‘New electricity tariff to attract N1.36tr investments in five years’

Power generation to reach 11,383MW by 2020

The new multi-year tariff order may raise the country’s yearly investment profile by N1.36 trillion over the next five years.

Besides, power generation is expected to hit 5,465mw by the end of 2016; 7,199mw in 2017; 8,999mw in 2018; 10,493mw in 2019 and 11,383mw by 2020.

Specifically, capital expenditure included in the Transmission Use of System (TUOS) are N206.212 billion in 2016; N418.504 billion in 2017; N265.203 billion in 2018; N247.828 billion in 2019 and N224.395 billion in 2020.

This information was contained in the multi year tariff order for the Transmission Company of Nigeria (TCN) for the period of January 1, 2016 to December 31, 2020 released by the Nigerian Electricity Regulatory Commission (NERC).

The document disclosed that the NERC carried out a comprehensive review of TCN’s submission and has approved additional revenue requirement for TCN, to enable it expand and adequately maintain and operate its’ network, in line with the expected growth in the Nigerian Electricity Supply Industry (N ESI).

According to the document, the cost of capital included in the MYTO is intended to provide a return on existing assets and appropriate incentives for future investment.

It noted that the cost of capital is an important component of the tariff and has been included in the yealy revenue requirement calculation as a return on the value of capital invested.

Dwelling on the projected generation capacity between now and 2020, the report disclosed that Kainji power plant is expected to be generating 400mw by 2020; Jebba, 462mw; Shiroro, 554mw; Egbin, 1,100mw; Sapele, 400mw ; Delta, 900mw and Afam iv-v, 500mw.

Geregu gas is expected to hit 282mw; Omotosho gas, 336mw; Olorunsogo gas, 336mw; Geregu NIPP, 378mw, Sapele NIPP, 250mw and Alaoji NIPP, 500mw.

It stated: “ NERC in 2012 determined that TCN’s initial asset valuation will largely reflect historical costs plus recent additions to TCN’s asset base. This provides an initial asset value at the beginning of 2012 of N189 billion. In order to calculate the asset value in each year of the tariff period, the forecast capital expenditures are added to this amount and depreciation plus any reduction in asset values due to the optimization are deducted. However, this was reviewed in this tariff review to reflect additional asset”.

It noted that market participants will be required to pay a number of institutional charges in order to enhance the effective regulation and administration of the electricity market.

These charges, it said, are the regulatory charge, system operation charge, market operation charge and payment for ancillary services.

It disclosed that NERC will continue to review TCN’s tariffs bi-annually as part of the minor review. “However, with effect from the issuance of this MYTO-2015 Order, minor reviews will henceforth apply retroactively by taking into account changes (gains/losses) that occurred within the minor review period in adjusting TCN’s tariffs bi-annually. “

“This is fair to both TCN and its customers in order not unduly short change any party on account of market indices not fully within their control”.