Metering – What Nigeria can learn from new UK model

The Nigerian Electricity Regulatory Commission (NERC) is currently working to develop a suitable metering model that will allow customers pay for what they actually use rather than the current fraud-prone system where DisCos charge crazy bills and many customers bypass meters to steal power.

A model that has been adjudged effective in more advanced electricity markets including the United Kingdom, Canada, Australia, the United States and some European countries is the Meter Service Providers model.

What is the MSP Model?

Odion Omanfoman, energy consultant and CEO of New Hampshire Capital Investments Limited explains, “under the MSP business model, a specialist meter services provider will enter into a meter services agreement (or similar agreements) with Discos to finance the procurement of electricity meters (inclusive of the associated communication and vending infrastructure) and also their installation and management.

“The meters are fully owned and managed by the MSP on behalf of the Discos. For providing the meters and the associated meter services, the MSP is entitled to a fee calculated as a proportion of revenues accruing from each meter financed.”

Through the MSP business model as it is operated in advanced energy markets, investors in meter services own the meters, maintain them and ensure they are functional. In the United Kingdom there are over 60 registered companies providing meter finance and asset management services to Distribution Network Operators in the £11billion scheme.

Some of the MSP are owned by mutual and hedge funds firms, financial institutions and private equity firms. Currently, the UK is primed to roll out 53 million smart meters under the MSP model which will replace existing traditional meters by the end of the decade.

However there are kinks in the project, chief of which is issues with the technology. Only five million out of 26 million homes have been metered in the UK. The smart meters to be deplored work like traditional gas and electricity meters by measuring energy use and automatically sending usage information the supplier through networks being created the country’s Data Communications Company (DCC).

The challenge to the project is that after years of delay, the DCC’s system could not support pre-payment meters, which supply millions of homes across the country. The companies are working on a complete version.

Options for adoption in Nigeria

In November 2016, NERC wrote to the eleven DisCos, instructing them to wind-down the Credited Advance Payment for Metering Implementation (CAPMI), an alternative meter financing scheme that was initiated in 2013.

NERC said the CAPMI, which allows electricity consumers self-finance their meter acquisition and installation had failed. Customers were supposed to be given meters in 45 days but after three years, only about 500,000 meters have been deployed. The DisCos were not prepared allow the scheme interfere with their preferred model -crazy billing.

Against this backdrop, the MSP model seems to be a viable alternative for Nigeria. But for it to work, a cost reflective tariff is required. Since the investors in the MSP will be third party, different from the DisCos, recovery of their investment can best be guaranteed if a separate line item on meter is built into customers’ tariff.

According to Omonfoman, demand for meters in Nigeria’s electricity market is valued at over $800 million with almost 50 percent of over 7.4 million customers unmetered or with degraded meters. There are significant upsides for Investors to finance and manage meters, considering that almost 80% or 23 million households are yet to be registered for electricity supply in Nigeria.

The MSP model would ramp up investments and improve liquidity in the Nigerian Electricity Supply Industry (NESI). The ability to make monthly deductions reduces the risk of investments and improve the DisCos revenue thereby enhancing their ability to meet their obligations to the Nigerian Bulk Electricity Trader (NBET). It has huge potentials for employment creation.

ISAAC ANYAOGU