Nigeria’s electricity regulator is fine-tuning a regulation that will cap the amount electricity distribution companies can charge in the current estimated billing regime, in order to dissuade use of the billing method and provide incentives for mass metering.
The Nigerian Electricity Regulatory Commission (NERC) is not stopping at simply capping estimated billing for electricity distribution companies (Discos), it also plans to de-risk and securitise the power sector because banks have become risk averse with regard to the power sector and investors are equally slow to commit funds because the sector is foggy. And the Discos say electricity tariffs have not been cost reflective, a situation which persistently keeps electricity distribution companies’ books in the red zone.
A source at the Commission who has been part of the deliberations to cap estimated billing exclusively told BusinessDay that they Commission is consulting with the Discos and in the coming months the regulation will be rolled out. However, the source did not disclose further details with regards to specific timeline for implementation.
“We have presented three alternative methods to the Discos on how to calculate the cap amount for their respective franchises. They have chosen one of the methods” the source said.
On acquisition of the 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, according to PricewaterhouseCoopers (PwC) estimates.
This is the reason why the Commission introduced the Meter Asset Providers (MAPs) regulation, which effectively deregulates meter ownership. It presents an option which comprise an operating lease where a third party, funds, deploys, operates the meters and retains ownership for a defined period while the DisCos pay a periodic “rent” for using the meters.
“The idea of introducing a cap for estimated billing in my mind is a sign that NERC does not want electricity customers to have meters. The tariffs may not be fair” Obiageli Okoye, a makeup artist who owns a shop at Maza-Maza, a transportation hub at Amuwo-Odofin local government area said.
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.
With an adequate metering system in place, transparency will follow and an assurance of fair billing and payments to and from suppliers and customers alike. This implies that metering must be a top priority for DisCos and the entire power sector value chain whose respective costs of service are all embedded in the final utility bill borne by the customer.
“It will be presumptuous for me to comment on a regulation that is not yet out. Once it is in the public domain, call me again and we will talk about it” Pedro Omontuenmhen, partner at PwC Nigeria said.
