to fostering a more robust and sustainable electricity market.
The long-term objective of these regulatory changes is to create a more stable and reliable power sector in Nigeria. By holding Discos accountable for their performance and ensuring adherence to established standards, NERC hopes to pave the way for increased investment in the sector, improved infrastructure, and ultimately, a more consistent and affordable electricity supply for businesses and households across the country. The new framework also emphasizes the importance of customer satisfaction, highlighting the shift towards a more consumer-focused approach within the Nigerian electricity distribution landscape.
