Why Estimated Electricity Billing Won’t Go Away Soon

 

On Thursday, November 16 2017, it was excitedly reported in the media that the Federal Government of Nigeria has directed the Nigerian Electricity Regulatory Commission NERC to reinstate the regulation that permits power consumers to purchase electricity meters on their own. The regulation, known as CAPMI, the acronym for Credited Advanced Payment for Metering Implementation, allowed electricity consumers to self-finance meter acquisition and installation because of inability of Discos to promptly deploy meters to them. It was initiated by NERC in 2013 but terminated 3 years after.

This latest decision of government was made known at the recent third meeting of the National Council of Power presided over by the Minister Babatunde Fasola and supported by 27 council members from 27 states of the federation.

While this would appear to be huge relief for most electricity consumers for whom electricity bills have become a major headache under the burdens of estimated and ‘crazy’ bills,  a much deeper analysis of the ambiguous statements of the directive reveals the unending insincerity of government in ensuring that the policy really comes into force. A committed enforcement of the policy will effectively end the era of estimated bills. That is not a decision core investors and operators of the industry are willing to entertain in the immediate run.

The reason is simple. Installation of energy meters will reveal one thing: how Nigerians are being ripped off by electricity suppliers!

What many Nigerians don’t know is that if all the current paying consumers of electricity in Nigeria are properly metered and the actual energy consumption fairly measured and billed, either on the pre-payment or post-payment plan, none of the 11 DisCos can remain in the business, given the prevailing situation in the power sector. By extension, none of the other power companies, that is, GenCos, IPPs, can also remain since they in turn largely earn their revenue through the DisCos. Transmission Company of Nigeria, TCN, is likely to be insulated from such insolvency as it still remains a government concern.

For instance, Ikeja Electric, the DISCO with the franchise of Lagos northern area, receives an average daily allocation of 500MW. That is 15% of total load allocation on the national grid and so far the highest in the country. Even if Ikeja Electric distributes this level of power all through the 24 hour period of a day for the whole 30 days in a month, (a situation which is presently impossible considering load shedding, load rejection, high fault incidents, technical losses and other factors), the company can only make about N4 billion per month at the present tariff rates. However investigations reveal that I.E. rakes in as much as N7 billion every month. So where does this extra revenue derive from? It is estimated billing, employed only to serve the revenue drive of the power providers.

Rather than install energy meters at consumers’ terminals to accurately determine individual consumption, the prevalent practice is to measure aggregated consumption at the bulk supply points. Most electricity distributors rely mainly on energy meters installed at distribution transformer substations located close to the various communities and on those at the various injection substations from where the main distribution feeders supplying these transformers radiate. This arrangement gives the electricity distributors a general idea of the total amount of energy to be billed from these bulk supply points and, upon this basis bills are computed and shared, not on actual consumption but, on the size of buildings and the assumed activities inside the buildings. The problem with this approach however is that a large percentage of energy distributed is not consumed by those who are billed or those who end up paying. It is fraught with arbitrary assumptions which work towards a target revenue, and without due considerations to large technical losses, energy theft, etc.

“If, for instance, 10,000 megawatts (sic) are allocated to an area and we discover at the end of the month that 2, 000megawatts were consumed by metered customers, the balance of 8, 000 megawatts will be billed to the unmetered customers because it is assumed that they used them,” one of the distribution officers said.

A resident of Obawole in the Iju area of Lagos, Mr. Stephen Omotayo, lamented that he had applied for a prepaid meter for several months but was yet to be given by the Ikeja Electric. He said the development automatically made the power company impose between N9,000 and N10,000 estimated bills on his two-bedroom apartment. He wondered why the company denied him the meters, having completed all the processes.

Describing the formula as unfair and exploitative, the president of the Nigerian Consumer Protection Network, a consumer advocacy group, Kunle Olubiyo, a lawyer, said the methodology remained a kind of incentive for the beneficiaries (DisCos) not to invest in the network or metering. 

Instances of protests, demonstrations, and bitter complaints are regular features that exist in the frosty relationships between electricity consumers and their respective distributors. In the final analysis, they all come down to the perceived inhuman, exploitative enterprise of electricity providers cresting on the desperate needs of Nigerians for electricity. In many of these cases, the regulators and government have refused to take firm stand. Since the commencement of the privatization in November 2013, there have been several directives on customers metering designed to address the salient issues of fair tariff, transparency in transaction and other regulations that guide the electricity market. By the last count, six of such policies have been issued the last conflicting with the previous one.

What most Nigerians may be unaware of is the conspiracy of silence among the industry operators, the regulators and government to allow the investors continue to enjoy the criminal enterprise of estimated billing to enable them meet up in their target revenue. Yes, that the term, “TARGET REVENUE”. From the moment it became clear to many of these greedy investors, who came into the sector on the mindset that the power industry represents another cash cow for them, but that they had probably made a terrible investment calculations, the agenda of estimated billing became a very attractive alternative strategy. The idea of metering the consumers of electricity was really never an option in the immediate foreseeable run except for the industrial and commercial customers on Maximum Demand supply.

Decrying the foot-dragging posture of government in all these unfortunate developments,  policy analysts at the Institute of Policy Studies opine that the government already knew that its directive to the electricity distributors to supply meters to all its customers by 2016 was not going to yield any result.

Recall that the DISCOs had reluctantly embarked on ensuring that most if not all of their maximum demand (MD) customers, that industrial and commercial consumers of electricity were metered when government issued the directive that all such customers without adequate metering facilities provided by the DISCOs should stop paying. The directive also barred the DISCOs from disconnecting such customers. That directive became possible on the strength of concerted efforts of organized private sector and industrial pressure mobilized by the Manufacturers Association of Nigeria on behalf of its members. This class of customers also represents the most reliable paying customers for the DISCOs. It will be commercial suicide for the distribution companies if such directive is allowed to stay. A clear indication of this is their latest reaction to the eligible customers’ policy to which they have threatened to declare force majeure.

Recall also that the unending agitation for tariff increase is another very sore issue that has continued to rear its head among the industry operators. The lamentation that the present tariff regime is so unfriendly to their business has refused to wane down. There are also deliberate undercurrents by these distributors to control consumers access to electricity meters. Many of the excuses advanced by these DisCos about the very low meter roll-out experienced everywhere are not unconnected to the strategy of ensuring that the  regime of estimated billing is as protracted as it can be.   All  are calculated towards promoting the primary interests of driving  their profit margins as high as they can get.

Many keen watchers of developments in the energy sector are afraid that given the policy somersaults and the desperate face-saving actions of government in the power privatization exercise, the power sector might be heading towards the darkest moment of its history. According to them, it is becoming clearer by the day that there is urgent need for direct government intervention to arrest the total collapse of the sector.

 

Posted by Leye Akinmodiro

Leave a Reply

Your email address will not be published. Required fields are marked *

Not a robot *