Estimated billing is painful!
Many electricity customers in Nigeria have no meters or are saddled with faulty meters to measure their electricity consumption. For these categories of people, the Electricity Distribution Company (DisCo) issues a bill based on an estimation of the electricity consumed. For many, such estimated bills are received with shock, anger and pain, since they are generally higher than payments made by customers with functional meters, who have similar consumption. The pain is made worse by realising that failure to pay leads to disconnection from electricity supply.
In the Nigerian Electricity Supply Industry (NESI), DisCos operate as the collection agents for the sector. Therefore, they must accurately account for inflows of electricity into their network and outflows of electricity delivered to customers. Without a doubt, metering for all customers is the right path to end estimated billing and provide customers with the assurance of fair billing. Metering also represents the foundation for sustainable revenue generation and commercial viability for DisCos and all stakeholders in the electricity sector. However, the path to metering for all is neither simple nor cheap.
A Plethora of Metering Intervention Programmes
Nigeria continues to struggle with a huge metering gap. 6.75 million customers are unmetered according to the Nigerian Electricity Regulatory Commission (NERC), and 38.91 million households need meters according to PwC estimates.
Metering constitutes a key performance target for the DisCos based on the contractual obligations enshrined in their respective Performance Agreements and regulatory targets. Therefore, all eyes are on the DisCos to close the metering gap and end estimated billing. However, DisCos keep pushing a position that without cost-reflective tariffs, there is simply no bankable business case or financial incentive to justify the capital investments (N52.5 billion annually according to PwC estimates) required to close the metering gap. As a result, customer agitations and a clear intent by the government to address the metering challenge has led to various intervention programmes, which while laudable, have not delivered the desired results.
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The first post-privatisation initiative was the Credited Advance Payment for Metering Infrastructure (CAPMI). NERC introduced CAPMI in 2013 due to the slow pace of customer metering by the DisCos, the high level of complaints received from customers, and dissatisfaction with the estimated billing practices. CAPMI provided a platform for willing customers to pay the cost of the meter into a dedicated account jointly managed by the DisCo and the meter vendor/installer. The Order stipulated that the customer would have their meter installed within 45 days of payment by a NERC accredited Vendor/Installer. However, CAPMI was terminated in November 2016 due to widespread complaints that most electricity customers were not being metered even after making payments beyond the agreed 45 days.
To address the widening metering gap considering past initiatives that have failed, NERC promulgated the Meter Asset Provider (MAP) Regulation in March 2018. The MAP regulation was to govern the relationship between the DisCos and third-party meter financiers and vendors focused on achieving three (3) core objectives: provide third party financing for metering, accelerate meter deployment and end estimated billing of customers.
Through the engagement of third-party meter providers by the DisCos, the MAP scheme was to relieve the DisCos of the responsibility of financing, operations, and management of meters. In addition, the Regulation was crafted to attract private investment in the provision of metering services and enhance revenue assurance in NESI. However, the MAP scheme as a regulatory intervention in the sector was considered to have limited success due to a plethora of issues ranging from regulated meter prices, insufficient local manufacturing capacity, unrecoverable import tariffs/levy imposed on the imported meters, bottlenecks at the port and more importantly the outbreak of the COVID-19 pandemic which disrupted global supply chains particularly China, etc.
Again, to address the issues associated with the MAP implementation, the Federal Government launched the National Mass Metering Programme (NMMP) in October 2020 through the Central Bank of Nigeria. The NMMP should facilitate the bulk procurement of 6.5 million Meters at the cost of US$405 million. The thrust of the NMMP was to increase the meter deployment rate, encourage local production and create jobs in the local metering value chain. However, the NMMP scheme has also been fraught with challenges, i.e., delayed deployment of meters despite the release of funds, uncertainty around who gets a meter and when it will be deployed, and the inability of willing customers to buy meters through any other channels.
The electricity sector has used a customer-led method (CAPMI), a service provider method (MAP) and now a Government-DisCo method with Government / CBN concessionary loan (NMMP) in attempts to close the metering gap. The varying impacts of the various metering interventions lend credence to the position that the different stakeholders in the electricity sector have varying incentives for metering customers. Evidently, a holistic and inclusive metering policy or regulation allowing all these interventions, initiatives, and programs to run concurrently and in parallel will go further and faster in delivering meters for all.
Way Forward: Hard Regulation vs Light Regulation (Liberalisation)?
For the sector to achieve meters for all customers and end estimated billing on time, below are a few suggestions on shifting metering policy and initiatives towards a Light Regulation (Liberalisation) regime in the electricity sector:
• Liberalise the purchase of meters by allowing everyone to freely select their preferred option for buying meters from approved meter suppliers. Furthermore, creating multiple meter financing and procurement channels allows for significant financing flows into the metering space and rapid deployment of meters, i.e., Customers can cash purchase meters directly similar to the Meter Asset Provider (MAP) initiative, customers can source equipment finance via the banks, DisCos can leverage concessionary funding from the CBN akin to NMMP. Even State Governments, Development Finance Institutions (DFIs) and Governmental Organisations (NGOs) can finance meter procurement via special intervention programs.
• Remove metering CAPEX from the base tariff. Instead, include meter costs as a separate line item only for customers whose meters were financed and procured by the DisCos.
• Eliminate price control for electricity meters. Instead, allow input costs and market factors to determine the selling price. This approach will create the required incentives for a competitive meter market that will unlock much-needed private capital, a large volume of meter supplies, innovation, and local manufacturing to take advantage of the opportunity landscape. Ultimately, the customer benefits from eliminating estimated billing and the assurance of fair billing, which is critical under a cost-reflective tariff environment.
• Enforce local content requirements. Increased local content metering would drive local and naira denominated investments, create jobs, stimulate skills and technology transfer. However, enforcement should be incentivised by the reduction in price controls and tax benefits, which allows local production to thrive and potentially compete across borders.
• Standardise and enforce meter specifications and quality requirements. Standardisation should be in conjunction with the DisCos to establish baseline meter specifications and create a level playing field for all stakeholders (suppliers and customers).
• Standardise the meter registration and customer onboarding process to allow easy and seamless registration of meters procured via any available channel.
