How Discos rip off electricity consumers

13 October 2015, Lagos – Despite efforts by the federal government to ensure that electricity consumers are provided with meters to pay for the actual energy consumed, some distribution companies have continued to subject customers to exorbitant estimated billing and other forms of extortion, thus fueling public outcry and litigations against the proposed upward review of tariffs. Ejiofor Alike writes

*Sam-Amadi, NERC.

Dr. Sam Amadi, NERC. Chairman

Since the private sector took over the assets of the defunct Power Holding Company of Nigeria (PHCN) on November 1, 2013, a lot of energy has been dissipated by the investors on agitation for upward review of tariffs, with little or no attention to the provision of adequate meters to ensure that customers are charged the correct bills for the actual energy consumed.

Inadequate provision of meters to customers was one of the greatest challenges inherited by the new investors from the defunct PHCN.

The former Managing Director and Chief Executive Officer of Ibadan Electricity Distribution Company (IBEDC), Mr. Fortunato C. Leynes, had told THISDAY that Integrated Energy Distribution and Marketing Limited (IEDM) and its technical partner, Manila Electric Company (MERALCO), from the Republic of Philippines, had inherited half of customer population without meters.

“Only half of these customers are properly metered. The remaining half is on estimated billing. With our experience in the Philippines, this is something we will say that we were surprised to learn about it because in the Philippines, all customers are metered and we see to it that there is always supply of meters for new customers coming in. We are just wondering what happened to the government in the past. This is something that seems to have been neglected because in an electric utility, electric meter is the cash register of the company. So, that is why it is foremost that serious efforts must be really put into buying meters and each customer must be metered,” Leynes had explained.

Since the takeover of the PHCN assets, only very few distribution companies have made deliberate efforts to roll out prepaid meters, having realised as Leynes submitted that meter is the cash register of a utility company.

While a few distribution companies began to roll out meters in a deliberate effort to bridge the huge metering gap inherited from the former PHCN, others roll out meters via press releases on the pages of newspapers to hoodwink the public, the Nigerian Electricity Regulatory Commission (NERC) and the Bureau of Public Enterprises (BPE).

THISDAY gathered that the focus of the majority of the companies is a quick return on investment, thus the enthusiasm on upward review of tariff to recoup their investment.

While the investors are agitating for upward review of tariffs, over 50 per cent of the consumers in the country do not have functional meters to capture their accurate tariffs.

THISDAY’s investigation revealed that most of the distribution companies have refused to key into the government’s efforts to ensure adequate metering, having identified estimated billing as a short-cut to huge profit.

Abuse of estimated billing guidelines
NERC had earlier set out the guidelines for estimated billings to protect consumers from extortion but the distribution companies flouted these guidelines in a bid to make quick profits.

Under item 5.1 of the estimated billing methodology released by the agency, one of the categories of customers, who may get estimated billing are customers with faulty meters, that is, existing customers whose meters are no longer functional.

“Where a customer’s meter develops a fault and a complaint is appropriately made by the customer, the DISCO shall repair or replace the faulty meter before the end of the billing cycle within which the complaint was made,” NERC’s document had stated.

The second category are customers whose meters cannot be read, that is, customers whose meter readings could not be obtained by the distribution company due to inaccessibility such as locked doors, absence of customers from home at the time of reading the meter or presence of dogs in the premises, among others.

“Whenever a DISCO is unable to obtain a meter reading at a customer’s premises and notifies the customer in a manner approved by the commission, the DISCO shall estimate the customer’s usage for the period. The DISCO shall endeavour to read the meter, at least, once in three months and the estimated bills issued shall not amount to a figure in excess of the cumulative average of the customer’s consumption,” the guidelines stipulate.

The third category is the existing customers without meters, that is, customers, who are directly connected but have not been provided with meters.

NERC directed that the distribution company shall endeavour to obtain an actual reading of all meters recording electricity usage at all supply addresses within their areas of operations every month, or at such intervals as approved by the commission.

The agency, however added that where the distribution company is unable to obtain an actual meter reading at a customer’s premises, the customer’s electricity usage shall be estimated by the company unless the customer provides his own meter readings within a stipulated period.

