Introduction

The Nigerian Electricity Supply Industry (“NESI”) has a chequered history, from its inception in 1886 when power was first generated until 2013, the NESI had been publicly owned, operated and regulated, save for a few private sector participation/interventions.

Although events leading to the privatisation of the NESI began as far back as 2000[1], unbundling of the Power Holding Company of Nigeria (“PHCN”) and handover of principal undertakings in the NESI to core investors through concessions and sale of equity holdings under the Electric Power Sector Reform Act 2005 (the “EPSRA”)[2], did not take place until November 1, 2013.

The distribution arm of the NESI is responsible for taking delivery of power from the generators through the transmission lines and transforming or stepping down the received high voltage power for eventual delivery to the final consumers. They are also in the business of marketing electricity (retail) to final consumers while charging tariffs which will systematically revert upward to the participants in the electricity value chain, that is, the transmission and generation companies.

The distribution arm of the NESI requires certain infrastructure to perform its functions and carry on business optimally. The availability or otherwise of adequate and functional metering devices[3] to electricity consumers have a huge impact on the operations of distribution companies. In the years leading to privatisation, the NESI witnessed huge expansions in the metering gap across the nation. Currently, about 54.7 per cent of registered electricity consumers does not have functioning meters.

The metering gap has stalled the smooth operation of the privatized NESI. Consequently, this paper aims to discuss the implications of the metering gap in the retail end of the NESI, attempts to close the gap, challenges faced in addressing the situation, and recommendations to address the metering defect in the NESI.

METERING THE NIGERIAN ELECTRICITY CONSUMER – THE JOURNEY SO FAR AND ATTENDANT CHALLENGES

Currently, there are eleven (11) electricity distribution companies (“DisCos”)[4] licensed under section 62 of the EPSRA to engage in the business of electricity distribution and ancillary services. Though there have been debates on whose responsibility it is to meter customers, it is clear that the Discos have the obligation to put in place a sound retail metering system.[5] This position is premised on section 67 of the EPSRA which provides that a distribution licence authorises the licensee to construct, operate and maintain a distribution method and facilities, including: (a) the connection of customers for the purpose of receiving a supply of electricity; (b) the/installation, maintenance and reading of meters, billing and collection; and (c) such other distribution services as may be prescribed for the purposes of the section.[6]

Since the privatisation of the power sector, trivial attention has been paid to the metering system such that there has been no substantial maintenance, monitoring or reading and issuance of new meters to consumers. This has resulted in a wide metering gap, electricity theft, decline in the accuracy of data on electricity consumption and loss of revenue, all of which culminated in the adoption of estimated billing.

Worthy of note is the fact that there are three (3) methods of billing electricity consumers in Nigeria: Post-paid, where consumers are billed for electricity already consumed and payment is made in arrears; Pre-paid, where consumers pay prior to consumption; and Estimated billing, where consumers are charged a fixed price regardless of the amount of energy actually consumed. The NESI has experienced all three methods of billing at different periods and sometimes a combination of two different methods.

Currently, electricity consumers who have functioning prepaid meters are charged using the pre-paid method while unmetered consumers are billed via the post-paid and estimated billing methods. Consumers have however frowned at estimated billing because it does not represent the actual amount of electricity consumed, thus resulting in a situation where consumers pay for more than they consume.

It is unfortunate that the privatized NESI with its actual prospects and developmental propensity has not closed to a reasonable extent, the metering gap in the NESI as only 45.3% of the identified customer population are metered[7]. Over time, certain policies and regulations have been introduced by the Nigerian Electricity Regulatory Commission (“NERC”), pursuant to section 96 of the EPSRA,  to close the lingering metering gap, assuage the effect of estimated billing and ensure the effective electricity supply to consumers, these initiatives are however yet to yield the desired result. Some of the policies introduced by NERC include: The Meter Reading, Billing, Cash Collection and Credit Management for Electricity Supplies Regulations 2007; the Methodology for Estimated Billing Regulations 2012; and the Consultation Paper on the Capping of Estimated Billing for Unmetered Electricity Customers 2018.

