NERC’s New Framework to End Estimated Billing

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Sam Amadi

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The Nigerian Electricity Regulatory Commission devices a framework to speed up the smart metering process to end estimated billing

| By Anayo Ezugwu | Jul 20, 2015 @ 01:00 GMT |

THE Nigerian Electricity Regulatory Commission, NERC, has developed a model framework to cap revenues accruable to electricity distribution companies in Nigeria as part of its effort to end estimated billing by the distribution companies, DISCOs. This new method could make the DISCOs lose more than N12.532 billion within a year. The framework was contained in a concept note for the capping of monies that distribution companies, DISCOs, can make from customers on estimated billing methods.

It showed that based on the current industry metering gap of 4,462,262, an average sum of N2,352.20 per meter could be forfeited as the yearly opportunity cost for DISCOs’ reluctance to provide meters to their customers.

Similarly, NERC, in the proposal, opted to cap the monthly billable electricity consumption for three chief tariff cadres in its tariff grouping; R2, C1 and A1 at 125 kilowatts hour per month (kWh/month), 125kWh/month and 100kwH/month respectively. Consumers on the R2, C1 and A1 tariff groupings are either on single or three-phase connections and use their premises exclusively as a residence, factory for manufacturing goods, as well as agricultural firms, water boards, religious houses, government and teaching hospitals, government research institutes and educational establishments.

NERC’s concept note on the estimated revenue cap explained that about 7,026,573 of electricity customers on R2 tariff cadre consumes an annual average of 9,398,263,687kWh of electricity, out of which 3,770,459 are unmetered and from which N5.805 billion is estimated to be lost in a year from the cap. From C1 which has 682,544 unmetered customers, N4.004 billion will be cut off from the cap in one year while N2.723 will be cut from A1’s 9258 unmetered customer population within the same period.

The document therefore summed the expected revenue shortfall from the capping as a result of DISCOs’ seeming reluctance to provide meters to their customers at N12.532 billion, saying: “This is the shortfall the industry stand to suffer due to the cap if the metering level remains the same. This is the financial incentive for the DISCOs to accelerate their meter rollout. Based on the current industry-wide metering gap, a total 4,462,262 meters required to fill the metering gap for the three categories of customers. Using an average meter life span of 10 years, the opportunity cost of not installing a meter is N23,522 which is very close to the actual cost of installing a meter,” it explained.

NERC also in the concept note clarified the counter measures it developed against DISCOs’ possible double standard in application of the capping regulation. In this regards, it tasked consumers to take up appropriate actions to ensure that DISCOs meet up with metering of their premises. “The Commission takes cognisance of the possibility that one possible consequence of capping will be that the DISCOs may illegally slam every unmetered customer with the maximum consumption allowed which may lead to the completely removal of R1 customer class or overbilling the very low consumers in A1, C1 and R2 consumer class.

Such customers who believe their consumption is much lower than the capped amount should avail themselves the opportunity to be metered with 45 days through the CAPMI scheme and once such customers pay for meter under CAPMI, they must be metered within 45 days period or the DISCO will be in violation of the Commission’s regulations and the Commission may then impose appropriate regulatory sanctions until functional meter is installed,” it said.

NERC explained that with this in place, DISCOs are expected to hasten their metering of customers to cut short their revenue loss, adding that as they progressively reduce the gap, it will continually tighten the cap to create new metering priority frontiers for the DISCOs.

The NERC also said it was making good progress in plans to deploy smart meter technology in the sector. It has taken delivery of a completed technical work it commissioned on regulation for smart metering and which will now allow it set up the appropriate framework for deployment of smart meters to distribution networks in the country. A number of the licensed electricity distribution companies in the sector have indicated their interest in deploying the technology in their networks and the expected regulation will provide the supporting framework for such development in the sector.

Sam Amadi, chairman, NERC, recently told journalists that the draft regulation would be put out for public review and consideration before it was finalised and approved as a regulatory document for use in this regard. “The Commission has also received completed technical work on the regulation on smart metering. This draft regulation is now slated for public consultation to enable operators and the general public review and comment on the regulation before it is finalised and approved by the Commission. This regulation will provide the framework for deployment of smart meters to protect the revenues of the distribution companies and help customers better manage their electricity consumption. Many of the distribution companies, in a bid to overcome metering cloning and other forms of frauds against the electricity market, are resorting to smart meter. This regulation will provide a supporting framework for smart metering in the Nigerian electricity market,” he said.

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