NERC also clarified that where a distribution company estimates a customer’s usage, it shall adopt the commission’s approved methodology for estimated billing, and the customer’s estimated electricity usage shall, under no circumstance, be arbitrarily inflated by the company.

For customers, who are adequately metered, the agency said that every distribution company shall obtain, through its authorised representatives, an actual reading of all meters in all supply addresses within its area of supply every month but not later than once in every three months.

“The customers shall be billed based on the last actual reading obtained until another reading is established. Consequently, a reconciliation shall be carried out which may result in the crediting or debiting of the customer,” NERC said.

For unmetered Maximum Demand (MD) customers, NERC said they shall be billed based on the “Load Measurement Method,” which is the measurement of the voltage and current on the customer’s premises for a specific period (between one and 24 hours), during normal operation and the application of the formula provided hereunder for estimation of monthly consumption in KWh = √3 x VL x IL x PF x Av x LF x 1000.
(Where: VL = Line Voltage in Volts; IL = Line Current in Amperes; PF = Power Factor; LF = Load Factor; Av = Number of hours of electricity supply availability in the month; Amount Payable = (Tariff Class rate x KWH) + Fixed Charge +VAT).

“Unmetered non-MD customers and others not captured above shall be billed based on the ‘weighted average cluster load.’ This method involves the subtraction of the entire metered load from the energy supplied to the feeder (33Kv or 11Kv and others) and the application of an appropriately determined availability factor and correction of losses, which is aggregated among the various numbers and classes of customers supplied by the feeder. The method shall require the determination (in advance through statistical analysis of historic information) of the averages of the proportions of the consumptions for the various classes of customers in the urban and rural areas and the relationship derived below is applied to determine the proportion of the energy supplied to the feeder, which shall be proportionately distributed among the various customers,” the guidelines explained.

THISDAY however gathered that most distribution companies do not read the non-prepaid analogue meters or visit residences to ascertain the loads to determine the actual energy consumption by customers.

To ensure that majority of the customers pay estimated billing, the customers who have no meters and even those with functional analogue meters are classified in the monthly bills by most distribution companies as “account with non-functional meter or meter is not in place” just to ensure that the actual meter readings, which capture the actual energy consumed are ignored.

One of the crude methods of estimated billing, THISDAY has learnt, is the equal allocation of bills to customers, who are using the same Feeder, without any regard to the nature of the premises occupied by each customer and the number of appliances or loads that consume electricity in each residence.

THISDAY gathered that when 100 customers, for instance, receive power from the same Feeder and only 30 customers have prepaid meters, the bill for the actual power consumed by the 30 customers is deducted from the bill meant for the total power sent to the Feeder in a given month.

According to investigation, the balance of the bill incurred by the Feeder is allocated equally to the 70 customers who have no meters, irrespective of the nature of each customer’s residence and the number of appliances that consume energy in each residence.

This has led to instances whereby customers in one-room apartment pay the same estimated bills with customers living in three-bedroom, four bed-room or even duplexes.

With the distribution companies’ preference to bill customers by estimation, most customers in the country are being slammed with exorbitant tariffs, which are far above their actual energy consumption.
This development accounts for the nationwide agitation against upward review of tariffs because most consumers across the country are concerned that the bills they pay are far above the energy they consume.

THISDAY gathered that consumers are worried that an upward review of tariff without effective metering would create rooms for the distribution companies to extort customers through exorbitant billings.

In other words, the higher the tariffs, the more exorbitant the estimated billings because only very few customers have their actual energy consumption captured and accurately billed.

THISDAY gathered that electricity customers with prepaid meters have nothing to worry about in the event of upward review of tariff because under a cost-reflective tariff, the cost of the actual energy they consume, which is captured appropriately by the meters is very commensurate with both the electricity supplied and the benefits derived from the energy supplied.

But majority of the Nigerian consumers, who have no prepaid meters are subjected to extortion of imaginable proportion as they are made to pay bills that are far higher than the power supplied, hence the nationwide protest against upward review of tariffs and the attendant litigations.