In 2012, NERC, in a bid to ensure that unmetered customers are billed fairly, introduced the Methodology for Estimated Billing (“MEB”), through which estimates are scientifically derived. The MEB according to NERC was a complete failure as the DisCos were unable to effectively implement the guidelines contained in the MEB.[8] Furthermore, the NERC in 2013, introduced the Credited Advance Payment for Metering Implementation (“CAPMI”).[9] Under CAPMI, consumers who were unmetered or had obsolete meters could advance payment into an account jointly managed by their relevant DisCo and a NERC accredited meter vendor/installer and within 45 days of such payment, the meter vendor would install a meter at the consumer’s premises.

The motive was to relieve the DisCos of the burden of the huge financial outlay entailed in providing meters for customers by making willing consumers provide the requisite funding.[10] Even though this initiative was bound to serve only a partial purpose given the fact that a good number of unmetered electricity consumers lack the monetary capacity and will to purchase the meters, the initiative did not meet its projected target as the initiative was scrapped by the NERC with effect from November 1, 2016, following recurring customer complaints about non-delivery of meters despite full payment.

In a renewed bid to close the metering gap, the NERC introduced the Meter Asset Provider Regulations 2018[11]  (the “Regulations”) which provides for the supply, installation and maintenance of end-user meters by third party entities approved by the NERC known as Meter Asset Providers (“MAPs”) The objective of the Regulations is to eliminate estimated billing and close the metering gap through an accelerated meter roll out in NESI.[12]

The Meter Asset Provider Regulations 2018; Prospects And Challenges

The metering of electricity consumers is of major importance to any electric utility company, not only from a revenue standpoint but also in the promotion of strong customer relationships.[13] The MAP Regulations lifts the burden of providing meters off DisCos and places same on MAPs who will fully undertake the responsibility of all retail metering services, including financing, procurement, installation, servicing/maintenance and replacement of metering equipment.

Under the Regulations, interested companies would obtain a ‘No Objection’ from NERC before proceeding to participate in a competitive bid organized by a DisCo of their choice and upon a successful procurement process by the relevant DisCo, NERC will grant a MAP permit, valid for a period of fifteen (15) years to the successful company. 

A Meter Service Agreement would then be entered between the DisCos and their procured and NERC permitted MAPs. In a bid to ensure that MAPs recoup their capital and make a profit, the Regulations provide for a Metering Service Charge, which is a periodic payment made by an electricity consumer to cover the cost of metering services. The charge would be included as a clear item separate from the energy charge on the billings of customers and same shall be aggregated and disbursed to the MAPs by the DisCos until full amortization of the meter by the consumer.

The Regulations share a similarity with CAPMI in that it provides that a consumer can elect to pay for a meter asset upfront and such a consumer would not be liable for the payment of metering service charge through the DisCo.  Though the Regulations has been lauded by industry observers as a step in the right direction, it cannot be said with utmost certainty that the Regulations would achieve its projected targets.

Worthy of note is the fact that milestones stipulated by NERC and the Regulations were not achieved within the stipulated timeline. Also, MAPs that have been licenced by NERC are yet to commence the metering drive as it is not clear if Meter Service Agreements with DisCos have been signed. Furthermore, DisCos through the Association of Nigerian Electricity Distributors (“ANED”) have expressed their dissatisfaction with the Regulations and have been reported to be uncooperative with the NERC and the licenced MAPs in implementing the provisions of the Regulations.[14]

A probable challenge the Regulations will encounter is the rampant disregard for electricity bills by consumers. The Regulations does not address the problem of persisting non-payment of tariff by consumers, a trend which arose as a resistance to the continued estimated billing practice by DisCos.

For the Regulations to achieve the desired objectives, there must be a change in the attitude of electricity consumers towards tariff payment. The inclusion of the Meter Service Charge in electricity bills will increase the rate of electricity tariff and if consumers are not responsive in paying what is charged, there would be a ripple effect.

