Electricity Tariffs as Momoh’s Minefield

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The new Chairman of the Nigerian Electricity Regulatory Commission, Prof. James Momoh will start on a wrong note if he implements his planned review of electricity tariffs in a sector where over 60 per cent of consumers are still being subjected to inflated estimated electricity bills, Ejiofor Alike reports

A thriving culture among the electricity distribution companies since the power assets were handed over to the private investors is the issuance of what the Nigerian Electricity Regulatory Commission (NERC) described as ‘crazy bills’ to electricity consumers.
In the words of the regulatory agency, “crazy bills are bills that are given to a customer that do not reflect the correct consumption of that customer.”

“Such crazy bills usually come in the form of estimated bills where the electricity distribution company gives the customer an estimate that far exceeds what that customer could possibly have consumed within the billing period,” NERC had said.

To save customers from extortion by the Discos, NERC had issued an estimated billing methodology or formula, and had ordered all the distribution companies to apply this formula in estimating their bills to ensure that customers pay for only what they consume.

NERC’s Regulation on Standards of Performance for Distribution Companies 1.10 also stipulates three months or 90 days as the maximum period within which a customer can receive estimated billing, after which the Disco must find every means possible to read the meter for actual energy consumed if the premises is metered.

Also Chapter II (4.1) of NERC’s Methodology for Estimated Billing 2012 also provides that the “Discos shall endeavour to obtain an actual reading of all meters recording electricity usage at all supply addresses within their areas of operations every month, or at such intervals as approved by the commission”.

Section 4.2 of the guidelines also stipulates that “where the Disco is unable to obtain an actual meter reading at a customer’s premises, the customer’s electricity usage shall be estimated by the company unless the customer provides his own meter readings within a stipulated period”.
Section 4.3 states that “where a Disco estimates a customer’s usage the Disco shall adopt the commission’s approved methodology for estimated billing, and the customer’s estimated electricity usage shall, under no circumstance, be arbitrarily inflated by the Disco.”

Customers eligible for estimation
Customers with faulty meters – customers who have been issued meters, which are no longer functional, are one of the categories of customers that may be issued estimated billing, according to NERC.
But NERC also mandates the Discos to repair or replace faulty meter as soon as a complaint is appropriately made by the customer.

Customers whose meters cannot be read – customers, whose meter readings could not be obtained by the Disco as a result of “inaccessibility occasioned by locked doors, customers not being at home at the time of reading the meter, and presence of dogs on the premises”, should also be issued with estimated bills, according to NERC.

The guidelines added that “where a Disco is unable to obtain a meter reading at a customer’s premises and notifies the customer in a manner approved by the commission, the Disco shall estimate the customer’s usage for the period”.

According to NERC, the Disco shall endeavour to read the meter, at least, once in three months and the estimated bills issued shall not amount to a figure in excess of the cumulative average of the customer’s consumption.

The third category of customers that should pay estimated bills are the existing customers, who have not been provided with meters.
For the unmetered customers, NERC’s rules stipulate that their estimated bills shall be based on the “weighted average cluster load,” which involves the subtraction of the entire metered load from the energy supplied to the feeder (33kV or 11KV and others) and the application of an appropriately determined availability factor and correction of losses which is aggregated among the various number and classes of customers supplied by the feeder.

Investigation has revealed that this NERC guideline for the unmetered customers is the most abused by the Discos to extort consumers because while the power purchased by the Discos from the Gencos are properly metered and confirmed by the Discos, individual consumers are arbitrarily slammed with exorbitant bills by the Discos based on the power they claim to have supplied to the feeder in a given area, when it is obvious that the customers are not in a position to confirm that such quantity of power was actually supplied to their feeder.

For the metered customers, NERC’s position is that every Disco shall obtain, through its authorised representatives an actual reading of all meters in all supply addresses within its area of supply every month but not later than once in every three months.
According to the agency, the customers shall be to billed based on the last actual reading obtained until another reading is established, with a reconciliation carried out which may result in the crediting or debiting of the Customer.

