Capping Estimated Billing- A review of proposed rules
The metering of electricity consumed is an important concern for both suppliers and consumers; whilst producers are concerned about maximising profits, consumers are more concerned about cost-cutting. A meter is the equipment which records the amount of electricity used by a residence or an organization. It is eminently imperative for every city, state and country to record their electricity consumption. Electricity meters record electricity in units, unit usually being kilowatt hours of usage periodically and in most societies, this would be done monthly.
The electricity meter is a box having a clock like device embedded in it, which records the power consumed in watts by the hour; hence the use of kilowatts hour in calculating energy consumption. Many energy meters now have digital devices which present the figures in a digitized format. Every electricity user is expected to have an electricity meter affixed inside and the residential complexes also have a meter box.
The Nigerian metering situation – NERC’s proposed solution
The situation has been so bad that poor metering is a substantial part of the large aggregate Technical, commercial and collection losses and a key bid item in the privatization of formerly government owned electricity utilities was an improvement of metering. The foregoing, notwithstanding, metering in Nigeria, remains a constant issue for debate, the reason being that many Nigerians have either not connected to the metering system or have non-functional metering systems. The Distribution companies (“DISCOS” or the “distribution companies”) are mandated to bear the cost of installing and maintaining meters for energy consumers. A disco is required to supply electricity to the customer with an operational meter first being installed. However, the discos have been unable to adequately fulfil this obligation.
To reduce the metering gap, the Nigerian Electricity Regulatory Commission (“NERC”) introduced measures to assist the DISCOS most notably the Credited Advance Program for Metering Implementation (CAPMI) where the customer is required to pay in advance for the installation of the meters and then recover its costs through discounted billing by the relevant DISCO. Many customers were willing to pay for the meters in advance but it would appear that the DISCOS were more than comfortable to continue to charge for estimated energy consumed by the burner-tip. Eventually, as good as the CAPMI initiative was, it didn’t quite come-off in address the metering situation, and this has been attributed substantially to the unwillingness of the DISCOS as it appears that metered customers were ‘unprofitable’ when compared to unmetered customers.
In spite of the concerted efforts at improving the metering situation in the country, the problem of poor metering is yet to be adequately addressed as it been shown that 50% of energy consumers in Nigeria are either unmetered or have non-functional meters. The metering system ensures that the customer is charged for the amount of energy consumer, however, for customers with non-functional meters, billing appears to be done arbitrarily and at the discretion of the DISCOS who are comfortable with the balancing achieved by transferring arbitrary energy charges to the unmetered customer. Due to this, the customers continue to contest the arbitrary charges, refuse to pay them or even resort to self-help by ‘tapping’ energy illegally.
To this end, NERC intends to fix a cap on the amount that the DISCOS can charge for estimated billing for energy use. It has therefore released a Concept Paper on Capping Estimation of Energy Consumption (the “Concept Paper”). From a review of the concept paper, NERC has announced an intention to introduce ‘an estimate charges capping system’. In this respect, NERC intends to protect the customer and dis-incentivised the distribution companies from estimated billing such that they then have to accelerate the metering of all unmetered customers. The cap is intended to be done in such a way that the DISCOS are left with no other option but to fast-track the metering of all customers. NERC has opted to set a tariff based capping system entailing consideration of the historical monthly energy consumption of metered customers within the tariff of the unmetered customer. For example the concept paper proposes a cap of 125kwh per month for R2 customers who constitute the vast majority of the unmetered customers.
Contentions
Some DISCOS may have reasons to complain as some of them have done much better than some other distribution companies. For example, the Jos electricity distribution company (“JEDC”) appears to have the lowest percentage of unmetered customers with just 39% of their customers yet to be metered. The JEDC may feel undone and unfairly treated considering that another distribution company has 76% unmetered customers. Perhaps, this is an area for NERC’s consideration; an approach to encourage the DISCOS which have done more percentage metering than the others. The capping may be executed in such a manner that the DISCOs that have made greater effort at metering their customers have a higher cap than the others. However, in general the DICSOs should have no reason to complain.
Firstly, they have the responsibility of ensuring the metering of customers in line with section 1 of the NERC Regulation on Connection and Disconnection Procedures. The law therefore places a legal burden on the distribution companies to ensure all customers are metered within two (2) years. There can therefore be no complaint as to the proposed capping. This is more so in light of the concerted efforts by NERC to assist them with closing the metering gap. To the extent that the law requires these distribution companies to meter, the only valid reason for failing to meet this obligation should be that their submitted metering plan has not been approved by NERC; yet this is rarely the case.
Further, it is understandable that the financial requirement of metering all customers may be heavy on the DISCOs; however, this sympathy is whittled down by the fact that the CAPMI initiative failed to achieve the desired result majorly because the distribution companies refused to see it through. Where a duty is created in law, a beneficiary is envisaged, in this instance, the law created a burden on the DISCOS to ensure the metering of their customers. Therefore the concept of capping should allocate the risk fairly to the person on whom a duty lies (the “Discos”) and not the beneficiary. In another sense, the customers may not really be categorised as beneficiary, considering that the cost of the meters is covered under the fixed charge of the billing structure. Regardless of the situation, it would appear that the DISCOS are under a direct obligation to ensure the metering of all customers.
The implementation of the Capping order is expected to be such that the DISCOS are given four a months’ (4) moratorium to ensure that all customers who have paid for the CAPMI are metered. Within this period, all estimates must be based on the billing estimation methodology. Upon commencement of the capping regulation, the DISCOS are to meter all unmetered customers within two (2) years from the start date; and thereafter, all unmetered customers will be treated on the ‘No meter no payment of bill’ basis while all new customers must be metered before connection ‘No meter no connection’
It is essential that the whole of Nigeria is metered. This is because until the country is completely metered, gathering energy usage data may be impossible. With all consumers fully metered, there can be study analysis of energy usage and thereafter the creation of energy hierarchy/aggregate levels and the resulting data can be diagnostic in identifying trends and variance per energy class. Based on the current industry-wide metering gap, a total 4,462,262 meters are required to fill the metering gap for the three categories of energy consumers in Nigeria. This percentage is close to half the energy user population, hence the need to fast track the complete metering of the country.
The Business Angle/ Conclusion
There is a business value proposition in engaging in business related to metering in terms of servicing, repairs, automation, cards and cards technology and even in the installation. The writer understands that to participate in many of these activities, a would-be participant is required to obtain some form of authorization from NERC and that recently, it has been a herculean task to obtain any authorization from NERC regardless of the merit of the applicant’s case. The writer therefore, urges NERC to improve on this aspect of its function so that trade and commerce can be more efficiently and effectively done and more job seekers employed in Nigeria.
Ayodele Oni