This may result in an addition to the existing threefold debt structure subsequently described and DisCos would also be unable to remit payment at agreed intervals to the MAPs which will, in turn, result in the MAPs’ inability to get a return on investments.

Implications Of A Defective Metering System

The desirability for an efficient metering system in the NESI cannot be overemphasised because not only is it the most effective way of monitoring consumption of electricity for the purpose of billing, it is also a process of ensuring accuracy and equity in the trade of electricity. In addition, it is a way of ensuring that every participant in the value chain gets a return on investment and services provided.

Investing in the power sector is capital intensive, banks and other financial institutions were and still are key players in the NESI. During privatization, several financial facilities were utilized and according to reports, the financing of the sale of the assets was estimated to be 70 per cent debt and 30 per cent equity, with most of the debt provided by the local banks who were initially reluctant to invest in the sector because the new institutions had no track record of creditworthiness and the NEPA/PHCN had a history of abysmal operational and financial management.

[15] The financial undertakings must be serviced/refinanced by these private investors who are now the GenCos and DisCos. Also, most of the acquiring companies focused majorly on acquisition finances and it appears that no concrete financial strategy was in place to cater for post-acquisition funding, for this reason amongst others, there is illiquidity in the NESI.

Apart from the subsisting financial obligations owed to local banks, there appears to be a subsisting handicapping threefold, bottom-up debt structure in the NESI.

Firstly, the DisCos who are the retailers of electricity, due to the existence of a poor metering system, amongst others, are unable to collect tariffs due to it from electricity consumers and invariably, DisCos are unable to make payment to the Nigerian Bulk Electricity Trading Company (“NBET”) for power purchased from it. NBET was established to engage in the purchase and resale of electrical power and ancillary services from GenCos and independent power producers to DisCos and eligible customers[16]. According to reports, as at April 2019, the amount due to NBET from the DisCos was about 778.7 billion Naira[17]

Secondly, due to the inability of the DisCos to meet their financial obligations to  NBET, NBET is in turn unable to discharge its financial obligations to the GenCos, from whom it purchases power in bulk. Further, about 80% of the generating plants are gas-fired, the relevant GenCos’ operational existence is dependent on adequate gas supply. As a result of NBET’s financial obligations to GenCos, GenCos are in turn unable to pay gas suppliers under the relevant Gas Purchase Agreements. As at January 2019, GenCos owed about 1 Trillion Naira to various gas suppliers.[18]

The above illustrated revenue standpoint reflects the cyclic effect of a defective retail metering system. If the metering defect is not immediately resolved, the myriad of debt will persist with grave consequences for the NESI and other related sectors. Furthermore, estimated billing places a huge burden on unmetered customers who ultimately are beset with outrageous and very high estimated bills that are not objectively or scientifically determined.[19] DisCos however allege that the current electricity tariff does not cover the cost of the supply of energy to consumers.

Recommendations And Conclusion

There is no gainsaying that for the NESI to be efficient and move from its current state of financial instability to being bankable and attractive to investors, all hands must be on deck and all participants in the sector must be alive to their respective and collective responsibilities.

It is essential for the key participants, in this case, the Ministry of Works, Housing and Power, the NERC, DisCos MAPs to cooperate and work together to curb the retail metering challenge facing the NESI.  The apparent absence of cooperation amongst the aforementioned entities is a major factor militating against several initiatives churned out by the NERC over the years to remedy defects in the NESI.

The ANED once lamented that the minister’s relationship with stakeholders is that of headmaster/pupils relationship, which gives no room for the much-needed “sincere collaboration.”[20] NERC must, however, be commended for running an open administrative system whereby stakeholders’ input is often requested during the process of formulating policies and or Regulations.

Furthermore, DisCos and MAPs must be seen to be transparent in the charging, receipt and accounting of the periodic Meter Service Charge. It is suggested that in addition to the details required to be published in Regulation 8 (11) of the Regulations,[21] DisCos should publish the market value of the meters and the estimated period which the charges would apply. This would enable the consumers repose confidence in the process and the parties.

