How Nigeria's new tariffs have improved transparency in the power sector

It’s been roughly half a decade since the Nigerian Electricity Regulatory Commission (NERC) introduced the Service-Based Tariff (SBT) regime to make electricity charges more transparent and fairer. The idea is simple: consumers should pay for electricity based on how many hours of power they receive.??

This may have seemed like a small step, as tariffs didn’t change significantly, but it was a necessary one for the eventual transition to cost-reflective tariffs in the power sector, which began in April 2024.???

Under the SBT, Distribution Company (DisCo) consumers are grouped into five bands, with charges tailored to the quantity and quality of electricity supplied to each group. ? ?

To ensure the SBT system worked efficiently, which means customers' electricity supply was commensurate to the tariffs they were charged, NERC was expected to monitor service delivery at all feeder levels to ensure DisCos complied with Service Level Agreements (SLAs). When the SBT was launched, no complementary data system was in place to enable customer validation, ensure effective implementation, and allow for accurately computed penalties and compensations where necessary.?

Recognising this gap, in 2021, the United Kingdom Nigeria Infrastructure Advisory Facility (UKNIAF), with Nextier Capital Limited as the implementing agency, developed the SBT Dashboard. This tool was designed to track key data for evaluating the tariff regime, monitoring DisCo compliance with SLAs, and assessing consumer satisfaction. The dashboard provided NERC with valuable insights into feeder performance, facilitated integration with existing data systems, supported DisCo performance assessments, and ensured accountability through penalties and performance reviews in commercial and settlement processes under the SBT system.?

The project became particularly significant following the upward review of tariffs for Band A customers in April 2024 from ?68/kWh to ?225 per kWh, representing a 300% increase in tariffs. This long-awaited adjustment made the need for transparency in service quality imperative.??

From inception to implementation, Nextier collaborated with various NERC units, including the Consumer Affairs Unit, the Engineering Performance and Monitoring Division, the Information Technology Department, and the Planning, Research, and Strategy Unit. External input was also gathered from key stakeholders, such as the Transmission Company of Nigeria (TCN) and all eleven (11) Distribution Companies (DisCos) across Nigeria. These contributions were instrumental in defining the metrics and datasets required to inform the content and complementary functionalities of the dashboard.?

Here’s how we did it.? ?

Developing the SBT Dashboard?

? As of Q3 2024, only 46.15% of 13.3 million registered electricity consumers were metered, making it nearly impossible for NERC or DisCos to determine how much electricity is delivered to customers using customer meters. As such, the dashboard relies on data gathered from DisCo feeders, which provides insights into energy delivered to clusters rather than individual customers.?

Nextier retrieved data from 11KV and 33KV DisCo feeders equipped with sufficient metering infrastructure. The team collected data at daily and hourly intervals, ensuring precise tracking. To streamline this process, we developed dedicated data collection software integrated with Google Sheets and a database server.?

We also introduced a standardized data collection template and feeder naming convention to ensure consistency across DisCos, simplifying tracking and enabling automation of regulatory tasks. This approach uncovered significant insights. For instance, we identified 60 previously unreported Band A feeders in Benin and 54 in Kaduna. These conventions also facilitated the migration to smart feeder meters and sustained coordination efforts.?

Real-time data collection was made possible using an Application Programming Interface (API), enabling the team to capture real-time electricity supply information. This process helped identify patterns and trends, making it possible to create accurate formulas for classifying consumers and clusters into bands, leading to fairer and more efficient tariff regulation.?

Most of the risks we encountered during data collection revolved around ensuring DisCos followed the instructions for data disclosure and collection while preventing data manipulation. Other challenges included delays by the Transmission Company of Nigeria (TCN) and DisCos in switching to new feeders and adopting the standardized feeder naming conventions. To address these issues, the team engaged extensively with stakeholders, emphasising the importance of the project and the benefits it would bring, such as improved service performance.?