What the distribution companies do not realise, THISDAY has learnt, is that high estimated bills and inadequate metering lead to huge revenue linkages as they encourage energy theft.

This is because customers, who are unable to pay the high bills, usually bribe the electricity distribution staff monthly to avoid disconnection while no money accrues to the companies.

THISDAY gathered that revenue leakages account for the inability of the distribution companies to pay the generation companies for the power generated.

This development stemmed from the fact that in the distribution companies’ bid to collect high estimated bills from majority of their customers, without providing prepaid meters, most of the affected customers who are slammed with exorbitant bills opt for other unofficial means of settling the electricity workers to avoid disconnection, while many others steal electricity outrightly.

Managing Director and Chief Executive Officer of Ibom Power Plant, Dr. Victor Udoh had told THISDAY recently that the excuse of the distribution companies is that consumers do not pay for electricity.

“Their (distribution companies) argument, their constraint now is that even when they sell the electricity that people consume, they are not able to collect the revenue. How can you collect the revenue when you don’t have the cash registrar? Cash registrar is the thing that when you go to a store in advanced countries, you buy something, they bring it to calculate what you bought, and then in the end, they bring a receipt and then you pay. It is the meter; most people don’t have meter. So, these people come with estimated bills; sometimes they are outrageous bills; people have come to complain. As long as people are not paying, they are not collecting and they will be unable to pay us,” Udoh said.

But instead of going for the cash register to measure actual energy consumption by customers, so as to collect the appropriate bills, the frenzy is about upward review of tariffs.

Apart from the public protests against the proposed tariffs, the issue of review of tariffs has brought NERC and the National Assembly on a head-on collision.

For instance, the House of Representatives last week asked the NERC to stop distribution companies from further increase in electricity tariff.

The resolution emanated from a motion sponsored by Hon. Solomon Maren (PDP-Plateau Mangu/Bokkos) on the need to arrest the proposed “unrealistic upward review of electricity tariff” by the distribution companies.

The lawmaker was concerned that despite the earlier decision of the House against the further collection of flat rates termed illegal, the distribution companies had begun devising other means of collecting monies from Nigerians.

The motion was unanimously adopted by the House presided by the Deputy Speaker, Hon. Suleiman Lasun.

The Deputy Speaker advised NERC and the distribution companies to immediately begin the provision of prepaid meters to every consumer nationwide.

The regulatory agency has also received knocks from a section of the judiciary for its role in encouraging the distribution companies to review tariffs.

NERC’s which initially set the tariff structure, recently abdicated this responsibility to the distribution companies, saying they should determine their individual tariffs and submit to the regulatory agency for approval before implementation.

The agency however directed the distribution companies to hold consultations with consumers in their areas of coverage, to agree on the tariffs that will be paid by different classes of electricity consumers.
But in most of the meetings held nationwide, consumers have vehemently opposed the planned review of tariffs and advised the distribution companies to provide meters first to capture the actual energy consumption of customers for proper billing.

However, rather than provide meters, NERC and the electricity distribution companies  have been pushing for the implementation of cost-reflective electricity tariffs so as to raise funds to enable them pay for the electricity supplied by generation companies and upgrade and expand aging distribution infrastructure.

NERC’s petition against judges
Chairman of NERC, Dr. Sam Amadi was the first to fire the salvo at some judges, saying that their injunctions against the commission and other power sector operators were frustrating government’s objective of ensuring an efficient and competitive private sector-driven electricity industry.

Amadi had also accused the judges of lacking knowledge of the power sector’s intricacies and abusing their powers of “judicial review” by handing out poorly thought-out injunctions, capable of defeating government’s objective and discouraging investment in the nation’s electricity sector.
The NERC boss had in a protest letter to the Chief Judge of the Federal High Court, Justice Ibrahim Auta, dated August 7, 2015, which was copied the Vice-President, Prof. Yemi Osibanjo and the Permanent Secretary, Federal Ministry of Power, Dr. Godknows Igali, argued that by its establishing statute, NERC enjoyed some level of independence in its operations.

