The Nigerian Electricity Regulatory Commission is to resort to franchising to break the monopoly enjoyed by electricity distribution companies

The Nigerian Electricity Regulatory Commission, NERC, has said that the natural monopoly being enjoyed by electricity distribution companies is becoming increasingly difficult to sustain. NERC in a consultation paper on the development of regulatory framework for electricity distribution franchising in Nigeria, called for comments from customers, electricity distribution companies, Discos, and other stakeholders, not later than May 6, 2019.

“The overarching objective of the proposed regulation on distribution franchising is to facilitate the development of favourable business models that would attract third-party investments in the supply of adequate, safe, reliable and prudently priced electricity to customers of Discos,” it said.

NERC noted that 11 Discos were licensed to, among others, carry out connection of customers for the purpose of provision of electricity supply; and installation, maintenance and reading of meters, billing and collection. “The provision of these services by Discos on a non-discriminatory basis is a fundamental requirement arising from the natural monopoly they enjoy as distribution network service providers.

“The sustainability of this traditional regulatory framework is increasingly becoming difficult due to continued technological improvements and advancement in the capabilities of Distributed Energy Resources.”

According to NERC, since the commencement of the power sector reform in 2005, the Discos have failed to meet stakeholders’ expectations in the provision of access to safe and reliable electricity services to all customers within their franchise territories, especially those areas that are not considered to be economically viable.

“Accordingly, introducing sub-franchising of Discos’ operations and coverage areas is expected to improve quality of supply of electricity to customers through investment in metering, billing, collection and network rehabilitation and expansion.

“Sub-franchising (referred to as distribution franchising for this purpose) means the business model applied by a Disco to authorise a third party to provide electric distribution utility services on its behalf in a particular area within the Disco’s area of supply. Proposals for the franchising arrangement can either be initiated by Discos or customer groups (community) within a specified geographical boundary.”

The regulator said the community, through a registered association, might formally approach the Disco to declare its interest and initiate franchising arrangements in the areas of supply, metering, billing and collection including additional investment in the distribution networks where appropriate.

“Additionally, any unserved or underserved community has the option of exploring the provisions of NERC’s Regulation on Independent Electricity Distribution Network in finding solutions to their supply challenges as may be applicable. Consequently, the commission has put forward a consultation paper to elicit comments from stakeholders in the Nigerian electricity supply industry.”

– Apr. 19, 2019 @ 11:45 GMT |