The Executive Director, Research and Advocacy, Association of Nigerian Electricity Distributors, Sunday Oduntan, tells OKECHUKWU NNODIM how the power sector will be adversely affected if the National Assembly passes the bill to criminalise estimated billing
What are your views about the bill seeking to criminalise estimated billing which is currently before the House of Representatives?
It is important to let people know that we are aware of their various concerns and that the bill actually seeks to ensure that we provide meter for all customers. We understand that the legislators need to address a vexatious problem for their constituents. We also know that the lawmakers are sensitive to their motivation to provide relief to customers who have been billed in excess of their actual consumption. But one thing you must understand also is that we absolutely do not take our customers for granted. Therefore, it would be idiotic for us to ignore the fact that we are in this business because of our customers. Now, because we don’t always get it right, I would like to profoundly apologise to any and all our customers who have been subjected to excessive billing. We are committed to fixing the problems and we will continue to work to correct any mistakes. Indeed, comprehensive metering is the desired objective of power distribution companies and there is no greater champion of this than the Discos.
Now, to do justice to your question, there is a need to provide some background. The metering problem almost goes back to the centralisation of electricity production, when the Electricity Company of Nigeria was founded in 1951. The Federal Government sought to address this metering gap with the National Pre-Paid Metering Programme long before the privatisation of the sector. But this programme failed due to corruption, inefficiency, lack of proper coordination, etc. When investors in the distribution companies came along, there was no true estimate of the metering gap. Indeed, the Discos, under their performance agreements, were only obligated to meter 1.7 million customers over a five-year period. The estimate of the metering gap at that time was significantly less than the currently identified four million gap.
Okay, now that you know the current metering gap, what is stopping you from bridging it?
Typically, the cost of the meters is incorporated into the tariff that you and I pay. So the cost of the meter has an upward impact on the tariff. For instance, the 1.7 million meters that the Discos are obliged to provide will cost N124bn, assuming they are three-phase meters at a cost of N73,000. To address the four million metering gap would cost N299bn. But the tariff only allows a total of N305bn for the 11 Discos over a five-year period to provide for capital investment such as metering, transformers, distribution network expansion, building of injection substations, etc. When you look at it another way, you will realise that providing meters for the 1.7 million customers as stated in the initial metering obligations would amount to 40 per cent of the money that was provided for every capital investment under the tariff. Meeting the four million metering gap would require 98 per cent of the money provided for capital investment under the tariff. Even more important is that to be able to address all the other critical capital investments and achieve comprehensive metering, the tariff would have to go up significantly.
Now, when you consider all the above explanations and some others that I’ve not mentioned here, you will appreciate the reason why it has not been easy to meter all customers up till this moment despite our genuine desire to get this done. The amount required to do this is huge and the allowance provided by the Nigerian Electricity Regulatory Commission in the tariff is minimal if you say it is to be used for just metering, excluding other things like the provision of transformers, injection stations and many others.
But how far have you gone in terms of meeting the metering demand?
There is nowhere in the world where you have four million meters waiting on the inventory. So, the meters will have to be manufactured. However, we have been providing meters for a lot of customers. But we admit that the gap or those who had yet to have their meters are enormous and we are trying to get them their meters, especially when you consider the new policy and the Meter Asset Provider initiative recently introduced by NERC. It is also important to state that the optimal installation of meters on a monthly basis per Disco is 20,000 meters. So, comprehensive metering cannot be accomplished soon. This is consistent with other countries that have been in a similar situation. It has taken five to ten years or more. You may ask why I said so. I will like to tell you that significant components of the meters are imported; so, it would require ready access to foreign exchange, with the cost being impacted by the diminished value of the naira. Also, the liquidity constraint of the sector adversely affects the ability of meter manufacturers and Discos to access debt financing for such a magnitude of metering gap that can only be bridged through the supply of about four million meters.
Since you don’t want the bill by the National Assembly, seeking to criminalise estimated billing, to be passed, in what ways are you currently addressing the unfair impact of estimated electricity bills on customers?
NERC has enacted the Estimated Billing Methodology which the Discos are mandated to apply in computing the bills of unmetered customers. So, if a customer believes that their estimated bill is inconsistent with their consumption, they have a right to dispute the bill by visiting their respective Discos business office. Discos are installing Check Meters, in instances of high estimated billing complaints, to better track customer’s consumption. Some Discos have incorporated manual energy calculators on their websites to further address issues of excessive billing or related disputes.
I will like to state that going forward, Discos are committed to meeting their metering obligation under their Performance Agreements. To date, a little over 1.5 million meters have been installed and we will do comprehensive metering ultimately. Credit has to be given to NERC, the regulator, which has rolled out the Meter Asset Provider regulation expected to alleviate some of the estimated billing challenges. It is our hope that under an expected Major Tariff Review, that consideration will be given to increasing capital expenditure provision that will enable the Discos to give the customers the meters that will enable them to manage their electricity consumption.
People believe that Discos prefer not to meter customers because they make more money from estimated bills. What would you say about this?
That is not true. In fact, let me tell you here and now that metering results in an estimated 30 per cent reduction in collection losses. Metering establishes a balance between energy supplied versus energy consumed by the customer, thereby reducing customer alienation. Metering allows for energy efficiency, allowing customers to manage their consumption and freeing up limited energy. Metering allows for assured or protected revenue for the Discos and this keeps the value chain commercially viable and promotes increased generation of electricity.
Why do Discos bill customers excessively through estimated billing?
Some of the reasons for excessive billing are because electricity theft in the sector amounts to 40 per cent of energy supplied. Also, 20 to 30 per cent of all meters are tempered with or bypassed. Increased supply leads to increased consumption. The cost of electricity is centrally recovered, so those illegal connections drive up the cost of your bill.
Since you oppose the bill on estimated billing, what are the possible effects of the proposed legislation?
First, there will be a mass disconnection of customers who do not have meters. And that is a fact. We won’t be able to collect our money if those without meters are being supplied electricity. To avoid this, we will have them all disconnected. Also, there will be adversity for customers that are unable to meet the required cost of a meter. There will be increased cost to customers with meters as a result of the Discos’ inability to disconnect customers who do not have meters but continue to consume electricity. We will experience diminished investment in service delivery and possible Disco bankruptcy due to the reduced inflow of revenue. We will also see force majeure implications for the investors due to a change in law. There will be a complete and total absence of foreign direct investment and the cheap capital that is needed to turn the sector around. The absence of such capital means that the sector will never grow and the possibility of a reversal of any gain of the sector is a very strong possibility.