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.