The Discos and MAPs must also ensure that the meters to be deployed under the scheme are in tune with modern technology which would enable such meters to be remotely and effectively monitored and read so as to ensure that consumers are charged only for actual consumption and also to help check the prevalent vice of electricity theft.

In addition, each DisCo is advised to set up a Meters and Bills Reconciliation Committee to cater for all meter and electricity charge disputes expeditiously, the committee may also be charged with the responsibility of attending to customer’s requests and complaints on metering within the license area, a Regulation may be made to this effect by the NERC.

Lastly, it is pertinent to state that, for the MAP Regulations and any other NESI policy to have favourable effects, the consumers of electricity must be supportive of the system by discharging their obligations and contributing their quota towards the emergence of an efficient NESI since all participants in the energy value chain are interdependent. It thus makes sense for all sector participants to work cordially and cooperatively toward the improvement of economic and civic conditions[22].


* By AbdulGaniyu Mustapha is a corporate attorney in Lagos and can be contacted at ganimustapha4@gmail.com

[1] Through the implementation of the Electric Power Implementation Committee’s National Electric Power   Policy 2001 which led to the Electric Power Sector Reform Act 2005.

[2] Cap E7, Laws of the Federation of Nigeria (LFN) 2004 (Revised 2010).

[3] Electric meter is a device which measures and records electricity production or consumption.

[4] Kaduna, Kano, Yola, Jos, Abuja, Ibadan, Ikeja, Eko, Benin, Port Harcourt, and Enugu Distribution Companies.

[5] It should however be noted that the Federal Government holds 40% shares in the DisCos

[6] See also, Conditions 41 (2) & (6) of the Distribution Licence Terms and Conditions.

[7] A statistic which is believed to be grossly understated.

[8]  The Nigerian Electricity Regulatory Commission – Consultation Paper on the Capping of Estimated Billings for Unmetered Electricity Customers. November 19, 2018.

[9] Order No. NERC/05/0001/13. Effective May 14, 2013

[10] P.O Olalere Esq. ‘’Are the DisCos Complying with their Performance Agreement on Metering the Nigerian Electricity Consumers?’’ http://www.spaajibade.com/resources/wp-content/uploads/2018/12/Metering-the-Nigerian-Electricity-Consumers-2018-Olalere.pdf visited last 29/03/2019.

[11] Regulations No. NERC/R/112. Approved by NERC on March 8, 2018

[12] Regulations 2 Meter Asset Provider Regulations 2018.

[13]  Edison Electric Institute, Handbook for Electricity Metering, 10th Edition, (EEI Edison Electric Institute Edison Electric Institute Publications. 2002)P. 557.

[14] https://www.nigeriaelectricityhub.com/2018/06/19/conflict-between-nerc-and-discos-over-n37-billion-fg-grant-to-private-meter-contractors/ visited last 5th April 2019

[15] CLS Stockbrokers LTD, Power Sector Report PT. 2 at http://www.cslstockbrokers.com/csl/images/stories/downloads/Economics/Power_Sector_IN_DEPTH_Report_part2.pdf last accessed 4th April 2019.

[16] Section 25 EPSR Act.

[17] https://www.thisdaylive.com/index.php/2019/04/04/n778-7bn-debt-to-nbet-weighs-down-power-discos/ visited last 5th April 2019

[18] http://thenationonlineng.net/shell-total-shut-four-gencos-gas-debts/ visited last 5th April 2019.

[19] The Nigerian Electricity Regulatory Commission – Consultation Paper on the Capping of Estimated Billings for Unmetered Electricity Customers. November 19, 2018

[20] https://www.sunnewsonline.com/power-sector-conundrum-as-news-of-total-collapse-spreads/ accessed last on 8th April, 2019.

[21] By this Regulation, DisCos are required publish in two national newspapers, details of successful applicants, the monthly metering service charge and a detailed roll out plan.

[22] Edison Electric Institute, Handbook for Electricity Metering, 10th Edition, (EEI Edison Electric Institute Edison Electric Institute Publications. 2002) P. 1.

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