1. “Energy Sector Governance and Cost Reflective Pricing in West Africa”by
Gershon, O., Ph.D,
Senior Lecturer
Department of Economics & Development Studies
Covenant University
and
Ezurum, A.
Emerald Energy Institute (EEI), University of Port Harcourt

2. Presentation Outline Introduction Problem and Research Questions
Background and Relevance
Problem and Research Questions
Sub-Research Issues and Concept
Methodology
Data
Analysis
Results & Discussions
Conclusion and Recommendation
Further Studies

3. Background and Research Context
Governance of Energy Markets is Key to Transformation
Energy is Key to Economic Growth Sustainable Development
Energy Sector Governance has Implications
Electricity Pricing: Investment Risks
Achievement of Policy Objectives
West Africa Power Pool
NBET – SAKETE in Benin and NIGELEC: Niger
Few studies have focused on energy sector governance
Focus: Malfunction and low liquidity Nigeria Energy Market
75million Nigerians lack assess to Electricity

4. Key Question and Sub-Questions
How Effective is Energy Sector Governance?
How Responsive are Electricity Tariffs to changes in Cost?
Sub-Questions:
Is the Multi-Year Tariff Order (MYTO) Cost Reflective?
Is MYTO Methodology Efficient or Poorly Governed in NESI?
MYTO:
is an accounting framework for determining the pricing structure
applies building block approach: sums identifiable costs to ensure fair pricing, sufficient cashflow and reasonable earnings
Cost Reflective Pricing:
is when the price of a good/service reflects its cost of production
results in allocative efficiency and maximization of society’s benefit

5. Data and Methodology Scope: From MYTO 1 (2008)  MYTO 2015 Methodology
MYTO 2.1 (amended)  MYTO 2015
Methodology
Aggregate Cost Data from NERC for ALL GenCos, TCN & DisCos
Apply descriptive statistics to compare actual Costs & Revenues from
No need to estimate parameters & test hypothesis
Marginal (Incremental) Cost Concept (relative to)
Electricity tariffs (price/marginal revenue)
Timing and extent of tariff reviews
MYTO assumptions – building block approach

6. Results and Findings
Marginal Costs and Revenues vary across DisCos (regions)
Competitive Market Structure is emerging
MYTO is cost-reflective if all costs are transferable to customers
The level of tariff sculpting is not with sustainable unless because
Debts accrue along the value chain for every unit of energy consumed
MYTO is becoming more complex to govern in the NESI
emerging risk to existing and new investments - if nothing is done
Lack of Metering leads unrecovered revenues
Tariff sculpting is not compatible with MYTO methodology and the rate of change in parameters
MYTO Assumptions are being violated in different areas: electricity demand, exchange rate, fuel cost, available generation capacity

7. Changing Assumptions/Parameters in MYTO Methodology

8. Summary Findings and Recommendations
Better Governance of Electricity Sector will ensure:
Cost-Reflective Pricing
Cost-Reflective Pricing will emerge from regional-based differentiated generation and transmission costs
We Recommend
a reworking of the energy governance structure to:
Provide meters and reduce the debt burden along the value chain
stop collective bargaining/negotiations (leading to regulatory capture)
introduction of policies towards unbundling of the transmission system to further reduce costs
implementation of feed-in tariffs for off-grid renewable energy

9. Future Research Areas
Related to this work are the following issues for future consideration:
Assessment of West African Energy Market Integration
Feasibility of regional-based cost-reflective pricing
Is MYTO responsive to declining generation and transmission costs?

10. Summary Data and Methodology Research Background and Questions
What is left?
Research Background and Questions
Data and Methodology
Research Outcomes and Results
Findings, Recommendation
and Future Research

11. Your Comments and Suggestions will be Appreciated
Questions
Your Comments and Suggestions will be Appreciated

12. RENEWABLE ENERGY & SUSTAINABLE DEVELOPMENT (ICRESD 2018)
INTERNATIONAL CONFERENCE ON
RENEWABLE ENERGY & SUSTAINABLE DEVELOPMENT (ICRESD 2018)
Towards Inclusive Growth
26th to 28th June, 2018
Contact: for more information

13. The Conference is aimed at
“…attracting key stakeholders, researchers, policy makers, energy professionals, development agencies, (renewable) energy, engineering and investment firms to collaborate towards delivering energy solutions and innovations for inclusive growth and sustainable development in Africa”

14. Expected Participants
Government
Electricity Market Regulators & Stakeholders
NBET, ECN, NERC,
MDAs
Industrial and Commercial Banks, Oil and Gas Companies
Development Agencies: JICA, UNDP, DIZ, USAID, AfDB, ECA
Industry
Local Energy Companies: GenCos, TCN, DisCos
Int’l Energy Companies, Consultancies and Research Centres
Advocacy Groups, Environmental Companies and NGOs
Academia
University Faculty, Researchers and PG Students

15. Your Suggestions will be Appreciated
Questions
Your Suggestions will be Appreciated