Ten months after the Meter Asset Providers regulation was supposed to have kicked off, the Nigerian Electricity Regulatory Commission (NERC), electricity sector regulator appears to be running out of ideas on how to unlock over N138 billion investment opportunities in the sector.
There are conservatively, an estimated 4.60 million unmetered registered electricity customers, according to third quarter 2018 report of the Nigerian Electricity Regulatory Commission. At an average of N30, 000 per meter, the metering gap sums up to N138 billion.
However, analysis in a PricewaterhouseCooper (PwC) report “Bridging the Metering Gap” shows that this figure is underestimated, which represents an even bigger investment opportunity. It contends that about 50 percent of installed meters are either obsolete or faulty, hence due for replacement. Another factor that swells the metering gap is Nigeria’s population growth and rising number of households.
In 2017, Nigeria’s population was put at 190.80 million and projected number of households in the same year was 40.60 million. “This implies only 18.40 percent of Nigeria’s households are on the distribution network” the report stated.
An unstated yet logical deduction from PwC’s report is that 81.60 percent of Nigerian households were yet to be metered. Therein lurks investment opportunities, if the Commission is able to efficiently and effectively implement pro-market policies.
The MAPs regulation was designed to bridge end-user metering gap in order to eliminate estimated billing and open up the meter market to investors who are supposed to play in the sector as third-party financers of metering assets. This would have taken the financial burden of providing pre-paid meters to customers off the books of electricity distribution companies (DisCos), which persistently complain about their inability to charge cost reflective tariffs and poor collection rate.
There are already 115 companies approved on the Commissions “no objection” list under the MAPs regulation, ready to enter into agreement with Discos. This has not happened yet. “We do not expect the delay to last more than one month, counting down from January 2019” a source at NERC, who does not want to be identified, told BusinessDay.
The Commission, however, does not have an impressive record for delivering on policy. Since 2013, ineffective regulation has been the blight of the power sector. So far, NERC has been unable to enforce sanctions. Tariff is not cost reflective and Discos tend to abuse market rules.
Comprehensive metering was part of the performance agreements, which the Discos signed with the Bureau of Public Enterprises (BPE) during the privatisation exercise, but six years after, they have hardly followed the plan, resulting in widening metering gap.
Regulatory constraints
On acquisition of the electricity distribution assets, the 11 Discos committed to metering 1.75 million customers annually but the metering capacity of the Discos is constrained by the limited allowable capital expenditure (“CAPEX”) in the Multi-Year Tariff Order (“MYTO”).
The total annual CAPEX provision of N46.30 billion in the MYTO, if utilised wholly for metering is insufficient to meet the Discos’ annual metering commitment which is estimated at N52.50 billion annually – 1.75 customers at N30, 000 per meter.
Communication gap between Discos and the Commission
Over 50 percent of the Discos did not understand the terms and conditions of the MAP regulation. They supposed contracts with the MAPs were merely for procurement and did not understand the potential impact on tariffs and their books.
“Only four or five Discos have provided impressive progress report to the Commission” the source at NERC said on phone.
The electricity industry is a value chain comprising generating companies, transmission companies and distribution companies. Electricity distribution companies interface with end-users and collect tariffs. Low tariff collection rate by Discos hurts the value chain. This makes an urgent investment case for metering.
In this light, metering represents the foundation for sustainable revenue generation and commercial viability of the electricity sector. This means that Discos need to accurately account for inflows of electricity into their network and outflows of electricity delivered to customers.
STEPHEN ONYEKWELU
