NERC’s New Metering Options, Lifebuoy to Discos, Consumers

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Technicians working on electricity meters

More than four million out of about seven million registered consumers in the 11 distribution networks in the Nigeria’s electricity market do not have meters installed at their consumption points, partly because the Discos have not invested enough to bridge the gap. Notwithstanding the challenges, the Nigerian Electricity Regulatory Commission recently said it was considering three new approaches to achieve total metering for the market, Chineme Okafor writes

The Nigerian Electricity Regulatory Commission (NERC) has indicated that it was considering three innovative options to improve the metering obligations of electricity distributions companies (Discos) to their customers, and also completely eliminate the regime of estimated billing of consumers by Discos.

According to a document the commission posted on its website, and which was obtained by THISDAY, the three options under consideration are Meter Service Providers (MSP) scheme, modified Credited Advance Payment for Metering Implementation (CAPMI), and franchising in rural and urban settlements.

As at August 2017, NERC records stated that the total number of customers registered by the 11 Discos as eligible electricity users within their respective networks was 7,476,856, while those metered were 3,451,611, thus leaving a metering gap of 4,025,611 and a collective metering percentage of 46.16.

Also within the records, four Discos – Abuja, Ikeja, Eko, and Benin were tops in their meter deployment efforts with their 52.17 per cent, 55.95 per cent, 60.73 per cent, and 69.49 per cent respective deployments, while the likes of Enugu, Kaduna, Kano, and Yola trailed behind with their meagre 27.72 per cent, 37.24 per cent, 34.43 per cent, and 23.61 per cent deployment levels. Ibadan, Jos, and Port Harcourt Discos, however maintained average meter deployment percentage of 41.35 per cent, 48.72 per cent, and 48.54 per cent respectively.

Because the electricity sector privatisation, which was concluded in 2013, predicated the share purchase agreements of the Discos upon various agreed Average Technical Commercial and Collection (ATC&C) loss reduction levels for the Discos, a 100 per cent metering plan within a timeframe was thus expected of the Discos to ensure comprehensive coverage of consumers.

Also, the comprehensive roll-out of metering facilities was expected to guarantee and protect the Discos’ revenue, minimise losses to them in technical and commercial levels, as well as protect customers from unfair and estimated billing, which has been massively abused by the Discos despite an existing regulatory methodology enacted by the NERC.

 

Previous Attempts 

But while the metering gap existed even before privatisation, there had been previous efforts before and after privatisation – majorly by NERC, to cut down on the number of Nigerian electricity consumers without meters.

The domineering objective being to eventually end estimated billing and adopt 100 per cent metering as the basis for billing all electricity customers in Nigeria, the sector inherited a meter maintenance fee or charges that were then levied on consumers by defunct Power Holding Company of Nigeria (PHCN) for meter deployment and maintenance.

These charges were eventually cancelled as a component of electricity bills or tariff to consumers by the NERC after it ruled that they didn’t in any way advance the deployment of meters by the Discos, and so had no reasons to be continued.

The regulator further pushed the Discos to respect their metering obligations to their customers as contained in their share purchase agreements, and even introduced a respite it called the Credited Advance Payment for Metering Implementation (CAPMI) in which consumers were free to advance payments to their Discos to procure and install meters to them and get rebate in the form of electricity units over a period necessary to offset their individual investments in the meters.

Eventually, the CAPMI scheme turned inadequate to close the metering gap after it was discovered by NERC that the Discos also abused it and were diverting consumers’ payments to them for meters to other ventures and not living up to their obligations. The regulator subsequently closed down the scheme and asked the Discos to clear existing orders from consumers in the CAPMI scheme, while continuing their investments in metering.

 

New Approaches

But following the slow pace of investments in metering by the Discos, NERC then announced its consideration of three new options that could be adopted to close up the metering gap.

Under the MSP scheme, which looked more like the introduction of a new value chain – metering, in the market, NERC explained that MSPs could be financial institutions, venture financiers or even Original Equipment Manufacturers (OEMs) and meter manufacturers with the capacity to provide comprehensive meter services to electricity customers.

It said the MSPs would own the metering infrastructure on a lease basis including replacement of faulty and obsolete meters, but will also enter into medium to long term meter service agreements with Discos, which would then integrate in their vending systems provisions that allow the MSPs to get deductions from customers’ vending.

Likewise, it explained that guarantees for this financing option could come from the World Bank or a N39 billion metering loan the federal government recently disclosed that it would provide for the sector.

In terms of obligations within the MSPs, NERC stated that Discos would provide details of customer base for the scheme to provide financing, the MSPs would provide financing for procurement, installation and maintenance of metering infrastructure, while NERC will approve all metering agreements between Discos and MSPs.

Also, MSPs would be expected to supply meters to Discos based on supply and installation contract, Discos will then own and maintain the meters. They will also retain billing and collection activities while collection accounts will be backed up by irrevocable payment orders.

The ultimate goal, however, would be to provide meters to consumers but with the financial burden of such venture taken off the shoulders of the Discos.

In terms of the benefits of the MSPs option, NERC said: “A large number of customers will be metered quickly in NESI, issues of electricity theft and meter bypass will be eliminated due to enhanced vigilance by MSPs, increased revenue protection for Discos due to focus on billing and collection, guaranteed repayment arrangement will encourage financiers to support MSPs.”

It, however, stated that there were other considerations such as Discos’ reluctance to cede control over the meter as part of their assets and financiers possible request for more stringent guarantees and conditions for participation in the scheme, which could stand in the way of this option.

The other option, according to NERC, would be a modification of the CAPMI mechanism, which it jettisoned before because of Discos’ repeated failure to comprehensively respect the terms of their engagement with customers in the CAPMI.

The commission explained that the scheme would be modified to have shrewd transparency in monitoring payment made by customers as well as input measures to guard against delays in meter installation and making of refunds to consumers for the investments.

On franchising as another potential option, the regulator noted that Discos would be allowed to enter franchise agreements with agents, who will retail electricity at an agreed discount to consumers but in line with NERC’s regulations, codes and metering requirements.

Electricity sold within this arrangement is, however, expected to be bulk metered by Discos at designated energy injection points, while agents check meters for internal energy accounting.

It also said the option had benefits that included faster meter roll-out, cost-efficiency, and ease of revenue collection in designated locations, as well as being less prone to the incidence of theft.

While these new metering options are largely expected to help the Discos achieve comprehensive metering of consumers under their networks, safeguard their revenues and energy, as well as end the abused practice of estimated billing, NERC, however, stated that they would not be adopted for implementation outside of existing metering strategies adopted and being implemented by the Discos, indicating that these three would serve to amplify the efforts of Discos in closing their metering gaps as well as provide assurance to consumers that an end to estimated billing could be near in sight.

On the other side, the new approach would equally open up a new market for new players in the meter supply chain, in addition to strengthening local meter suppliers, which had frequently complained of poor patronage from the Discos.

As was stated by the Minister of Power, Works and Housing, Babatunde Fashola, at a recent policy dialogue on the power sector organised by the Lagos Chamber of Commerce and Industry (LCCI): “It would enable other businesses that are not distribution companies to supply meters. The core business of the Discos is not meter supply, their core business is distributing power but it needs meters to do so. Those who specialise in manufacturing, supplying and installation of meter would now go into that business subject to license by NERC.”