• Thursday, July 18, 2024
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BusinessDay

Why electricity meter access projects fail in Nigeria

electricity meters

Plans by the power sector regulator to provide meters to Nigerians appear doomed even before they have started because of a plethora of reasons among them the revelation that majority shareholders at most of the electricity distribution companies (DisCos) perfected plots to sabotage the initiatives, sources tell BusinessDay.

A detailed investigation by BusinessDay found that related to this was the exorbitant price of the meters in Nigeria, a direct result of the ploy by DisCos to control supply and thus price of the meters.

As a result the cost of meters in Nigeria is more than 100% more than it should cost the ordinary Nigerian customer. Businessday investigation found that China’s largest electricity meter producer (name withheld), can supply all Nigeria’s meter requirement in one year and at a price no more than N25,000 for a single-phase meter and N60,000 for three-phase meter and this is after a good margin has been factored in.

Thirdly, the plan to make meters available to all customers has been consistently sabotaged by the Discos who discourage the metering of their customers so they can continue the notorious estimated billing of consumers which on the average allow DisCos charge customers up 70% more than they would have charged if the customer had a meter.

Businessday was told that the Discos fear they will suffer revenue loss if tall their customers were metered and because of this they have worked to frustrate the well-structured MAP scheme worked out by the regulator, NERC.

A senior manager in one Disco said, “generally there is the concern that full metering will lead to a significant decline in revenues.”

Another reason why the meter access plan has not succeeded is that the Disco have largely failed to invest in upgrading their vending platforms which dispense the codes that are assigned to each pre-paid meter. These platforms need significant upgrade to be able to handle the jump in the number of pre-paid meters in their network that will arise should all consumers be supplied with meters.

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Businessday learnt that despite the good intention of NERC, the regulator generally does not appear to fully understand the intricate web of deception created by the Discos to circumvent market rules or to sabotage them.

According to one senior engineer, “truth is, meter access is not being hindered by lack of cash and it appears the people at NERC do not understand this. This explains why NERC is pushing for a CBN and World Bank funding to expand meter availablability in Nigeria.

“Why do you say Nigerians cannot buy electricity meters for their homes when these same Nigerian home owners have built their houses, paid for the toilets, kitchens, wiring and are buying for themselves Chinese smart phones, sometimes two or three in one household; when these same Nigerians are buying Gotv decoders without the support of a bank loan.

“Check very well and you will find that it is the case that these same Nigerians they say cannot pay for meters without a CBN or World Bank loan are the same people who are depositing cash for meters and having to wait for months without being supplied the meter.

“So, who is financing their Gotv decoders or their Chinese smart phones or the deposit they are placing with DisCos for meters?”

A source said, “NERC has to change its thinking about the issue of funding for meters and they must interrogate the the entire matter of meter access very well.”

Secondly, he said “everything must be done to bring down the price of meters significantly with NERC cracking the whip to remove Discos from controlling the process of meter supply and deployment.”

According to one Meter Access Provider, MAP license holder, his company was told by a Disco that they were not needed by the DisCo to supply meters because they had them in their warehouse. The MAP license holder was later told he had to buy meters from the DisCo subsidiary if he was keen to supply meters to the DisCo and at an agreed price which allows the DisCo use transfer pricing to make huge profit.

Two power transactions lawyers who spoke to BusinessDay confirmed that some of their clients have been discouraged from pursuing contracts to supply meters to the DisCOs which had initiated the process of setting up a meter deployment business.

“The DisCos set up their own related companies or buy stakes in these businesses and this has derailed investments plans,” said one lawyer who only agreed to speak to BusinessDay on condition of anonymity.

The lawyer said “the danger with allowing subsidiaries of DisCos setting up these kinds of companies to acquire procurement contracts to execute projects like metering is that it removes the scrutiny and accountability that would have been present were purely independent parties are allowed to execute the contract, it creates a conflict of interests and fosters corruption as it removes obligations for related parties to do business on ‘arm’s length basis’.”

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Wolemi Esan, energy lawyer and partner at Olaniwun Ajayi said it would be difficult for DisCos to directly set up another business apart from distribution of electricity.

“By the terms of their license, they are not allowed to do anything else apart from power distribution.

Esan said that MAP programme was designed in such a way as to avoid abuse through competitive bidding process, the regulator fixing the prices and a third-party vendor licensed to procure meters.

However, some beneficial owners of some companies are not always visible to the public. Many are layered to hide real owners, a development the new Companies and Allied Matters Act amendment is set to correct.

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 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. In September 2016, CAPMI was cancelled. Between November 2013 and June 2016, only about 500,000 meters were deployed by the 11 Discos within their networks, with less than 35% of that directly done by the Discos, said NERC.

“Some Discos were merely selling meters to their customers in the guise of implementing the CAPMI. Some Discos were reprimanded for their non-compliance to the CAPMI order, yet there was minimal improvement in meter deployment,” said Anthony Akah, then Acting Commissioner of NERC.

The DisCos blamed the regulator for bowing to popular discontent over tariff increase and failed to effect a cost-reflective tariff that would have made it easier for them to procure meters. They also said the exchange rate devalued in 2016 hiked the cost of meters way beyond their reach.

In reality, estimated billing has provided DisCos easy access to revenue without putting in the work. DisCos did not invest in technology upgrade to enumerate customers and collect their data so, when NERC introduced the MAP programme in 2018, DisCos gave the scheme only half-hearted support and many quickly began to take position in the new meter firms.

Matters worsened the next year when the Federal Government introduced a 35 levy on meters. This misguided policy and the inability to raise finance according to NERC’s 2019, fourth quarter report accounted for the slow pace of the metering programme.

DisCos also said that the sector requires a long-term, financing from multilateral organisations like development banks to fund universal metering for all electricity users.

“The MAP programme tailored for extended repayment because there is no long-term fund for the MAP providers to tap into to provide long term repayment schemes. MAP providers can only access short term commercial loans at an average of 18-20 percent to be passed on to the repayment program,” said Kester Enwereonu, director at Enugu DisCo in an opinion piece published in BusinessDay.

Electricity meters, a non-issue in poorer African countries faces undue complications in Nigeria due to insincerity of operators and poor regulation.

Currently, discussions are on in government to secure a total of $350million in financing from the World Bank and the Central Bank of Nigeria to provide meters across Nigeria.