21 August 2017

Nigeria: Hope, Anxiety As Govt Moves to Deregulate Electricity Meter Acquisition

The Minister of Power, Mr Babatunde Fashola, last week announced plans to liberalise the acquisition of meters by customers for the 11 electricity Distribution Companies (DisCos) to check complaints of overbilling.

The announcement, though greeted with ovation from some quarters, caused other customer groups and operators of power assets to call for a fair and transparent move in the intervention process planned by government. The Daily Trust dissects the perspectives in this report.

At the monthly power sector meeting held in Kano on August 14, 2017, Mr Fashola said government in the past, under the defunct PHCN, attempted to intervene in metering customers by introducing the Credited Advanced Payment for Metering Initiative (CAPMI).

He said CAPMI was wound up in 2016 "because of the distrust and disaffection it was creating between consumers and DisCos with government caught in the middle, with numerous petitions by customers who paid for meters that were not delivered within the approved time or at all."

He announced the new plan of the DisCos reaching agreement with their customers and supplying meters. "Some DisCos have come back to say that their customers still want to pay for meters and they can reach agreement with them on how to pay for it," Fashola disclosed.

Although he said government is supporting that, for customers to start paying for meters, the minister said the Discos have the obligation to meter customers in their utilities.

He said the Nigerian Electricity Regulatory Commission (NERC) will make regulations that will guide meter service providers, meter and retail franchise operators, community aggregation services for electricity sale and meter provision and low cost meter supply.

Once this is done, Fashola said the terms of licensing and the roll out of the metering programme will begin.

He noted that this liberalisation of meters is different from CAPMI because "it is not a government initiative which CAPMI was. However, through NERC, government will monitor and regulate to ensure that DisCos do not use this as an excuse to abdicate their responsibility to provide meters."

The Daily Trust analysis of the pronouncement shows that this same scheme is similar to CAPMI. The CAPMI which Fashola wound up in 2016 was a regulation of NERC in 2012 during the privatisation process.

The new plan, just like CAPMI, may allow customers to buy meters from DisCos or use it on a lease basis. Either way, the CAPMI methodology plays out when customers pay N24,000 for a single phase meter and about N54,000 for a three-phase meter.

Checks show, however that unlike CAPMI when meters were delayed for those who paid, there seems to be more meters available if this new plan works out as Fashola said government has approved the injection of N39 billion loan to contractors for meters.

AfDB proposes metering firm with FG's equity

Another metering plan is the proposed intervention of the African Development Bank (AfDB) to create a Metering Asset Company (MAC) with the Federal Government owning equities through the Bureau of Public Enterprises (BPE) and other partners.

The presentation seen by Daily Trust says the company will draw funding from the government (BPE), Development Finance Institutions (DFIs) including AfDB and IFC; the Nigerian Sovereign Investment Authority (NSIA), local banks, meter manufacturers, private funding and the DisCos.

The presentation, made at a workshop on metering challenges in Lagos on July 17, 2017, confirmed that addressing the metering gap was part of the Power Sector Reform Plan (PSRP) started by Fashola in April.

It noted that only about 3.4 million out of the 7.5m customers have electricity meters, according to NERC, creating a gap of 4.1m. Half of the meters installed are faulty, non-functional or obsolete with additional 1.7m meters needed, it said.

It hinged the intervention on DisCos' financial constraints to meet their metering obligations under the Performance Agreements with the Bureau of Public Enterprises (BPE).

"In 2016, the DisCos only installed 215,424 meters - far below the 1.7 million commitment," it said.

To tackle this shortage, the proposal said the newly created Special Purpose Vehicle (SPV) Meter Asset Company (MAC) will finance, procure, supply, install and maintain meters.

On its operation, MAC "will enter into a service agreement with selected DisCos to deploy a specified number of meters in exchange of a service fee calculated as 'periodic meter lease payments up to cost recovery, and 'a proportion of the electricity payments made by end-users to the DisCos.'

Once the DisCos accept, MAC will install meters for the customers and during the lease period, the new company MAC partly owned by government will be "fully owned and managed by MAC" but electricity bills (including meter leasing fees) will be paid by customers to the DisCos.

This means, customers will be compelled in a future regulation to pay 'leasing fees' for meters if the proposal scales through.

For meter purchase by customers, Fashola at the meeting last Monday said, "Anybody who qualifies under safety regulation by the Nigerian Electricity Management Services Agency (NEMSA) and under licenses issued by the Nigerian Electricity Regulatory Commission (NERC) can supply meters to customers... Meter supply is an open but regulated business."

However, NERC 2017 licensed metering service providers' document showed that there is no provision for meter sellers that would sell directly to electricity users. The record showed that there are four meter manufacturers, 21 importers, five vendors, 40 corporate installers, and individual installers. There is no direct company that supplies meters to customers except the DisCos during the CAPMI period and at present.

What NERC may do in its proposed regulation is to add such licencees of which the MAC being proposed by AfDB with government backing will be at the centre, contracting the other licencees for provision, installation and maintenance through the DisCos, if the plan scales through.

The process for the MAC is ongoing, sources privy to it said. Investors will be invited through an Expression of Interest (EoI) for the pilot project. AfDB said it will seek government endorsement for the structure and equity holding and move to selecting two pilot DisCos for the phase 1 after which they will reach a financial close.

Some electricity customers who spoke on the minister's proclamation argue that the only transparent means of solving the metering issue is to allow meter dealers have sales outlets for NEMSA certified meters at the service centres of DisCos so that willing customers can buy and have them installed immediately just like buying poles, cables and transformers.

Chief Matthew Oloh, a commercial customer class and fruit juice producer in Nasarawa State said, "I am happy about this but if it is not customers buying the meters directly, then there is no assurance for us. Why must government even be involved in the process of buying and supplying meters," he queried.

"Special attention must be paid to procurement issues with all the board members of the licensed firms made open to the public. Transparency is what will work in the sector if customers are to get meters promptly," said Arc. Robert Atuche, a residential customer in the Karu area of FCT.

For Engr. Bature Usman, a meter and transformer installation expert in Kaduna metropolis, the move will mean more business for installers, meter suppliers and vendors. He however urged NERC to expedite action on the planned regulations so that Nigerians can see the clearer picture of how it will work.

The Association of Nigerian Electricity Distributors (ANED) representing the 11 DisCos was yet to comment on the pronouncement by the minister. Its officials told Daily Trust that it was making consultations before making any reaction on the development.

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