Mass metering: A tale of weak regulator, crafty DisCos, helpless consumers
Nigerian Electricity Regulatory Commission (NERC) had in a recent report, noted that five million of the eight million electricity users are billed arbitrarily by distribution companies (DisCos).
This development underscores the failure that has greeted the power sector in Nigeria, especially since it was privatised about seven years ago.
At take-over, a part of the key performance indicators for the 11 DisCos was to meter at least 1.75 million customers yearly. The assumption was that since reduction in Aggregate Technical, Commercial and Collection (ATC&C) was key to the reasons the DisCos were selected, mass metering would significantly reduce losses.
Seeing that the gap persisted, NERC introduced Credited Advance Payment for Metering Implementation (CAPMI), due to high level of complaints on poor quality services received from customers and dissatisfaction with estimated billing practices.
Through CAPMI, willing customers pay the cost of the meter into a dedicated account jointly managed by the DisCos and meter vendors/installers, and once payment was confirmed, the customer will have the meter installed within 45 days by a NERC-accredited vendor/installer. But the scheme eventually failed, as customers were not supplied duly despite making payments.
Since the DisCos had said their metering capacity was constrained by the limited allowable capital expenditure in the Multi-Year Tariff Order (MYTO), NERC introduced the Meter Asset Providers (MAP) policy, which brought in investors and required customers to solely bear the cost of prepaid meters. Like CAPMI, the scheme did not solve the problem.
This development and other customer-related challenges had forced some experts to conclude that the DisCos were playing games with metering.
To worsen situation, the government’s inability to design a sustainable approach to estimated billing raised critical questions on ability of NERC to regulate the sector, considering the gross lack of enforcement not only in the areas of metering, but also in other areas of consumer complaints and remittance.
Last week, the James Momoh-led NERC in a release, said President Muhammadu Buhari “directed that there should be a nationwide mass-metering programme in an effort by the Federal Government to put a stop to estimated and arbitrary billing for electricity.”
The directive, which was also tweeted by the Personal Assistant to Buhari on New Media, Bahir Ahmad, and corroborated by the Minister of Power, Sale Mamman, has continued to raise dust due to lack of modalities, as similar directives in the past had failed to meet set objectives since the privatisation of the sector in 2013.
With inherent challenges facing the recently-introduced MAP policy, where cost of meter was transferred to consumers, Momoh disclosed that Buhari approved a waiver of the import levy on meters at reasonable costs, even though the Commission recently moved the price upward by about 40 per cent.
Indeed, with the need to enhance indigenous capacity and job creation, now heightened by the COVID-19 pandemic, stakeholders argued that the import waiver being granted undermines the current administration’s commitment to local content development, as it is an incentive for mass importation of meters against scaling the production capacity of made in Nigeria meters.
Coming amidst clamour against increase in electricity without commensurate services, Momoh further disclosed that tariff reviews going forward would only follow service-based principles, adding that “under these service-based principles, DisCos will only be able to review tariff rates for customers when they consult with customers, commit to increasing the number of hours of supply per day and quality of service.
“In all cases poor and vulnerable Nigerians will not experience any increase. In line with these expectations, DisCos are directed to engage with their customers on a Service Based Tariff structure. Under the Service Based Tariff Structure, DisCos can only review tariffs for customers under the following conditions – customers are consulted and communicated a guaranteed level of electricity service by the DisCos based on hours of supply; customers are metered and no estimated billing through the strict enforcement of the capping regulation.”
According to the NERC’s report for the third quarter of 2018, out of a total of 8,310,408-registered active electricity customers in the country, DisCos metered only 3,704,302 (44.6 per cent), leaving out 55.4 per cent of end-use customers.
Notwithstanding the expected average deployment of 1,640,411 meters yearly ( quarterly average of 410,103), DisCos installed only 157,173 (i.e. 38.3 per cent) meters during the third quarter of 2018.
Former Chairman of NERC, Prof. Sam Amadi, did not see anything new about the announcement for mass metering, which he noted has always been part of the power sector plans.
