NERC approves five-year performance improvement plan for power distributors

Nigeria's power sector is set to undergo significant improvements with the recent approval of a five-year Performance Improvement Plan (PIP) and Capital Expenditure benchmark by the Nigerian Electricity Regulatory Commission (NERC). The plan, effective from July 1st, 2021, until June 30th, 2026, aims to enhance the efficiency and effectiveness of power distribution companies in the country. George A. Toome, the Director of ECHO Electricity Distribution Company, and OT ECOMI, the CEO and Executive Vice Chairman of Proton Energy, shared their insights on the developments in Nigeria's power sector during a CNBC Africa interview. The discussion began with a focus on the planned tariff increase, with George emphasizing that customers in service bands D&E would continue to enjoy tariff freezes. He highlighted the regulatory mandate for bi-annual tariff reviews to account for factors such as inflation and pricing movements. The potential impact on tariffs would depend on policy decisions, with measures in place to address any shortfalls that may arise. OT ECOMI echoed the importance of cost-reflective tariffs and efficiency gains leading to future tariff reductions. Regarding the expected outcomes of the five-year performance improvement plan and capital expenditure, George highlighted the alignment process within the power value chain. The emphasis was placed on synchronized markets, where increased capital expenditure and improved supply quality could eventually lead to tariff reductions. The market's movement towards certainty and investment opportunities was underscored, with revenue sources for the PIPs comprising a mix of loans and equity investments. The conversation then shifted to the Bureau of Public Enterprises opening bids for the sale of the National Integrated Power Project's five gencos. OT ECOMI stressed the need for swift action to attract experienced power company investors, particularly in the context of global transitions away from fossil fuels. Contract certainty and robust agreements for power purchase and gas supply were deemed essential to secure funding for these projects. The discussion concluded with a reflection on Nigeria's power sector investments and the perceived value for money. Despite mixed results across the supply chain, George acknowledged progress in enhancing electricity supply capacity but noted challenges in distribution and alignment issues. He highlighted ongoing efforts to align the entire value chain, from gas production to distribution, to optimize power generation and consumption. Overall, the approval of the five-year Performance Improvement Plan signals a new chapter for Nigeria's power sector, with a focus on efficiency, reliability, and financial sustainability. The collaborative efforts between regulators, distribution companies, and investors are vital in driving the sector towards improved service delivery and ultimately benefiting consumers and businesses nationwide.