Metering Challenge: Options Before DisCos

Prepaid-meters

Provision of meters for electricity consumers has proved a tricky task for the 11 distribution companies, but there appears to be light at the end of the tunnel.  

  good number of Nigerians who use electricity from the 11 electricity distribution companies in the country tend to think that the Discos are very comfortable providing them electricity without meters to accurately gauge their consumption. To these consumers, the Discos’ continued resort to estimated billing practice as against the provision of metering facilities proves their liking for unmetered billing.

There is also the notion that the Discos believe they would not make from metered billing as much money as they are making from estimated billing, which leaves room for indiscriminate award of bills and manipulation.

The Nigerian Electricity Regulatory Commission has a legal process for estimated billing in areas where meters are not available.

However, the Discos deny these allegations and insist that they lack the huge capital investment needed for the metering of power consumption.

 Metering Gap 

As at August, NERC records showed 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. This leaves a metering gap of 4,025,611 and a collective metering percentage of 46.16.

The records also revealed that four Discos – Abuja, Ikeja, Eko, and Benin – were tops in their meter deployment efforts with the 52.17 per cent, 55.95 per cent, 60.73 per cent, and 69.49 per cent deployments, respectively. Enugu, Kaduna, Kano, and Yola were behind with the meagre 27.72 per cent, 37.24 per cent, 34.43 per cent, and 23.61 per cent deployment levels, respectively. Ibadan, Jos, and Port Harcourt Discos maintained average meter deployment percentages 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 expected of the Discos to ensure comprehensive coverage of consumers.

The comprehensive roll out of metering facilities was also 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.

 Tricky Path 

The Discos have continued to complain about the huge financial commitment required to provide meters. They have pointed out through their association, Association of Nigerian Electricity Distributors, that the inadequacy of rates charged by them has limited the capital investment required to improve on their retail of electricity, including the provision of meters for consumers.

They have also explained that there were several other issues that had contributed to the slow pace of metering in the sector. The added, however, that since the distribution assets were handed over to them, they had made efforts to improve on metering, though, not as much as they would have wanted to.

“Meter fraud is huge – by-passing, tampering, recoding, hook-ups, is a big issue to us even in places we had installed meters already,” said Mr. Sunday Oduntan, Executive Director for Research and Advocacy in ANED.

“In a particular Disco this constitutes about 62 per cent for non-maximum demand and 43 per cent for maximum demand customers, pool of fraudsters has been inflated hugely by the corrupt staff let go by PHCN and ourselves,” Oduntan added.

To overcome them however, he said: “Major scale organised meter fraud has to be combatted by tamper proof meters – split unit and pre-paid installed in areas already fully enumerated.”

“For the area being metered, all the transformers and sub-transformers must first be themselves metered to create an audit trail of accountability. Disco must be reorganised around feeders and sub-feeders and every connection on every feeder must be traced and enumerated into our customer database.”

“Database has the capability to monitor consumption (and lack of consumption) by individual meters to detect meter fraud, and by sub-feeder and feeder to identify corrupt staff. Until this is in place metering will not work, most will simply be by-passed,” Oduntan added.

 Directive 

Despite the challenges, the government feels the Discos have a duty to meter their customers and do that as soon as possible to improve their revenue collection and retail services in the market.

Minister of Power, Works and Housing, Mr. Babatunde Fashola, recently asked the NERC to expedite action on a metering regulation it had planned to introduce for the electricity market. Fashola told NERC that he wanted the regulation to be completed before the end of November, and that with it, the commission would be able to give operational licenses to meter suppliers who could help close the metering gap and resolve its related challenges.

The minister indicated that the supply of meters would have to be resolved through the new regulation from the NERC.

 Previous Attempts 

While the metering gap existed even before privatisation, there had been previous efforts before and after privatisation, mainly by NERC, to cut down on the number of Nigerian electricity consumers without meters. The central objective is 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, which were then levied on consumers by defunct Power Holding Company of Nigeria 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 was decided that the charges did not help the deployment of meters by the Discos, and so there was no reason to continue them.

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) under 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 out to be 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 ended the scheme and asked the Discos to clear existing orders from consumers in the CAPMI scheme, while continuing their investments in metering.

 New Regulation

 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.

According to NERC, the three options currently under consideration would eliminate the regime of estimated billings. A document on this from the commission explained that the three options under consideration were Meter Service Providers (MSP) scheme, modified Credited Advance Payment for Metering Implementation (CAPMI), and franchising in rural and urban settlements.

Under the MSP scheme, which looked more like the introduction of a new value chain-metering, in the market, NERC said licensed 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.

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.

Besides, 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 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 stated 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 had jettisoned before because of Discos’ repeated failure to comprehensively respect the terms of their engagement with customers in the CAPMI.

It 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 the option of franchising, 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 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 stated that they would not be adopted for implementation outside of existing metering strategies adopted and being implemented by the Discos.

These three new options are intended to help the efforts of Discos to close their metering gaps as well as provide assurance to consumers that an end to estimated billing could be near in sight.

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 who had frequently complained about poor patronage from the Discos.

As Fashola stated at a recent policy dialogue on the power sector organised by the Lagos Chamber of Commerce and Industry, “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.”

Source: IWIN

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