NIGERIAN ELECTRICITY REGULATORY COMMISSION
Uniform System of Accounts (USOA) for the
Nigerian Electricity Supply Industry (NESI)
Presented by:
Abba Ibrahim Terab
Analyst Financial & Accounts Analysis
Accra, Ghana
Tuesday, 3rd June 2014
Outline
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Background
Uniform System of Accounts
Development Process
Structure of the USoA
Principles of USoA
Reporting Requirements
Conclusion
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Background
• NERC is the statutory agency mandated to
regulate and monitor the Nigerian Electricity
Supply Industry (NESI).
• Individuals and entities intending to engage
in the business of electricity generation,
transmission, system operations, distribution
or trading are required to obtain operating
license from the Commission
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Background
• The Licenses issued by the Commission
include conditions requiring
the
maintenance of records, the provision of
information and the separation of
financial records between regulated and
non-regulated activities.
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Background
• Rate regulated activities are considered to be
unique from other general commercial activities
due to:
a) Regulatory objectives of:
• setting ‘just and reasonable rates’ for
consumers;
• ensuring the financial viability of suppliers;
and
• protecting the availability and stability of
supply
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Background
b) Rate balancing requirement for suppliers to either
increase the selling price (rate) to recover
‘allowable revenue’, or lower the rate to eliminate
‘excess’ revenue;
c) Rate changes usually apply prospectively and are
often designed to ‘smooth’ the impact of rate
changes for customers over time;
d) Some specific assets and liabilities arise where a
rate regulation regime exists (regulatory assets &
liabilities or regulatory debit & credit balances).
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Uniform System of Accounts
USoA is a regulatory tool designed to
provide the necessary financial
information about the regulated business
for:
a) Tariff Determination/Review and other
regulatory decisions that requires
financial information
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Uniform System of Accounts
b) Monitoring of Financial Performance to
safeguard against systematic failure
c) Avoiding varied interpretations between
companies of definitions and reporting
requirements
d) Improving robustness and consistency of
reported data
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Uniform System of Accounts
e) Detection of certain anti-competitive
behaviour such as cross - subsidisation and
undue discrimination
f) Comparative competition and monitoring
the financial health of the licensed utilities
g) Improving transparency in the regulatory
process
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Development Process
The Commission in collaboration with
the NASB (now FRC) began the process of
developing accounting standards for the
NESI in 2008.
Following the adoption of IFRS,
emphasis shifted to regulatory reporting
framework
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Development Process
Various regulatory reporting frameworks
were considered
US’s FERC 2009 version of USoA was
adapted
Stakeholders consultation workshops
held
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Development Process
Partnership with Michigan Public Service
Commission
(MPSC)
through
NARUC/USAID
Reviews undertaken by Consultants’
Industry
Working
Group
(IWG)
comprising
representatives
from
GENCOs, TCN, DISCOs and NBET
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Development Process
Exposure to Audit /Accounting
Firms, Professional Accounting
Bodies and licensed utilities;
Comments received and reviewed.
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Structure of USoA
Definitions and Instructions
Generation
Transmission
Distribution
Trading
Appendix – Regulatory Chart of Accounts
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Structure of USoA
Numbering System – Seven (7) Digit whole
numbers based on the following principles:
• Specific Sector of Operations in the NESI;
• Classification of Account Groups in line
Financial Reporting format;
• Sub-grouping of related items/activities for
ease of reference; and
• Listing of Accounts serially in the applicable
sub-groups
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Structure of USoA
1000000
Generation
1100000 - 1199999
1200000 - 1299999
1300000 - 1399999
1400000 - 1499999
1500000 - 1599999
1600000 - 1699999
1700000 - 1799999
1800000 - 1899999
Non Current Assets - Generation
Current Assets - Generation
Current Liability - Generation
Non Current Liabilities - Generation
Equity Accounts - Generation
Income/Revenue Accts - Generation
Expenses Accounts - Generation
Taxation Accounts - Generation
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Structure of USoA
2000000
Transmission
2100000 - 2199999
2200000 - 2299999
2300000 - 2399999
2400000 - 2499999
2500000 - 2599999
2600000 - 2699999
2700000 - 2799999
2800000 - 2899999
Non Current Assets - Transmission
Current Assets - Transmission
Current Liability - Transmission
Non Current Liabilities - Transmission
Equity Accounts - Transmission
Income Accounts - Transmission
Expenses Accounts - Transmission
Taxation Accounts – Transmission
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Structure of USoA
3000000
Distribution
3100000 - 3199999
3200000 - 3299999
3300000 - 3399999
3400000 - 3499999
3500000 - 3599999
3600000 - 3699999
3700000 - 3799999
3800000 - 3899999
Non Current Assets - Distribution
Current Assets - Distribution
Current Liability - Distribution
Non Current Liabilities - Distribution
Equity Accounts - Distribution
Income/Revenue Accts - Distribution
Expenses Accounts - Distribution
Taxation Accounts - Distribution
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Structure of USoA
4000000
Trading
4100000 - 4199999
4200000 - 4299999
4300000 - 4399999
4400000 - 4499999
4500000 - 4599999
4600000 - 4699999
4700000 - 4799999
4800000 - 4899999
Non Current Assets - Trading
Current Assets - Trading
Current Liability - Trading
Non Current Liabilities - Trading
Equity Accounts - Trading
Income/Revenue Accounts - Trading
Expenses Accounts - Trading
Taxation Accounts - Trading
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Principles of USoA
• Completeness – To provide
consistent and reliable information
to NERC
• Flexibility – Provide a platform that
can change as required
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Principles of USoA
• Uniformity - Mostly in accordance with
the IFRSs where it does not conflict
with regulatory objective
• Transparency – Developed jointly by
NERC,
Licensed
Utilities
and
Consultants
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Reporting Requirements
• All licensed utilities are required to file
annually:
• IFRS based audited Financial
Statements
• Balance Sheet and Profit and Loss
Statement in line with USoA
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Conclusion
• USoA enhances transparency about the
rate-regulated environment and how it
impacts the amounts, timing and
certainty of entities’ future cash flows;
• Availability of detailed information would
enable users to measure correlation
between actual and allowed earnings
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Conclusion
• Enhances relationship between the
regulator and the entities, including
entities’ historical experience in
recovery of costs and earning the return
allowed by the regulator
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Conclusion
• Implementation of USoA is one of the
surest ways to reduce information
asymmetry and to improve the quality
of the regulation
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THANK YOU
Contact us at:
Adamawa Plaza, Plot 1099 First Avenue,
Off Shehu Shagari Way,
Central Business District,
Abuja
Website: www.nercng.org
E-mail: info@nercng.org
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