Discos’ abuse of NERC’s guidelines
Despite these laudable steps taken by NERC to check the excesses and impunity of the Discos that overbill their customers, exorbitant estimated bills have become embedded in the culture of most Discos.
In fact, investigation has revealed that several years after the death of a customer, some Discos still send estimated bills to his or her unoccupied residence.

NERC’s rules to ensure that the Discos close metering gap, standardise customer estimation, as well as stop extortion and exploitation of customers have been constantly violated by the utility companies.
It is a common knowledge that while the Discos deploy the police, Civil Defence and even social miscreants to invade customers’ premises three times in a month to carry out disconnection for non-payment of unjustifiable bills, most of the companies do not assign any official to read the meters even for once in one year.

Today, over 60 per cent of Nigerian electricity consumers pay estimated bills because the Discos do not visit customers’ premises to read functional meters, once they are not prepaid, contrary to NERC’s rules.
Since these estimated bills are crazy bills that do not reflect customers’ actual consumption, there have widespread protests against the distribution companies across the country.

Worried by the nationwide abuse of estimated billing methodology, NERC had in late 2017 mulled three innovative options to improve the metering obligations of the Discos to their customers, with a view to eliminating the regime of estimated billing of consumers.
The three options under consideration were Meter Service Providers (MSP) scheme, modified Credited Advance Payment for Metering Implementation (CAPMI), and franchising in rural an urban settlements.
The regulatory agency had earlier in June 2017 initiated a process that could lead to the sack of the management boards of the 11 Discos over poor performance.

The agency’s Commissioner for Engineering Performance and Monitoring, Prof. Frank Okafor, had told the operators at the 16th edition of the monthly power sector operators’ meeting hosted by the Niger Delta Power Holding Company (NDPHC) Limited in Enugu that “there are so many challenges, I will tell you, and I will also tell you that a lot of the Discos have not done well in metering people”. “They committed to certain level of metering every year, but they have not done that,” Okafor reportedly said.
NERC had earlier announced that consumers who were not provided with prepaid meters as at March 1, 2017 should stop paying estimated bills.

At a point in 2014, the Sam Amadi-led NERC had even considered placing a ceiling on maximum amount a Disco could charge a customer as estimated bill in reaction to the barrage of complaints received over estimated billings.

Momoh’s planned tariffs review
Instead of NERC to intensify efforts to eliminate crazy bills before increasing tariffs, NERC’s new chairman, Prof. James Momoh, who took his oath of office last Thursday, after two years of power vacuum at the agency, shocked the bewildered electricity consumers, when he told journalists that the commission under his watch would undertake a scientific review of tariffs.

Due to the several unresolved issues in the power sector, including the wide metering gap in the sector, NERC had suspended the implementation of five reviews of electricity tariffs since the industry was privatised in November 2013.
For instance, the regulatory agency suspended the planned review of tariff for R2 customers in January 2015.
However, the private investors alleged that the six-month suspension was a political decision by the former administration to enhance its chances in the 2015 general elections.

Also the Multi Year Tariff Order 2015 that was signed in December 2015 was also suspended in January 2016 by NERC, which later implemented it in February 2016 following protests by the private investors.
Although there have always been protests against NERC’s tariffs reviews, the wider public protests, which have become violent in many areas, are actually against the refusal of Discos to use meters to determine the bills paid by majority of their customers.

The fear expressed by majority of the consumers is that if NERC implements a new review of tariffs without addressing the issue of estimated billing, a customer whose actual monthly consumption today is N4, 000 but is currently being slammed with estimated bills of N10, 000- N20, 000, will pay as much as N20, 000 – N40, 000 monthly estimated bills under the new review, instead of about N5, 000 – N6, 000, which will be his new actual consumption.

Momoh acknowledged that electricity tariff calculations are not done by guesswork, adding that the commission would be looking to collate relevant data, review and understand them, and then make decisions from its findings.
It is, however, uncertain how he intends to convince already aggrieved customers to pay for electricity that is not metered.
The general belief is that prioritising tariffs review will be a misstep by Momoh as his efforts should be concentrated on ensuring that both metered and unmetered customers pay for the actual power they consume so as to curb the massive opposition that will greet any new review.