30 January 2013

Nigeria: Electricity - Another Look At Nerc's Self Metering Plan

It was with mixed reactions in June 2012 that Nigerians received the federal government hiked electricity tariffs dubbed Multi Year Tariff Order (MYTO) II which provided that electricity consumer would no longer pay for meters.

The cost of metering was factored into the tariffs, chairman of the Nigerian Electricity Regulatory Commission (NERC) Dr Sam Amadi had said. Also, he promised that within 18 months from June, all electricity consumers in the national grid would have been metered.

In 2012, the NERC ad-hoc committee on metering came with a startling finding which indicated a huge deficit in meter deployment in the country. It said about N50 billion was needed to bridge the gap.

The committee's chairman, Mr. Bamidele Aturu while presenting the report to the chairman of NERC, Dr. Sam Amadi in Abuja, said the total number of customers captured in the records of operators in the Nigerian Electricity Supply Industry is 5,172,979 million.

The number represents 18.65 percent of Nigeria's total households put at 28,900,492 million as provided by records from the National Bureau of Statistics in 2006.

The report revealed that, "Out of the number of customers registered, 2,893,701 million or 55.94 were metered, while 2,355,045 million were unmetered. Out of the number of customers metered, about 701,385 or 22 percent of the meters were fully faulty."

The report said, "At present, a total of 2,956,069 million or 54.83 percent of all the customers registered are not metered or have no functional meters. On the average therefore, only about 2,434,541 million or a minute 8.42 percent of the total households in Nigeria are currently being billed correctly by the DISCOs if a household is used as a metering index."

The remaining registered customers are therefore at the mercy of estimated billing. "This development has created a wide gap in effective billing which calls for emergency response," the committee chairman said.

The commission had also in 2012 developed a framework for estimated billings for those yet to be metered as a means of removing excessive billing by the staff of the Power Holding Company of Nigeria (PHCN).

However, eight months after that announcement, not a single meter of the 2 million deficits is known to have been deployed under the post MYTO II metering plan. With only 11 months to go for the deadline and nothing to show for it, the federal government is now unveiling an alternative initiative.

The customer is to self finance the procurement of meter and stop paying the fixed charges until the cost of the meter is recovered.

Addressing newsmen in Abuja recently, the NERC chairman, Dr Sam Amadi said; "to date, records show that there are an unacceptable number of customers who are without meters. Compounding the issue is the menace of unrealistic estimated and crazy bills. This has compelled the Commission to explore alternative ways of ensuring the quicker deployment of electricity meters to customers."

By the new initiative, customers who pay for their meters are to be connected within 45 days of payment, Amadi explained.

Pertinent questions come to mind with the new initiative.

The distribution companies (discos) had agreed to deploy meters for free as part of the new tariffs but disappointingly, they haven't done so, eight months after. The inability of the discos to deliver on commitment remains a big minus from the new tariff regime, apparently going away with it, without hassles. No sanctions from the sector's regulators - NERC.

The NERC chief executive, Sam Amadi, had explained in 2012 that the discos would get loans from banks to deliver the free meters. That never happened. While blaming the discos for not showing enough enthusiasm for the deployment of meters as committed, he said the commission reserves the right to sanction them for their failure.

However, he said "regulation is not police work. It is problem solving. The objective is to finance the entire sector and we have met with the discos and heard their narratives."

He said the situation was not caused by "failure of enforcement" by NERC but partly due to the sky rocketing personnel cost after the salary increase of workers of the discos by government.

Last year, the federal government had raised the salary of electricity workers by 50 percent following persistent demand by the workers before the sale of the companies could be finalized.

Amadi further said the 'sector has to be 'grand-fathered'.

"We don't have to put people into panic. We need good sense and the sector is being gradually de-risked," Amadi said.

He added that the NERC Act provides for sanction for disobedient market participant, cancellation of licenses saying "we are not doing so now because of the transition the sector is undergoing."

As part of the power sector reform road map, the discos and power generation plants have been put on sale. Preferred bidders emerged last year. The payment and final take over by the new owners are expected to be concluded in the second quarter of 2013 as promised by the federal government.

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