The Nigerian Electricity Regulatory Commission (NERC) has introduced a series of stringent sanctions aimed at electricity distribution companies (Discos) that fail to meet prescribed service and operational standards. These new punitive measures are designed to protect consumers from service disruptions and financial overcharges that stem from infractions by these utilities.
In a significant regulatory move, NERC has declared that it will cut five percent from the administrative and operational expenses of any Disco that does not off-take at least 95 percent of the total energy allocated to it for distribution. This directive is part of NERC’s newly issued Order on Performance Monitoring Framework, which applies to all Discos across the nation.
The framework introduces a rigorous set of seven key performance indicators (KPIs) that will assess the efficiency and reliability of service provided by the Discos. These indicators include energy off-take relative to partially contracted capacity, revenue recovery rate, and compliance across several operational benchmarks such as the reporting of a uniform system of accounts, API feeder streaming, and the implementation of forum decisions.
Moreover, the order specifies penalties for non-compliance with these standards. For instance, if a Disco fails to off-take up to 95 percent of available energy in any given month, it will receive a rectification directive. A repeated failure in two out of three months within a quarter will trigger a five percent reduction in the guaranteed administrative and operational expenditure (Admin OpEx) for the subsequent quarter.
Further financial penalties are outlined for overbilling customers. In cases where a Disco overbills, ten percent of the naira value of the total over-billing for that period will be deducted from the Disco’s annual Admin OpEx allowance during the next tariff review. Additionally, credits will be adjusted for customers who were overbilled. If the energy overbilled exceeds 20 percent of the allowed cap or if more than 20 percent of the unmetered customer base is overbilled, NERC may take severe enforcement actions, including the withdrawal of the Key Yardstick License (KYL) of the Head of Billing or the officer responsible for the billing function.
The NERC has also set strict fines for failing to resolve customer complaints through its contact center or headquarters after the expiration of specified timelines in the Customer Problem Resolution (CPR). Depending on the type of complaint—ranging from billing issues to metering, connection delays, and voltage problems—fines may vary from N1,000 to N10,000 per day.
Should non-compliance with customer complaint resolutions continue beyond two months, NERC may impose additional enforcement actions, such as withdrawing the KYL of the head of customer service or the responsible officer. Reflecting on the performance of the Discos, NERC noted that the failure to fully comply with all the KPIs outlined in Order No. NERC/320/2022 has led to widespread customer dissatisfaction, unmet operational obligations, compromised market discipline, and jeopardized the financial sustainability of these utilities.
NERC emphasized that the imposition of these regulatory interventions is not limited to the specified sanctions but may extend to other enforcement actions permissible under the Electricity Act or any other regulatory framework. This comprehensive order signifies NERC’s commitment to improving the quality of electricity distribution, ensuring that Discos adhere to higher standards of operation, and providing recourse for consumers affected by substandard service practices.