When migration delays persisted, NERC stepped in by issuing an Order for the migration of customers and compensation for service failure under the service-based tariff framework (NERC/2023/003) with clear timelines for compliance. Additionally, stations failing to provide data for more than three hours received formal warnings, reinforcing accountability.?

After data collection, we proceeded to data analysis and refinement to meet the project's specific needs. This information was then used to create a visual dashboard for NERC, allowing real-time service delivery tracking to meet key performance indicators (KPIs). The dashboard provided insights like feeder performance, load analysis (measured in MW), data compliance, and carbon emissions linked to electricity consumption.?

The inclusion of carbon emissions data was particularly significant, as it supported the project's Environmental, Social, and Governance (ESG) goals. This aspect aligned with the National Renewable Energy and Energy Efficiency Policy (NREEEP), ensuring the initiative contributed to broader sustainability objectives.?

However, creating the dashboard was only one step toward enhancing transparency in the power sector.?

SBT Dashboard- Effective and Proven Results??

? After building the dashboard, Nextier organized training sessions to help NERC staff use it effectively. The system has made it easier for NERC to track how DisCos deliver electricity to different customer bands, uncovering cases where some customers were left out of the network. This innovation has led to fairer electricity distribution, with more customers moving from lower to higher tariff bands.?

The dashboard also helps NERC verify how DisCos classify customers and charge tariffs, providing a reliable tool to address discrepancies or complaints. While customers can’t access the dashboard directly, the commission uses it to validate and resolve their issues.?

As of January 2022, data from the Multi-Year Tariff Order (MYTO) showed 2,369 feeders across all 11 DisCos, with AEDC and EKEDC having the highest number. Of these, 479 feeders (20%) were classified as Band A and 1,218 (51%) as Band B.?

Fast-forward to November 2024, and there was a significant improvement in electricity supply, with a total of 3,092 feeders (a 26% increase since 2022) recorded from all 11 DisCos. We’ve also witnessed an approximate 80% increase in the number of band A feeders from 479 to 1,117, with a 54% reduction in the number of band B feeders to 703.?

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The SBT dashboard has made it easier for NERC to validate how DisCos classify customers and approve their migration plans. It also provides a clear and transparent framework for setting tariffs and ensuring DisCos follow MYTO Orders when charging customers. This added transparency has boosted stakeholder confidence in the power sector’s operations.?

NERC has also kept the standardized naming convention, making it easier to collect and track data. This process allows for quick identification of DisCos and their performance metrics (KPIs) on the dashboard in a simple, user-friendly format.??

There’s room for more transparency and accountability?

The current SBT dashboard collects data from feeders, which tracks energy delivered to end users, but using customer meters would improve monitoring, transparency, and service delivery.??

This change would help NERC ensure DisCos meet their SLAs and KPIs while also giving customers more insight into the services they're receiving. It would also make resolving complaints more efficient and targeted to precisely pinpoint areas for improvement. Ultimately, this will build trust with customers, showing them that NERC is committed to ensuring that services align with tariffs and that their energy needs are being prioritized.?

This momentum also creates opportunities to improve service delivery, accountability, and transparency in other sector areas. The Nigerian power sector still faces challenges like inefficiencies in transmission infrastructure, grid collapses, and gas shortages. Implementing supervisory control and data acquisition systems (SCADA) could significantly boost the efficiency of the electricity market.??

However, these solutions will only be effective if penalties are in place for non-compliance and failure to meet SLAs. For instance, the SBT dashboard not only tracks DisCo performance but also supports NERC in penalising actions like unauthorized customer downgrades.?

A functional electricity market requires improved liquidity but also needs better accountability and transparency across the value chain. While market players push for cost-reflective tariffs to stay profitable, they must also be held accountable for the quality of service they provide. The key to achieving this is by setting up reliable tracking, monitoring, and reporting systems, like the SBT dashboard. These systems should be tamper-proof and accessible to key stakeholders, providing NERC with a solid foundation to enforce penalties when necessary.?

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Written by: Elohozino Okpowo & Ruth Ephraim?