Much Ado About Cost Reflective Tariff

Following the handover of the 11(eleven) Distribution Companies (DisCos) and the 6(six) Generation Companies (GenCos) to the core (private) investors and the great expectations that greeted the announcement in November 2015, it would appear that all hopes for improved electricity supply in Nigeria have gradually faded away.


Three years post-privatization, Nigerians are still far from being convinced that the core investors in the unbundled power companies truly possess the requisite technical expertise, experience and financial capability to improve the state of electricity generation and distribution across the country. Some consumer groups have already called for the reversal of the entire privatisation process by the Federal Government describing it as a failure. Other stakeholders have expressed the view that the issues which characterized the power sector pre-privatization such as poor electricity supply, broken-down infrastructure and non-meeting of consumers remain prevalent across the country.

In their reactions to the public outcry and contrary to popular opinion, the core investors argue that the successor companies are engulfed with various legacy issues which they inherited from the now defunct Power Holding Company of Nigeria (PHCN). More specifically, the investors have consistently expressed a view that suggest that their poor performance can majorly be attributed to the absence of a Cost Reflective Tariff (CRT) for electricity in Nigeria. Where a tariff is cost reflective, it is expected that such tariff reflects all the costs of electricity generation, transmission and distribution. By implication, the costs are passed-through to and borne by the consumers.

Click here to read more.