Section 122: Tariff Principles.

1 The Authority shall, in exercising its powers of commercial regulations, be guided by the following principles in designing a pricing framework for transportation, distribution and processing petroleum tariffs—
a for transportation, distribution and processing of petroleum shall be on a cost-reflective basis;
b charged shall permit a reasonable return for licensees on their investments;
c shall not discriminate between customers with similar characteristics under section 116 of this Act; and
d shall be determined in US Dollars or other foreign currency as applicable with a view to attracting foreign investment to midstream and downstream petroleum operations, provided that payments of the tariffs may be made in the respective foreign currency or equivalent value of Naira at the open market rate published by the CBN as applicable under the regulations.

2 The tariff methodology for tariffs related to new gas transportation pipelines, gas distribution networks and facilities requiring a gas processing licence shall include, that—
a tariffs shall be determined in US Dollars, but may be paid in Naira, where the applicable exchange rate shall be based on the Securities and Exchange Commission over the counter market rate or any successor rate;
b the capital costs may be recovered in equal installments over a period as determined by the Authority;
c the after tax rate of return on equity shall be such that it attracts major investment and the rate of return shall apply during construction;
d where short pipelines connecting producers or consumers to a gas transport pipeline or gas transport pipeline network and in other justified cases, the Authority may approve that capital costs be based on 100% equity, otherwise a reasonable debt or equity ratio shall apply;
e where a debt or equity ratio applies under paragraph (d) of this subsection, the cost of any interest and financing charges shall be recovered;
f operating costs, including allocation for overhead and profit margin on operating costs, shall be recovered and the costs shall be adjusted for inflation;
g line losses and gas energy use shall be taken into account;
h any applicable tax, levy and duty shall be recovered;
i where capital costs have been fully recovered, the tariff shall no longer include the items under paragraphs (b), (c) and (d); and
j tariffs shall be based on the estimated throughput as estimated by the Authority, notwithstanding the capacity of the gas transportation pipeline, gas distribution network or processing plant.

3 The Authority may by regulation modify or provide further detail on the provisions of subsection (2) and establish more favorable tariffs for credit worthy shippers willing to commit to long term ship-or-pay agreements facilitating the financing of the respective pipelines or plants.

4 The Authority may approve negotiated tariffs where one or more wholesale customers connect with a pipeline to a transportation network or transportation pipeline or in other cases where justified in the opinion of the Authority.