A Review of the Nigerian Energy Industry

NERC to cap DISCOs’ revenue from estimated billing

Electricity meters
Electricity meters

06 June 2015, Abuja — The Nigerian Electricity Regulatory Commission (NERC) has set in motion consultations and actions that could eventually lead to its capping of the revenues that electricity distribution companies (Discos) in the country can generate from their customers through the estimated billing method.

NERC at a consultative session yesterday in Abuja, disclosed its intention to take away whatever incentives that drive Discos in the electricity industry to continually ignore extant plans to provide prepaid meters to customers in their networks.

It said by this, Discos had resorted to habitually bill unmetered customers albeit unfairly in most cases through the estimated billing methodology it initiated in the past to primarily address the sector’s shortfall in metering of customers and revenue generation. NERC noted that Discos had been found guilty of abusing the methodology, hence its decision to cap the revenues accruable to them from the methodology.

It expressed its faith that the new initiative would inspire widespread metering of consumers.

In the same vein, NERC has begun processes to legally breakdown and restructure the Transmission Company of Nigeria (TCN) into two functional components; Transmission Service Provider (TSP) and Independent System Operator (ISO) for ease of running of the country’s transmission network.

NERC’s intended restructuring of TCN is reportedly in line with the provisions in Sections 65 and 66 of the Electric Power Sector Reform Act (EPSR) 2005 which provided for the separation of the entities.

This move is also coming at a time that the Federal Ministry of Power recently carried out major organisational reshuffling TCN, thus discretionarily appointing new officials into positions without the knowledge and approval of the regulator as legally enshrined.

NERC has however frowned at the development and written to the ministry to do the right things in line with extant laws that govern the sector.

“Let me be very clear that we want to start today to open up these propositions for industry comments. We hope that after today, stakeholders will send much more deeply considered views on these issues,” Chairman of NERC, Dr. Sam Amadi said while opening the meeting.

He then said on the proposal to cap estimated bills by Discos that: “All of you are away of efforts by the commission to encourage aggressive metering of consumers, which is a core responsibility of distribution companies.

We started with the N2.9 billion metering subsidy released during the days of PHCN. During the MYTO-2, we also put 18 months period during which all consumers should be metered.

“We created the Credit Advance Payment for Metering Implementation (CAPMI) project which was a way of encouraging consumers who could not wait too long for when the new owners come and roll out their meters to sign off for metering and pay and get rewarded or compensated through energy credit based on the fixed charge.”

Amadi however posited that these initiatives did not yield the outcomes the commission expected, adding: “Within the same period, estimated billings continued to grow. Consumers continued to complain about outrageous, exorbitant or huge bills arising from estimation.

“We have investigated, monitored and started some administrative action against some of the distribution companies. Few have not complied with the methodology.

“This new initiative is to build up on the previous initiative aimed at shifting the economic incentive for metering back to the Discos instead of the consumers.

“And the idea is to cap the revenue that would come from unmetered consumers on the basis that that could encourage the distribution companies to do more to meter those consumers,” Amadi said.

Although, some Discos like Abuja and Port Harcourt openly expressed their reservations on the new initiative on the ground that it would adversely affect their operations, NERC however proposed to cap such revenues based on options such as building size, load, energy consumption and amount paid per month.

Amadi in this regard noted that Discos will not have to bill consumers beyond certain consumption levels as NERC will peg their estimated bills revenues on any of the options that will be adopted eventually.

Similarly, NERC proposed to create a small ISO with a not-for-profit structure, and run by market participants through a board.

The proposed ISO will manage the country’s grid while TSP will undertake such jobs as expansion of transmission access.

Stating that the commission would equally consult with the new government to take its policy direction for the power sector, Amadi said:

“The commission has no pre-disposed or pre-concluded views on any of these issues.

The ISO is provided for in the EPSR Act. It is now left for the industry, whether it is appropriate at this stage, what would be the model, the nature it would take, who and would should own it, the management structure and how it should operate largely in line with the market rules and the EPSR Act.”

He then noted that: “Regulation is not popularism, so, we envisage that there would be some issues around this proposal. That is why it is presented before every one of us. You will be able to see some of the issues that we have identified.

“This presentation is to allow us to profit from the wisdom of industry operators, fellow regulators, policy makers in the industry, as well as consumers who themselves are responsible or are the ‘victims’ of estimation arising from lack of metering. I do hope that you will clearly make your views known.”

With regards to the ministry’s recent discretionary actions at TCN, THISDAY confirmed that a letter had been sent to the ministry by NERC disclosing its discontent with the development.

NERC’s letter emanated from the ministry’s recent unilateral restructuring and appointment at TCN without recourse to extant laws and regulatory approval.

Manitoba, TCN’s management contractor was sidelined in the appointment despite its valid contract to reposition the company, and new officials were appointed to run for instance, the market operations of the entity without regard to existing regulatory requirements for appointment of personnel into the entity.
*Chineme Okafor-Thisday

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