Understanding The Nigerian Power Sector (NERC)

What is NERC?

NERC is The Nigerian Electricity Regulatory Commission. NERC is an independent regulatory body with authority for the regulation of the electric power industry in Nigeria. It is an independent watchdog and regulatory body for the power industry and was inaugurated on October 31st 2005. NERC does not generate, transmit or supply electricity, however, they regulate the bodies that do.

For better understanding, NERC can be compared to the Nigerian Communications Commission (NCC) which regulates telecommunications in Nigeria.

What does NERC do?

The primary job of NERC is to issue licenses to operators/investors. They are also responsible for setting and reviewing electricity tariffs.

Reasons For NERC’s Bi-annual Tariff Review

The purpose of this is basically to protect the interests of consumers. (Yes, our interests). NERC works to make sure;

  • The electricity market is efficient.
  • Electricity tariffs are fair.
  • There is maximum access to electricity is both in urban and rural areas.
  • Rights of the customers are protected.
  • Electricity is adequate, reliable and safe.
  • There is a level playing field for the customers, operators and intending investors.

When and why was NERC formed?

NERC was formed under the Electricity Power Sector Reform Act in 2005. The reform was in response to the inadequacy in the power sector at the time. The power sector was run by the government utility body which we all know as NEPA (Nigerian Electric Power Authority) which was later transformed to PHCN (Power Holding Company of Nigeria). With the challenges of the power sector seeming to overwhelm the single government body, the Electricity Power Sector Reform Act (2005) was formed, in turn providing for the creation of NERC.

What is the mandate of NERC?

The Commission was created to oversee the orderly reform of the electricity industry and mandated as follows: To Ensure adequate, safe, reliable and affordable electricity to all consumers.

How does NERC set and review consumer tariff?

NERC sets consumer electricity tariff using a methodology called MYTO and a review is done twice every year.

What is MYTO?

Multi-Year Tariff Order (MYTO) is a methodology used for determining tariffs across the electricity value chain. MYTO sets a 15-year tariff path with bi-annual minor reviews (taking cognizance macroeconomic indicators such as inflation rates, cost of gas and exchange rate) and a major review every five years.

How Your Electricity Tariff Is Determined

What effort is NERC making to curb discrepancies in the power sector and protect the interests of electricity consumers?

  • Estimated billing: The Commission has addressed estimated billing by working with the industry on the minimum number of months or period within which one can continue to receive estimated billing. The Commissionís Regulation on Standards of Performance for Distribution Companies 1.10 stipulates three months or 90 days after which the Utility Firm must find every means possible to read the meter for actual energy consumed if the premises is metered.
  • Poor power supply:  The Commission has established rules and regulations for private investors, and has so far granted generation licenses up to 70 Independent Power Producers (IPPs). In addition to the issuance of licences, the Commission has come up with numerous regulations governing the industry.
  • Mass Disconnection: The Commission is paying attention to consumer rights and obligations. There are procedures for connections and disconnections stated in the Connection & Disconnection Procedures for Electricity Services Section 2(2.1).  The Commission has put to stop mass disconnection where a group of customers are disconnected just because of a few defaulters, which leads to wrongful disconnections. Note that those who owe past overdue bills would be subject to disconnections. However, there are procedures for doing that. The Utility Company is to work with those who owe bills, give them a reasonable time to pay their bills, if everything fails, they will give them a final warning after which the consumer shall be subject to disconnection.


Busayo Oladejo

Passionate about Information technology, Project management and Social media.

Leave a Reply