Metering and Power Theft Challenges faced by DisCos in the NESI

By: Yusuf Hamisu Abubakar, OON

Chairman, Kaduna Electricity Distribution Plc

NBA 2017 Annual General Conference

August, 2017

Introduction

Under the Electric Power Sector Reform Act (ESPRA) 2005, it was envisaged that a functional NESI will be established with proper market structure. To achieve this, energy accountability across the supply chain is necessary for the credibility and interdependence of the value chain where power is to flow from gas suppliers, generating companies to transmission, distribution and then to the consumers while cash is to flow in the opposite direction. The energy flow is captured through the technicality of the metering instrumentation. Meter is not just a measuring tool, but a communication one as well – we have meters at various points of interface; from transmission – 33KV Feeder – 11KV Feeder – Distribution Transformer – Customer premises.  This facilitates effective energy audit and business intelligence. The meter is also a critical element of trust between a supplier and a consumer.

Inadequate metering is one of the major obstacles facing the Nigerian Electricity Supply Industry (NESI). To a large extent, the gap in grid metering is being met but there however remains a huge gap in the level of metering of retail customers.

To engender and sustain stakeholder confidence, everyone must be assured of fair and accurate assessment of supply and consumption. DisCos want to be paid what is consumed and the customers want to pay only what they consume; metering provides this assurance when properly done. At the time of privatization, each DisCo committed to a metering plan in their business plan and performance agreement which would guide their operation towards achieving a five-year loss reduction trajectory.

Purpose of Privatisation

The purpose of the privatisation was to ensure increased electricity supply in the country, through enabling and preservation of efficient industry and market structures, while also ensuring the optimal utilisation of resources for the provision of electricity services. The reform also sought the maximisation of access to electricity services, by promoting and facilitating consumer connections to distribution systems in both rural and urban areas.

The reform, however, provided for a cost reflective tariff which in essence ensures that the prices charged by licensees are sufficient to allow the licensees to finance their activities and to allow for reasonable returns on investment. The reform also made adequate considerations for safety of lives and equipment as well as protection of consumer rights.

One of the critical aspects of the privatization programme was to ensure accelerated reduction in ATC&C losses within the industry. Given the various regulatory and operational challenges faced since privatization, requisite finance and traction is yet to be fully garnered by the entire industry, but particularly the DisCos, to make the necessary investment required to achieve their committed loss reduction target.

Metering Status in the NESI

The NESI, in 2013, anticipated a planned metering roll out targeting the existing six million (6,000,000) electricity customers across the eleven (11) discos. The anticipated committed metering is over a million and half meters per annum. However, the total meters deployed, yet, is less than a million over the last three (3) years.

These meters, including single and three phase meters as well as maximum demand or whole current meters, are installed across existing and new consumers estimated to be a total of about twenty million premises in the nation. It is noteworthy that there is empirical evidence that shows a correlation between low meter coverage and higher incidence of ATC&C losses

The four (4) producing meter manufacturers in Nigeria have been developing bespoke metering systems to ensure conformity with local costumes (example prepaid MD meters) and to aid the development of electricity metering systems as envisaged in the Metering Code of the NESI.

Regulatory Intervention/Inconsistency and Metering Plan

Aside from microeconomic challenges, regulatory inconsistencies and policy shift have impeded the ability of Distribution Companies to attract the required funding for metering and finance their capital expenditure. Every capital expenditure to be undertaken has to be provided for in the revenue requirement which is the basis for setting tariff. The total CAPEX provided in the revenue requirement is not sufficient to undertake our metering obligation.

Pronouncements by the regulatory body have a huge impact on the market. Sometimes due to public outcry and pressure to meter and to avoid estimated billing, initiatives that are inconsistent with the DisCos Business plans are introduced by the regulator. Such regulatory inconsistencies is driven by pressure and in response, the regulator comes up with knee jerk reactions that cause distortion in the operations of DisCos  and indiscipline in the market  Some examples of these interventions are the Nigerian Electricity Regulatory Commission’s order to meter all customers within 1 year – which is in violation of the privatization agreement and provision of the Multi Year Tariff Order [MYTO] 2012 - without taking into account the financing and implementation challenges, the introduction and termination of the CAPMI scheme among others.

Challenges

The privatization programme was premised on the provision of a cost reflective tariff. Having the right pricing is an essential requirement for viability of the business. Due to lack of cost reflective tariff, DisCos are constrained in attracting funds to finance their CAPEX. The limitation imposed by allowable revenue requirement to aggressively meter, restriction on bulk metering where it is uneconomical to provide individual meters and insistence on prepaid metering as against the use of credit meters (for some category of customers) are some of the challenges hindering accelerated metering in the NESI.

Meters Serving as a Shield for Energy Loss

A lot of electricity consumers in Nigeria are oblivious of the transition that has happened from public to private enterprise and as such do not see electricity as a commodity to be bought and paid for. They therefore devise multiple ways of engaging in electricity theft through meter tamper or outright bypass. A recent analysis conducted on the vending transaction on all PPMs in network of most Distribution Companies over the period Jan – Dec 2016 shows that about 40% of the pre-paid meters have questionable transaction record. Further, analysis conducted on newly installed meters between January and June 2017 reveals that 15% of the meters have already been compromised. However, metering has an overall positive effect on the consumers and the company, however, metering is not an end in itself.

Thus, beyond deploying the required meters in the system is the ability to constantly monitor to avoid tampering or else huge investment in metering might end up adding to the company’s losses. In addition to metering therefore, huge investment has to be made in technology to ensure the exercise succeeds. DisCos must therefore select meters with robust technological features and also constitute a powerful monitoring and enforcement units to tackle the menace. I must also state here that the accessorization of metering systems to provide for remote detection and control is limited by the regulated pricing of the meters in the tariff set by the regulator back in 2012.

To this end, we urge the Nigerian Electricity Regulatory Commission to facilitate the on-going review of penalties charged for electricity theft as what is being charged now is not serving as deterrent to unruly customers. We further call on the NERC to ensure that these customers are also denied supply until providing the conniving agents, be they staff of the discos or otherwise.

Conclusion

With the power assets now in the hands of private investors, it is imperative to recognise that values and systems that drive public sector services cannot work under private initiatives. Private sector is driven by value creation and profit motive. Regulatory inconsistency and policy changes when done without consultation and certainty is inimical to business. Business thrives in an atmosphere of confidence, credibility and predictability.

It is our hope that policy makers and regulators would have the discipline to support initiatives that will attract investments and sustain confidence in the sector. It is only when there is clarity that adviser like lawyers, financers and investors can take the risk that is necessary to ensure growth in the economy.

It is also our hope that adequate consultation would be made by relevant stakeholders before any policy pronouncements are made.

Thank you.