He therefore urged the judges to always exercise restraint and defer to his commission in the exercise of its quasi legislative and judicial powers, particularly as it relates to the fixing of tariffs.

“My Lord, permit me to bring to your notice a subtle threat that can undermine the success of the power sector reforms. This threat is in the form of an increasing spate of seemingly reckless and inconsiderate interim injunctions that have been issued against the commission and electricity distribution companies at the instance of consumers, who have not made out clear case meriting such intervention by the court.

“Without challenging the powers and competence of the court to issue these injunctive reliefs, it would appear that the issuance of such injunctions against legitimate business operations of licensed electricity companies is not well considered.

“They do not seem to have fully considered many principles that have been laid down by the courts on how to manage such delicate situations. For one, far-reaching injunction should not be granted against a party who has not been notified of the application pending the determination of the suit.

“When the court feels compelled to grant such orders, it should endeavour to make the return date early enough to allow the respondent be heard on time so as to avoid damaging its legitimate business. This is more so in a regulated business where every aspect of the operation of the business is regulated by law,” he said.

Amadi cited an instance where a court allegedly granted an order of interim injunction against NERC and 11 distributing companies from disconnecting electricity supply to them and from charging them higher tariff as contained in the Multi-Year tariff Order 2012 (MYTO-2) and adjourned to September 2015.

Amadi, also a lawyer, said his decision to write Justice Auta was to seek the establishment of “a possible judicial policy of restraint” which protects the right of electricity consumers to justice without undermining the viability of the nascent electricity market.

“Already, we have started receiving suits at the instance of consumers who have raised several complaints against the electricity providers and the regulator. Unfortunately, most of these are baseless in law and misconceived in facts, but nevertheless, are asking courts to stop the operators from exercising their license terms and conditions to collect dully approved tariffs. We fear that there could be an epidemic of interim injunctions of the sort mentioned above which may undermine the capacity of operators to improve power supply,” he said.

“How should Nigerian courts treat regulatory decisions of NERC and such agencies? Because they are established with clear legislative mandates to carry out clearly defined executive functions, the court should defer to their decisions, except those decisions are blemished by clear illegality, irrationality and irregularity. Because judges are not experts in the technical work of agencies, they usually defer to the agencies’ decisions except they are manifestly illegal or unreasonable,” Amadi added.

Amadi urged the Chief Judge of the Federal High Court to consider assigning cases relating to electricity tariff and related issues to specified judges to aid their understanding of the intricacies of the industry and help “build a clear and consistent Nigeria jurisprudence on this subject and prevent conflicting decisions.”
Judge upbraids Amadi over petition

But miffed by the petition, a judge of the Federal High Court in Lagos, Justice Mohammed Idris, had recently descended heavily on Amadi, for having the “audacity and courage” to lie against judicial officers in the petition.

When one of the the legal suits filed by some consumers seeking to stop the tariff review came up in his court recently, a visibly irked Justice Idris described Amadi’s action as a reckless, senseless and stupid exercise of executive powers, and an attempt to intimidate and distract the court.
Amadi in his petition was said to have made specific reference to an order made by Justice Idris in a suit filed by a lawyer, Toluwani Yemi Adebiyi, challenging the planned upward review of electricity tariffs.

The judge had issued an ex-parte order asking the parties to maintain the status quo in respect of the planned tariff increase pending the determination of the suit.

But Amadi in his petition allegedly quoted a completely different order from the one the court made, a development which enraged the judge.
Adebiyi, in response, filed Form 48 (notice of consequence of contempt of court) against Amadi, stating that the NERC boss should be punished for bringing the court to disrepute.

When the matter came up, Adebiyi attempted to brief the court on the developments on the matter since the last adjourned date, but he was frequently interrupted by NERC’s lawyer, Anthony Idigbe (SAN), who urged the court to ignore all the “distractions” and concentrate on hearing the substantive suit.

Idigbe said the suit was very important because it would allow the court to make a judicial pronouncement on the administrative and executive reforms carried out in the power sector so far where the sector had been moved from a monopolistic to market-driven sector.

