Crafty DisCos, weak NERC and unresolved issue of consumer metering
Earlier this month, precisely on November 1, Nigeria’s electricity privatisation clocked eight years. In 2013 when the power sector was privatised, expectations were that the existing eight million consumers connected to the grid would not only enjoy constant power supply, but should have metres that ensure a transparent and fair billing.
This is part of the reasons the Performance Agreement (PA) signed with the Distribution Companies (DisCos) included Key Performance Indicators (KPIs) of progressive metering of consumers. In KPIs, the Nigerian Electricity Regulatory Commission (NERC), through the EPSRA Act of 2005, states that power utility companies are charged with the responsibility of metering consumers. This was the basis for Sections 32 sub-section D, and Section 76 sub-section 2 of the Act, which aim to calculate tariffs to achieve the legislation on liberalisation.
According to the NERC, Nigeria has a total of 8, 310, 408 registered active electricity consumers. Since the power sector was privatised eight years ago, the distribution companies have only metered 3, 704, 302 (44.6 per cent) of their customers, leaving out 55.4 per cent. The government said that additional 9,000 metres were provided from last year to date.
On paper, the average deployment by the DisCos should be 1, 640, 411 metres per year (quarterly average of 410,103), but only 157,173 (38.3 per cent) metres were deployed during the third quarter of 2018.
Historically, when the Federal Government was solely in charge of the power sector through the Power Holding Company of Nigeria (PHCN), formerly National Electric Power Authority (NEPA), there were limited efforts at ensuring that consumers are metered. The development did not generate any fuss because power was seen as a social service. This development left gaps that the DisCos were charged to bridge when they took over.
However, before privatisation, the Federal Government introduced the National Prepaid Metering Programme (NPPMP). With the plan, the government appointed Revenue Cycle Management (RCM) contractors to procure and install pre-paid metres at low cost to electricity customers. But the NPPMP was not sustainable owing to some reasons, including huge cost of procuring the metres, lack of transparency in the appointment of RCMs, short duration of the RCM contracts, uncoordinated metre procurement processes, proliferation of sub-standard metres, non-standardisation of metre technology and corruption.
To speed up the process of metering, NERC in 2013 mandated the electricity distribution companies to commence implementation of Credited Advance Payment for Metering Implementation (CAPMI). CAPMI came about due to the slow pace of customer metering by the DisCos as well as the high level of complaints received from customers who were dissatisfied with practices associated with estimated billing. It also provided a platform for willing customers to pay the cost of the metre into a dedicated account jointly managed by the DisCos and metre vendors/installers. Once payment has been effected, customers would have their metres installed within 45 days by a NERC-accredited vendor/installer. But that arrangement also faltered following recurring customer complaints about the non-delivery of metres after full payment had been made. The initiative was wound down with effect from November 1, 2016.
After the failure of CAPMI, NERC window-shopped for another policy and came up with the Metre Asset Provider (MAP). It stated that the move came against the backdrop of the renewed bid to ensure that electricity customers only pay for what they consume. The regulation was to cater for the supply, installation and maintenance of end-user metres by other parties approved by the commission.
The MAP Regulation (No. NERC/R/112), which came to force on April 3, 2018, introduced metre asset providers as a new set of service providers in the Nigeria Electricity Supply Industry (NESI). As assets with a technically useful life of 10-15 years, the regulation provides for third party financing of metres under a permit issued by the commission and amortisation over a period of 10 years.
Under the scheme, electricity distribution companies, in line with their licensing terms and conditions, are obliged to achieve their metering targets as set by the commission under the new regulation. In the new policy, NERC had approved the cost of a single-phase metre for N36, 991.50 and N67, 055. 85 for a three-phase metre. These costs are inclusive of supply, installation, maintenance and replacement of the metres during their technical life.
Under the new plan, a customer will initiate a request for metering by filling in all necessary details, including his/her phone number. After the application, the utility companies would visit the customer’s location for site verification to determine the type of metre needed; an SMS will be sent advising the customer to make a payment. If the customer makes payment, he must be metered within 10 working days.
Four years after, the Federal Government introduced the Nigerian Mass Metering Programme financed by a credit facility of N120 billion from the Central Bank of Nigeria (CBN). The first phase of the programme, which should have seen the deployment of over one million metres, performed below par. The plan could also not progress to the next phase before NERC increased the price of metres. Now, a single phase metre, which was selling for about N44, 896.17 has moved to N82,855.19 while the three phase metre jumped from N58, 661.69 to N109, 684.36.
Although on paper, the metres were expected to be provided free of charge to electricity consumers, most customers were reportedly forced to pay for the assets by the DisCos. The Federal Government had promised that whoever pay would be reimbursed through tariff units, but that does not match the provisions of MAP, which has transferred the burden of metering to consumers.
Without metering, billing of consumers will remain on the discretion of DisCos as regulations in the electricity sector are barely enforced by NERC. Without metering, revenue collection by the DisCos and remittance to the power sector will also not be transparent.
Recall that despite being privatised, the Federal Government has spent over N2 trillion in subsidising the electricity sector. This is because the sector has either not been able to generate enough revenue or the funds collected by the DisCos are not properly remitted. Without metering, monitoring the payment will be elusive.
Currently, there are over five million electricity customers that are billed arbitrarily amid rising cost of electricity. While the plan by the National Assembly to criminalise estimated billing has been a mirage, the capping of estimated billing by NERC is rarely enforced. The practice of estimated billing in the industry has prevailed and is now perceived in some quarters to be the toast of the DisCos. The current metering gap in the industry has been identified as evidence that most DisCos are not fully committed to closing the metering gap. But who bears the brunt of these rigmaroles and failures? Ultimately the consumers as evidenced in the following story.