The recent order by the Nigerian Electricity Regulatory Commission (NERC) which repealed the proposed estimated billing system and replaced it with a capping system will serve the interest of both the distribution companies (Discos) and the electricity consumers in a win-win situation, a report by the United Capital has shown.
Prior to the order, the Discos had been charging their unmetered customers for power used using the estimated billing process, which the customers had widely criticised, often describing the bills when served them as “crazy”.
The estimated billing regime was put in place by the commission as part of measures to reduce some of the Aggregate Technical, Commercial and Collection losses (ATC&C) borne by Discos and to serve as an interim solution pending the widespread adoption of meters.
However, to address fairness in the billing of different types of consumers, NERC had issued an, “Order on the Capping of Estimated Bills in the Nigerian Electricity Supply Industry’, with effective from 20th February 2020.
The commission explained that the focus of the order was to promote parity in the billing of metered and unmetered electricity customers, given the several complaints about Discos issuing unrealistic estimated bills.
However, United Capital in its report on the efforts by the NERC, said the regulator’s order which brought an end to estimated billing, introduced limit to tariff payable by consumers without pre-paid meters and mandated Discos to meter their customers would benefit both the Discos and the consumers.
It stated: “Overall, the benefits of this order accrue to both Discos and electricity end-users. First, unmetered R2 and C1 consumers will be able to pay charges that are more commensurate to their consumption.
“Second, the order eliminates the incidence of inflated estimated bills and creates customer satisfaction and fewer complaints, which are integral goals the NERC set out to achieve.
“Third, the deadline to meter high-end customers will prompt Discos to fast track metering, which is positive for the reduction in collection losses. More importantly, this will increase overall electricity supply to Nigerians, lower collection losses, buoy revenue, and reduce the incidence of liquidity crisis across the value chain by giving Discos a better shot at meeting their minimum remittance to NBET and MO”.
The firm added that, “the biggest advantage of all comes in play when the transition to cost-reflective tariffs takes place in April 2020. If the previously estimated billing practice was still in place, and tariffs were reviewed upwards, this would have had a severe implication on consumer wallets belonging to the R2 and CI class. With energy demand now similar to metered counterparts, tariffs paid for will be relatively fair.”
It also noted that despite the huge benefits for both end-users in terms of fair pricing and reduction in collection losses for Discos from the Meter Asset Provider (MAP) scheme introduced by NERC in 2018, metering progress has remained abysmal.
United Capital stated that as of June 2019, the average metering progress across the 11 Discos was 43 per cent of registered electricity customers, with players such as Yola Disco (21.0 pervcent) and Kaduna Disco (22.0 per cent) at the bottom of the table.
According to the firm, the rapid growth in the number of electricity end-users continues to outpace the metering growth.
It added: “Notably, Discos have failed to capture total actual consumption across these different segments. While the default rate is lowest amongst the C and D class of consumers, the default rate is highest among the R, A and S classes of consumers.
“For instance, collection losses can be assumed to be relatively higher for the R class of consumers due to over-billing, energy theft and related issues.”