Amadi’s lawyer, Edwin Anikwem, also told the court of his objection to the Form 48 filed against his client, adding that the application should be given priority and be heard first.

At that point, Justice Idris intervened and gave his side of the story.
The judge said while he was out of the country on vacation, he received a call drawing his attention to newspaper publication about the petition written by Amadi to the Chief Judge (CJ).

He said upon returning to the country, the CJ circulated the petition to all the judges of the court and it was at this stage that he thought of where Amadi got the courage and audacity to lie in the petition by quoting an order that was never made by him.

“I don’t know where the author of the petition got his information from. The first thing that came to my mind was where did he get the courage and audacity to lie against me and even copying the Vice-President (VP) of the Federal Republic of Nigeria and the Minister of Power in the petition he addressed to the CJ?. I began to wonder the stupid and reckless audacity of Amadi to write such a petition and copied the VP and Power Minister. I was very upset because it was nothing but a reckless, stupid and senseless exercise of executive powers which was clearly intended to intimidate the court. But I tell you, this court can never be intimidated. Never! I can never be intimidated and I can never be distracted. Without the Form 48, I can even order Amadi to come and explain the content of his petition. I’m not saying that people cannot complain about what we do here, but certainly not to clearly lie against us.”

The judge however pleaded with Adebiyi to withdraw the Form 48 against Amadi, saying that the polity had been heated up lately about orders of arrest and that he would not like to join the fray.

“It is not my style and I want to plead with lawyers to save me from that hurdle. But Amadi should be warned not to play politics with matters in court. They should leave the court out of politics and allow us to deal with substantial justice,” Idris added.

Adebiyi, who was not pleased with the judge’s position on the withdrawal of the Form 48, said the change that Nigerians have been yearning for would not come “if the courts would continue to allow people like Amadi to get away with such acts of contempt”.

He said despite the interim order against the hike in electricity tariffs, NERC had been making secret moves to effect the increment, and there was the need for the court to make an example of the defendant.

Adebiyi however reluctantly withdrew the Form 48, after which it was struck out.

On his part, Idigbe tendered an unreserved apology to the judge for Amadi’s action, adding that he could personally vouch for the integrity of the judge, adding that he would personally write the NERC chairman to also apologise to the court.

The court also granted an application by the 11 electricity distribution companies in the country to join the suit as co-defendants.
Sanctions against Ikeja Electric, Abuja Disco
NERC had in June sanctioned the Abuja Electricity Distribution Company over what it described as outrageous bills issued to electricity consumers within the Federal Capital Territory.

The agency also ordered that a refund should be made to over-billed customers of the AEDC through energy credit.

NERC was, however, silent on the amount to be refunded to the over-billed electricity consumers but noted that the sanction became imperative as a direct consequence of the adjustments in estimated methodology in some of the company’s business unit.

The sanction, it noted, followed earlier Notice of Enforcement and subsequent investigation of instances of over-billing perpetrated by the electricity distribution company.

Ikeja Electric also recently came under the regulatory hammer of NERC for flagrant abuse of processes in its makeshift electricity metering plan, the Credited Advance Payment on Metering Initiative (CAPMI).

NERC said it had fined Ikeja Disco the sum of N131.4 million,  following its discovery of the company’s “flagrant breaches” of its CAPMI order, the enabling act of the commission and terms and conditions of its licence.

NERC’s Head of Public Communication, Dr. Usman Arabi, noted that the fine on Ikeja Electric was contained in an order it issued to it on September 29, 2015.

Arabi had explained that the fine was a follow up to an earlier ‘notice of commencement of enforcement action’ which it issued to the distribution company alongside 10 others, over ‘manifest and flagrant breaches observed by the commission’ in the implementation of the metering initiative.

So, for NERC to have admitted that the 11 distribution companies flagrantly breached the implementation of its metering initiative is a strong indication that the companies view estimated billing as a short-cut to wealth and are not prepared for an serious efforts towards effective metering.

NERC and BPE should collaborate to sanction erring companies by way of fines, as well as outright removal or suspension of their officials, who are aiding and abetting such breaches of the market rules.

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