Electricity Act: NERC Sets New Rules for Minigrids Operations, Pegs Technical Losses at 4%
ICAN tasks FG on power sector policies, explains opposition to tariff hike
The Nigerian Electricity Regulatory Commission (NERC) has published new guidelines for the operators in the Nigerian mini-grids space, setting their allowable technical losses at 4 per cent in the extant rules.
A mini-grid is any electricity supply system with its own generation capacity, supplying electricity to more than one customer and which can operate in isolation from or be connected to a distribution licensee’s network.
In the regulation, NERC stated that the mini-grid should have between 0kW and 1MW of generation capacity per site.
Technical losses, which usually occur within the power distribution network, are a major source of concern in the power sector in Nigeria, which may have prompted the industry regulator to peg the technical loss limit for mini-grid at 4 per cent.
The regulation under the new Electricity Act (EA) signed by NERC’s Chairman, Sanusi Garba, also stated that allowable non-technical losses for the mini-grid operators, mostly interconnected solar plants, shall not exceed 3 per cent.
According to the new guidelines, interconnected mini-grid permit holders shall pay the Distribution Companies (Discos) a Distribution Use of System (DUOS) charge which shall be agreed upon between the interconnected mini-grid permit holder and the Disco and approved by the commission.
“Where the interconnected mini-grid permit holder and the Disco are unable to agree on the usage charges, the methodology prescribed in schedule 8 of these regulations shall be applied.
“The MYTO methodology included in schedule 14 of these regulations and approved by the commission shall be used to determine the retail tariffs and other charges for a mini-grid permit, subject to a limitation that allowable technical losses shall not exceed 4 per cent and allowable non-technical losses shall not exceed 3 per cent,” it stated.
A mini-grid permit holder, NERC said, may decide to determine retail tariffs and other charges by the use of the MYTO calculation tool or an agreement between the minigrid operator and the community, represented by customers consuming not less than 60 per cent of the electrical output of the mini-grid.
However , it stated that this is subject to the commission’s right to intervene and review the tariff that has been agreed with the communities’ equity and fairness.
Where a mini-grid is interconnected, the duly authorised representatives of the connected community, the mini-grid developer and Disco, NERC said, shall sign a tripartite contract covering the transaction, and the tripartite contract.
“Where an application has been filed for an intended area, the commission may register the tripartite contract and grant the minigrid permit, where the proposed retail tariff is calculated using the MYTO methodology and agreed by the mini-grid developer, the distribution licensee and connected community, and approved by the commission.
“The tripartite agreement shall cover the following arrangements: Right to access the Disco’s network infrastructure for the purposes of interconnection.
“Construction and ownership right for additional infrastructure, where applicable. Tariff for electricity generated by the mini-grid and fed into the distribution licensee’s network where applicable.
“Availability of stable nominal voltage and effective system protection at the connection point of the generator with the Disco’s network, where applicable and tariff for the purchase of electricity from the distribution licensee's network, where applicable,” it added.
The tripartite agreement, it said, shall also involve the consent of the connected community to purchase electricity from the mini-grid at the defined tariffs.
It added that where an area has been identified either by a connected community or minigrid developer, and a notification is made to the commission to consider the development of an interconnected mini-grid, a mini-grid developer shall submit a technical and investment proposal to the Disco.
On safety, NERC stated that all mini-grid operators shall apply the established safety guidelines for the design, construction, commissioning, operation and maintenance of their generation and distribution assets.
“A mini-grid operator shall comply with the environmental laws affecting their operations and any compliance breach would be treated as an infraction, leading to the suspension or termination of their permit,” NERC added.
Meanwhile, the 59th President of the Institute of Chartered Accountants of Nigeria (ICAN), Dr. Innocent Okwuosa, has explained that the institute opposed an attempt in 2023 by electricity Distribution Companies (Discos) to increase electricity tariff in order to enable Nigerians to have access affordable energy as provided in Sustainable Development Goal (SDG) 7.
Okwuosa gave the explanation when the council members of ICAN paid a courtesy visit on the Managing Director of Eko Electricity Distribution Company (EKEDC), Dr. Tinuade Sanda.
He also acknowledged that the power distribution sector in Nigeria is faced with multifaceted problems that include outdated transmission and distribution networks.
He called on the government to establish and implement clear and consistent policies that would create conducive environment for investment in the sector.
“When in July 2023, the Discos moved to increase electricity tariff, the institute advised against this move not because we are not aware of the challenges facing the Discos’.