The Nigerian Electricity Regulatory Commission (NERC) may consider taking away the metering of consumers from the electricity Distribution Companies (Discos) and hand it over to other private entities that would provide meters and handle metering services.
BusinessDay investigations reveal that some private investors have been pushing for a proposal to provide meters and metering services to be approved by NERC.
Industry sources however tell BusinessDay that the idea has been on the table of NERC for some time and that the agency may be only waiting for the electricity market to mature before taking the bold step of extracting the metering service from the Discos.
The source further says that slowness and seeming reluctance of Discos to dispense meters to consumers may force NERC to finally remove the the service from the ambit of the Discos.
“The NERC is seriously considering this option, in order to permanently resolve the problems associated with meter supply”.
Efforts to get the reaction of NERC on the issue have not been successful, as there was no response to enquiries made on the matter by email.
Contacted by BusinessDay, Sam Iwere, chief operating officer of Eko Electricity Distribution Company, said it was not possible for government to do that because metering is the main source of getting revenue for the Discos. Iwere wondered why government should be contemplating extracting metering from the Discos. “It means the government would strip the Discos bare in terms of revenue. So where would they be expected to get the money to run their affairs?” he asked.
Other industry stakeholders are of the view that extracting metering from Discos would permanently resolve the problems of supply and fair billing.
Commenting on the matter, Odion Omonfoman of Camberia Energy, said the best way to address the metering gap is for the meter services industry to be deregulated and to allow third party companies provide meters and metering services on behalf of Discos, to electricity customers.
“It is important to state that the metering services to be provided will not include billing and collection, which are the exclusive purview of Discos. Thus Discos should not be afraid that these meter companies will take over their customers.”
Omonfoman said the UK and Australia are examples of jurisdictions that have deregulated metering industries. Meters are provided by third party companies to electricity customers for a fee. These third party companies own the meters and are responsible for maintaining and replacing the meters as well.
“However, investors in metering need to be assured of top-line revenues for providing the meters and metering services. Thus it is important for NERC to disaggregate the current tariff structure and clearly delineate a portion of the electricity tariffs that would be set aside for the payment of meter services. NERC also needs to come up with regulations that regulate the operations of these third party meter companies.
John Uwajumogu, CPA, Partner , Transaction Advisory Services, with Erns and Young said: “I am personally in agreement with this proposed plan to allow third party companies provide meters and metering services on behalf of Discos to electricity customers. However, with the caveat that it will be implemented under a credible governing framework and using a process that is transparent and factors in the interests of all stakeholders (consumers, government, operators).
“Our initial view is that this metering company would have to be completely independent of the government, in principle and in substance. Accordingly, it should have a board independent and its funding sourced from the capital market.”
Uwajumogu said on the surface, this proposal may seem to undermine the independence of the Discos, while delegitimising the privatisation of the sector.
“ However, one should note that the sector, and distribution in particular, is heavily regulated and therefore, still subject to stringent rules by the regulator. “Also, the current distrusts around billing between the consumers and the Discos on one hand, and on the use of funds between the regulator and Discos on the other hand, require a unique approach to solving the dilapidating issues of collection and commercial losses, which are threatening to collapse the entire industry”.
The current state of the sector, he observed, demands emergency action by government, because if the extant conditions were to persist, Nigeria would not achieve any of its diversification or economic development goals as reliable power supply is a constant theme that runs across the economic recovery growth plan.
Program assurance around revenue capture he said is a fundamental faucet of any utility based business; which metering will help provide.
He said as we have now experienced, revenue leakage affects Discos, and reverberates across the entire value chain. He further observed that a strategic mis-step in the privatisation process was in not validating a revenue assurance model in a particular franchise area (say Lagos Island), which would have been used as a case study during privatisation. However, as the saying goes “ better late than never.”
Olusola Bello
