12 months from now, it will be a full decade since the privatization of the generation and distribution chain of the now defunct Power Holding Company of Nigeria (PHCN), the state utility enterprise that was the sole player in the generation, transmission, and distribution of electricity in Africa’s most populous country.
The privatization was undertaken largely due in part to the failure of PHCN and its predecessor company (National Electric Power Authority) in turning the corner of value delivery in the power sector in a country of over 200Million people. The failings of PHCN stalled economic growth, industrialization, and impeded the standard of living of an ample size of the population as a result of incessant power cuts and blackouts. Given this reality at the time, many observers and stakeholders alike believed privatizing the power sector was the be all and end all.
So, on November 1, 2013, the generation and distribution arm of the power sector was privatized into six generation companies (Gencos) and 11 distribution companies (Discos). The privatization of the 11th distribution company wasn’t completed until November 2014.
Behind the figures are humans who mostly struggle to pay the estimated bills delivered to them by the distribution companies – in addition to the occasional cost of maintenance of supply transformers and other sundry distribution lines that the discos have abdicated the responsibility to the consumers
Going by unceasing power outage, the unbundling has yet to deliver the benefits that necessitated the denationalization in the first place. The gap in value delivery has been ascribed to non-cost reflective tariffs, energy theft, non-payment of utility bills by consumers, obsolete power distribution infrastructure, and belly-up metering systems, among many other relevant reasons. To tackle this barrage of challenges, money is required. This is one place the Discos fall short.
Given that the Discos are the interfacing entity with the end users of their product offering (electricity), they are responsible for collecting revenue for every service provider in the power sector value chain, and with every sense of reason, effective metering is the substructure upon which efficient revenue collection, the continuity, operationality, and profitability of the power sector rely.
For not meeting up these metering responsibilities, the power sector has been cash constrained, which has led to little investment in infrastructure that will help improve operational efficiency, deliver value and drive down ATC&C (Aggregate Technical, Collection, and Commercial) loss – which was a major basis for selecting the successor distribution companies. PwC, the consulting giant, reckons that the ATC&C loss is at about 45%.
ATC&C loss is characterised by losses on the distribution lines due to heat on aged lines and vandalism; billing inefficiency and revenue collection ineffectiveness. Even when it is known that the metering of the distribution network of the Discos and the customer’s place of use is key to improving collection and commercial loss, there has been tardiness on the part of distribution companies to undertake mass metering in almost 10 years since they took over. Many unlucky customers without functional electricity meters, have to contend with estimated bills that are generated by the distribution companies who do this by spreading the naira value of the outstanding units of energy not accounted for by metered customers and delivered to their network to the non-metered customers. For many customers in this category, it is either they are overpaying, given that their electricity usage cannot be accurately gauged, or underpaying the Disco – whichever way it goes, it is a loss to the customer or to the distribution company.
With the aforementioned loss to either customer or distribution company, why then does the metering gap persist? The devil is in the detail. Policy efforts like CAPMI (Credited Advance Payment for Metering Implementation), the MAP (Meter Asset Provider) regulation by the Nigerian Electricity Regulatory Commission (NERC), and more recently the NMMP (National Mass Metering Program) by the Central Bank of Nigeria have barely scratched the surface of the metering gap conundrum.
The CAPMI programme, according to NERC, “provides a platform for willing customers to pay the cost of the meter into a dedicated account jointly managed by the Disco and meter vendor/installer. Once payment has been effected, the customer will have their meter installed within 45 days, by a NERC accredited vendor/installer”. With regard to the MAP regulation, the NERC planned to provide “for the third-party financing of meters, under a permit issued by the Commission, and amortisation over a period of 10 years”. Since April 3, 2018, when the MAP regulation became effective, all distribution companies operating in Nigeria had been obliged to meet their metering targets under the MAP directive. NERC affirms that under the MAP regulation “the electricity bill of customers provided with a meter under the new regulatory framework shall comprise of two (2) parts – energy charge and metering service charge”. The metering service charge payment will be eliminated from the customer’s electricity bill “, upon the full amortisation of the meter asset over its useful life”. And then there is the National Mass Metering Programme (NMMP) by the Central Bank of Nigeria (CBN), whose objectives are to increase the national metering rate, eliminate arbitrary estimated billing, cut down collection losses and shoot up financial flows to achieve 100% market remittance obligations of the Discos amongst other aims – which is hinged upon the CBN giving financing support to Discos and local meters manufacturers for deployment to customers.
As reported by the Nigerian Electricity Regulatory Commission (NERC), the industry regulator, unmetered electricity users as of Q4 2021 stands at 5,741,365 out of the total registered customers base of 10,514,582. To put, ~55% of the recorded electricity customers’ population are unmetered. If these figures are anything to go by, it is that the initiative of NERC has largely not bridged the metering gap as intended.
Despite that the metering gap number can be quoted with ease shouldn’t reduce the cruciality of what the data connotes, that is: unmetered customers over/underpaying whilst the disco loses income or unduly gains at the loss of the consumer. It should be noted that behind the figures are humans who mostly struggle to pay the estimated bills delivered to them by the distribution companies – in addition to the occasional cost of maintenance of supply transformers and other sundry distribution lines that the discos have abdicated the responsibility to the consumers. With these numbers in mind, the need for NERC to come up with a more robust implementable metering policy to overcome the metering gap cannot be overstated.
Adeoloye is a petroleum geoscientist with a strong interest in the entire energy value chain.