To solve the problem of estimated billing, the electricity sector regulator, the Nigerian Electricity Regulatory Commission (NERC) granted licenses to third-party investors to provide customers meters for a fee. Nearly three years later, less than 10 percent of the contracted volumes have been delivered.
According to data released by the regulator on Friday, out of the contracted 6,588,971meters under the Meter Asset Providers (MAPs) programme only 508,812 or 7.5 Percent of contracted volumes have been supplied.
This presents an existential threat to the power sector where on average only 22 percent of market invoices were remitted back to players by DisCos in the first 9 months of 2020 and continues to fuel discontent because customers believe they are being cheated when placed on estimated billing.
Enter MAPs
When the MAPs regulation was issued by NERC on March 8, 2018, the Commission said the aim was to fast-track the roll-out of end-use meters through the engagement of third-party investors for the financing, procurement, supply, installation, and maintenance of electricity meters. The effective meter roll-out date started in May 2019.
Customers would be required to pay a service charge along with the energy charge. Customers who choose to buy meters can do so through the DisCo, and upon certification of the premises, MAPs shall install the meter in 10 working days.
The MAPs regulation is significant because it effectively unbundles Nigeria’s electricity distribution sector, by re-allocating the responsibility for providing metering services, effectively creating a new class of market participants -Meter Asset Providers.
Under the MAPs regulation DisCos are prohibited from self-dealing which means that DisCos and their core investors, including their subsidiaries, affiliates, directors, and their relatives are prohibited from setting up, owning shares, or holding directorships and senior management positions in the MAPs.
It also places an obligation on the DisCos to conduct an open and competitive bidding process for MAPs. To ensure compliance with statutory requirements, procurement processes for metering services were subjected to top-level review by tender auditors who were engaged by NERC to audit all meter service procurement.
The regulations placed a mandatory obligation on DisCos to provide payment security within 30 days of executing an MSA with a MAP and the regulation adopts a framework that ensures that commercial expectations are managed and contractual obligations are enforceable between the MAPs and DisCos.
Read also: Group urges Nigerians to stop buying transformers for Discos
“It is a very big lift; it will enable the meter manufacturers to be busy and enhance their capacity,” Kola Balogun chairman, Momas Electricity Meters Manufacturing Company Ltd, an indigenous meter provider said at the time.
Balogun said it will allow some investors to inject a high-value capital into the metering scheme, which will eventually lead to the liberalisation of metering because there is now an opportunity for consumers to pay and get meters immediately.
The Electricity Meters Manufacturers Association of Nigeria (EMMAN) also said the move will create massive employment opportunities for Nigerians and ensure the transfer of technology to Nigeria as well as enhance Foreign Direct Investments (FDIs).
These hopes are wilting away as a visit to the customer center of any DisCo will show. Thousands of Nigerians besiege them every day and their chief complaint is lack of meters. Like many other regulations in Nigeria, MAPs regulation is a vivid reminder of the Nigerian dystopian reality where brilliant regulations suffer from poor execution.
How MAPs began to fail
The first signs of cracks in the policy became evident when the initial commencement date (March 8) was postponed to May. Sources told BusinessDay this was because DisCos tried to set up their own procurement subsidiaries to supply meters against extant rules in order to control the entire process.
Some DisCos demanded from potential investors details of their plans with a view to setting up the same business. This contributed to initial hiccups in the negotiation and raised the final cost of meters approved by NERC.
According to one MAPs license holder, he was told by a Disco that he does not need them to supply meters because they had them in their warehouse and later wanted the MAP license holder to buy meters from their subsidiary and then to supply back to the DisCo at agreed price using transfer pricing to make a huge profit.
Findings also showed that some investors selected by the various DisCos and approved by NERC started as MAPs, failed to meet meter orders because they were cash-strapped.
The regulation had allowed for both upfront payment of meters and payment on installment basis. So investors required a large capital outlay to import bulk meters. Local manufacturers were constrained by difficulties acquiring foreign exchange for some input.
To further compound matters, in 2019, the Federal Ministry of Finance introduced a 35 percent import levy on electricity meters, raising both tariff and levy to 45 percent. The Nigerian Customs Service swung into action with immediate implementation of the policy but were also applying it on Semi Knock-Downs (SKDs) which some assembling plants imported to build an electricity meter. Unable to clear the meters at the ports, they began to pile up.
“Nigerian Customs are the reason Nigerians are not getting meters today,” Chantel Abdul, managing director of Mojec International, a local meter assembling outfit told BusinessDay in March last year.
Abdul said that there were hundreds of cargoes of meter components for production stuck at the ports because the Nigerian Customs is demanding a 35 percent levy and a 10 percent duty before they can clear them.
Analysts said that the levy was an egregious display of lack of coordination by government agencies.
“It doesn’t show we are serious about encouraging meter roll out if we are increasing import duty at the same time,” said Chuks Nwani, an energy lawyer and vice president of Power House International, a Lagos-based consultancy.
Same old problem
As the creaking MAPs programme trudged on, millions of customers could not get meters, investors complained that foreign exchange difference has raised the cost of meters.
DisCo revenue was badly impacted. A reconciliation done last year showed they owed a combined sum of N622.4billion, and interest accrued on this debt has risen to N308.2 billion.
In June 2020, NERC increased the price of single-phase to N44,896.17 from N36,991.50 and three-phase meters to N82,855 from N67,055.
In July, NERC approved a new tariff system, the Service Reflective Model, where customers will be charged based on the number of hours they are supplied with power daily. It was postponed to September due to COVID-19.
But labour groups threatened strike action and the Federal Government reached an agreement with them which includes the provision of free meters to customers.
As part of this measure, in October, the Federal Government announced a plan to provide 6million free meters for electricity customers under the National Mass Metering Program (NMMP) to be funded by the Central Bank.
The NMMP is to roll out 6 million meters for all connection points on the grid without meters over the next 18 to 24 months. It is estimated that this will impact 30 million consumers.
But analysts have raised concerns about how it will work alongside the MAPs, showing an absence of clear thinking and likely accounts for its poor success. The FG has only been able to distribute only 16,300 meters under the NMMP.
Though MAPs have been included in the NMMP, there are still questions about who will pay for the meters estimated to gulp over N269billion.
“ I don’t know how the government that is currently borrowing to finance basic obligations will pay for it,” said Ayodele Oni, an energy lawyer, and partner at Bloomfield law firm.
Still no meters
According to NERC data, only 4,231,940 or 40.39 percent of the total customer population of 10,477,856 are metered as at the end of the first quarter of 2020. With 59.61 percent of the end-use customers on estimated billing, apathy to settling electricity bills continues to grow.
Until recently, DisCos have taken a dim view to metering their customers. Prior to the privatization of the power sector, Nigeria had a huge metering gap estimated at over 3million in 2012. At the time of taking over in November 2013, the Discos had a pact with the Bureau of Public Enterprises (BPE) and NERC to bridge this gap.
This was not achieved in 2012 hence NERC approved the implementation of Credit Advance Payment for Meter Installation (CAPMI) in March 2013, where customers pay in advance for meters as credits to be recouped from future payments for electricity.
But the scheme did not work quite as expected and was canceled in September 2016 and since then customers have been marooned ever since.
