NERC Issues Tariff Rules For Mini Grid Operations

The federal government has issued rules guiding tariff allowance for mini grid operations in the country.
Under the guidelines released by the Nigerian Electricity Regulatory Commission (NERC), operators of mini grids could determine retail tariffs and other charges by the use of the Multi Year Tariff Order, MYTO calculation tool.
On the other hand, a mini-grid operator may adjust tariff under an agreement with the community, represented by customers consuming not less than 60 per cent of the electrical output of the mini-grid.
The new guidelines has also set allowable technical losses for mini grid operators at 4 per cent in the extant rules.
The regulatory agency further in the rule said the mini-grid should have between 0kW and 1MW of generation capacity per site.

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.
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 NERC, 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 four per cent and allowable non-technical losses shall not exceed three per cent,” it stated.
A mini-grid permit holder, thus may decide to determine retail tariffs and other charges by the use of the MYTO calculation tool or an agreement between the mini-grid operator and the community, represented by customers consuming not less than 60 per cent of the electrical output of the mini-grid.

This is, however, subject to NERC’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 mini-grid 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 mini-grid 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 stated.