Section 123: Tariff Methodology.

1 Tariffs charged by licensees for the use of any facility or infrastructure licenced by the Authority for use in midstream and downstream petroleum operations shall be set according to one or more tariff methodologies adopted by the Authority for a particular set of licences, in conformity with the applicable fiscal regime, provided that the tariff methodologies shall—
a allow an operator to recover reasonable cost incurred, benchmarked against industry best practice and a reasonable return on the capital invested in the business;
b ensure the efficiency of the business;
c ensure the continued improvement of the quality of services;
d avoid discrimination between customers with similar characteristics, such as similar size or similar consumption profile under section 116 of this Act;
e in case of distribution licences, ensure efficient charges relating to petroleum product or natural gas supply covering Acting, metering and other services;
f avoid economic distortions and ensure a competitive market for the sale and distribution of petroleum products and natural gas in Nigeria; and
g avoid cross-subsidies among different categories of consumers.

2 Tariffs may differentiate between credit worthy shippers willing to make long term ship-or-pay agreements facilitating the financing of the pipeline or plant and other shippers or users.

3 The Authority shall, prior to establishing a tariff methodology, initiate and conduct a stakeholders’ consultation in the manner specified in subsection (5) to consult applicants, operators, consumers, prospective customers, consumers associations, associations of prospective customers and any other persons with interest in the subject matter of the proposed tariff methodology.

4 The Authority may, in establishing a tariff methodology, take into consideration the submissions of the stakeholders’ consultation referred to in subsection (3).

5 Prior to holding a stakeholders’ consultation referred to in subsection (3), the Authority shall publish in at least two national newspapers with wide coverage and on its website, notice of—
a the stakeholders’ consultation;
b its invitation to licensees and stakeholders to participate in the stakeholders’ consultation;
c the venue and period during which the stakeholders’ consultation is to be held;
d the nature of the matter to which the stakeholders’ consultation relates;
e the matters upon which the Authority would require submissions;
f the form in which licensees and stakeholders are to make submissions to the Authority on the subject matter of the stakeholders’ consultation;
g the period of notice for the commencement of the stakeholders' consultation, which shall not be less than 21 days; and
h the address or addresses to which the submissions may be sent.

6 Notwithstanding the requirements under subsection (3), the Authority may, due to the exigency of the circumstances, establish a tariff methodology without conducting a stakeholders’ consultation, where it considers it necessary to do so.

7 A tariff methodology made under subsection (6) shall be valid for six months with effect from its commencement date, except it is confirmed following a stakeholders’ consultation conducted in accordance with subsections (4) and (5).

8 The Authority shall fix a date for which the determined tariff methodology shall come into effect and shall cause the notice of the commencement date to be published in at least two national newspapers with wide coverage and its website.

9 Where the Authority considers it necessary that an existing tariff methodology or tariff should be amended, the Authority shall conduct a stakeholders’ consultation on the proposed amendment in accordance with subsections (4) and (5).

10 A person under obligation to set tariffs shall be bound by operative tariff methodology adopted through the method prescribed in this section.

11 A holder of a licence engaged in the sale of petroleum products to retail customers or who is subject to third party access or open access obligations under this Act, shall display at its office a current copy of the tariffs applicable to the services provided by the holder.

12 A holder of a licence shall not pass the costs of any fine or penalty incurred under this Act or any other law to a consumer.