“What will change will be when the government provides funding for procurement and installation of meters for all consumers, and provides clear regulation and enforcement to make sure we are all metered in record time.
“Metering plans of the DisCos are mired in poor financing and receivables. We need more than a presidential diktat to solve the metering crisis,” he said.
While NERC had signed a Nigerian Content Law for the power sector in an attempt to trigger industrial development and economic growth through localisation of skills and products in the electricity sector, Amadi noted that prevailing development is an indication that the policy is not being effectively implemented.
According to him, the new waiver of custom duty on imported meters will have the short-term effect of reducing the cost of metering, and perhaps increase foreign meters, but also affect local production of meters, except the government can match it with other policies and fiscal incentives that will still make local meter manufacturers competitive.
Although NERC believes its new directive would make the masses pay less, Amadi was of contrary opinion, stressing that the new tariff may compound the poverty crisis, except it boosts economic growth that compensates for the welfare losses of the poor.
“But with the power sector trapped in gross inefficiently and incompetent leadership, the impact of tariff increase may actually compound poverty and undermine sustainable economic growth,” he stated.
While NERC was supposed to be independent and have its decision approved by its board, Former President, Nigerian Association for Energy Economists (NAEE), Prof. Wunmi Iledare, wondered why a presidential approval was needed for the market regulator.
Considering that the country is not under military regime, the professor said a lasting solution to the energy sector problems must be apolitical.
He described the failed metering, as illegality and a violation of business ethics, stressing that estimated billing without any inclination to reconcile remains consumer gouging.
“Here is where I think NERC must penalize DisCos charging consumers without metering. I don’t really think a presidential order or approval is going to achieve much without a regulatory backing. Perhaps the government will pay to implement this order. Then that becomes another bailout for DisCos at the expense of the more important priorities, like education, health and infrastructure development,” Iledare stated.
He opined that the Presidential order remained a way to enrich a few elites, as while it is the responsibility of DisCos to install meters, the choice is more of a business decision than politics.
Iledare described import waiver on meters as an ad-hoc solution to a complex problem, adding that the move could cause double jeopardy, especially job losses, loss of revenue and perhaps the local manufacturers of meters.
“The forgone import duties could have been given as incentives to local manufacturers in the form of tax holidays or credits or allowances. I expect all options to have been evaluated. But I do not see how the costs can be less than the benefits to support this waiver,” he said.
President, Nigeria Consumer Protection Network, and Member of National Technical Investigative Panel on Power Systems Collapses/ Systems Stability and Reliability, Kunle Kola Olubiyo, decried the waiver of import duty on meters, saying it would affect local manufacturers.
To him, while mass importation of pre-paid meters would provide a quick fix, there is an urgent need for the Federal Government to initiate a very strict regime of sanctions against off-takers, who have deliberately refused to accept indigenous technology.
“As important as the vexed issue of metering is, there are other variables and extraneous factors that if not eradicated or boldly addressed, the Nigerian electricity market shall remain an elusive growth, and a vicious circle of stagnation,” Olubiyo stated.
He called on the government to review the price of gas downward, as the current price methodology discriminates and creates disparity in the business model with different pricing options for different off-takers.
“End users of electricity have been badly battered and impoverished by a cartel of energy cabals fiddling with the economic soul of Nigeria and holding the nation’s jugular down in perpetually counterproductive operations,” Olubiyo said.
Consumer Right Advocate, Adetayo Adegbemle, noted that the Federal Government has not spelt out modalities for mass metering even in the recent agreement signed with German firm, Siemens.
Adegbemle, while rejecting moves that encourage imported meters against local production, said: “What we should be seeing, and as fallout of the Covid-19, should be a Federal Government intervention in local manufacturing, or even assembly; otherwise, enforcement of local content components for meter manufacturing is defeated. Waiver for import duty on meter, without adequate capital by importers would also not achieve anything.”
Speaking on tariff review, he stated no DisCo has completed customer enumeration, stressing that challenges would persist without first knowing the number of customers or their demographic characteristics.
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