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MUST READ: UNFOLDING THE INTRICACIES OF THE MAP SCHEME   

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Thursday, 18 April 2019

The Association of Nigerian Electricity Distributors, the umbrella body of electricity distributors (DisCos), has raised questions over the new third-party-meter intervention draft introduced by the Nigerian Electricity Regulatory Commission (NERC).

NERC introduced the Meter Asset Provider (MAP) Scheme for metering of customers as a strategy to deal with the issue of estimated billing. According to the regulators, the DisCos and MAPs will enter into a metering service agreement, which will provide for the number of meters to be installed by MAPs in the DISCOs’ franchise areas.  

The Executive Director, Research and Advocacy, ANED, Mr. Sunday Oduntan, while speaking to Independent Energy Watch Initiative, I-WIN, commended NERC for its effort towards eliminating estimated billing. However, he revealed that unless irregularities within the scheme are addressed the intervention may not live up to expectation.

“I have previously commended the Federal Government for the introduction of the MAP scheme through NERC; I believe it is for the general benefit of the country. Nonetheless, few irregularities have become obvious to us, and except they are looked into immediately, the program will struggle in achieving its goal.”

“First, the regulations state that electricity consumers can pay in advance for meters, and others can pay by installment. Now from experience, if consumer X pays completely for his prepaid meter he has no problems, he can decide at any time to buy electricity or not, but if consumer Y that has opted for installment plan fails to vend regularly and vends in small amounts, a situation arises whereby whenever he or she vends, the entire amount of the payment made will automatically be used to service his or her prepaid meter debt thereby leaving him or her in darkness. This situation will leave the consumers frustrated and may lead to claims of fraudulent practices on the part of the electricity distributors. It is not a fraud; it is bad payment programming” he stated.

In this regard, what is required is customer education and the development of practical installment schemes that take into account a customer’s payment pattern or history for customers that choose the installment plan. The basis for this assertion is the fact that customers who choose the installment scheme are likely the indigent ones. Therefore, there may be a need to develop different installment plans that customers may choose from that best suits their financial capability or status. Additionally, customer education serves to ensure that customers understand the concept of payment deductions during vending for power. Also, customer education helps to inform the customer about the required monthly payments for the installment plan that a customer may choose.

Mr. Sunday further stated that the disparity in the prices of meters provided by  MAP is another cause for concern, “Issue number two, let’s use Lagos state as our case study, now Yaba is divided into two areas in the electricity franchise network, Eko DisCos manages one half of this area, while Ikeja DisCo manages the other half. Let us say consumer X, who is serviced by Eko DisCo, buys his or her prepaid meter for N53000 (Fifty-Three Thousand Naira) from the MAP provider and customer Y who lives on the other end of Yaba buys his prepaid meter for N 63000 (Sixty-Three thousand Naira) from Ikeja DisCo. Do you know what will happen? Customer Y will be seriously aggrieved and may feel cheated, not knowing that the companies that provided the prepaid meters to each of the DisCos are different” he asserted.

In dealing with these issues arising from the MAP Scheme, the Spokesman for the DISCOs called for a roundtable discussion of all the involved parties, this, he stated, should have been done before the scheme was rolled out.

“What we expected NERC to have done was to invite the meter providers to agree on a benchmark flat price. The Specs of the meters had been standardized; therefore, the price must be standardized as well. The DISCOs have all the details that MAPs need to operate effectively. Therefore, we should have been called as well to scrutinize the pros and cons of the scheme before implementation.”

In response to the issues raised by ANED, the Nigerian Electricity Regulatory Commission, NERC, stated that it had never failed as the regulator, to engage stakeholders in the sector before issuing out new regulations. According to the regulator, this was the case with the MAP scheme; in fact, NERC reveals that they held many engagements with the stakeholders, the DISCOs being the key stakeholder. The regulator stated that they held ten forum hearings in the six geopolitical zones. The regulatory body went on to state that it would be impossible not to engage the DISCOs because the implementation of the MAP scheme is the responsibility of the DISCOs.

Regarding the difference in meter prices for different franchise areas, the regulatory body stated that they had envisaged that problem and are proffering solutions to make sure that all the meters come out at the same price. NERC insisted that they will address the issue of differential pricing for meters. The regulator noted that a competitive process for determining the cost of meters was extended by the Commission to engender more competition and has hence fixed a uniform price for all MAPs based on the outcome of the procurement of all DisCos.

The regulator indicated that phase 1 of the implementation of the MAP scheme would focus on upfront payment. Phase 1b would be “off vending” financing by DisCos and phase 2 will be financed through a fixed charge on vending until fully amortized.

The electricity regulator also addressed the issue of installment payment for prepaid meters under the MAP Scheme. They agreed that the installment payment scheme could pose some challenges, especially for the indigent customers, as the rate of payment for electricity (the average vending amount by the customer) and the amount of installment payment may be so disparate that customers may only end up paying for meters without enough money to buy electricity.

The regulator indicated that they are looking at creating different payment schemes so that the payment for meters does not unduly impact payment for electricity. In seeking to eliminate this challenge, the regulator could be experimenting with the option of third-party financing to support such class of electricity customers. The success of this option (third-Party Financing) will be dependent on the ability of the microfinance institutions to offer the customers long-term debt; without the long-term debt, the installment payment scheme may foist unfavourable conditions on customers, especially, the indigent ones. 

On its part, the regulator insisted that it had anticipated these problems and is working assiduously to ensure hitch-free implementation of the MAP program. In this regard, NERC declared that they are hopeful that they will come out with a solution that will be a win-win for all parties involved.

I-WIN’S ANALYSIS

Given that the regulator has talked about its engagements with the stakeholders, one wonders how robust those engagements were; did the regulator really mean ‘all’ stakeholders? Did these engagements include the financiers, customers, GENCOs, NBET, DISCOs, etc.? Is there a need for more consultations as issues emerge?

More than eight months after the regulator announced the introduction MAP scheme, one can only wonder how long these engagements would take. The expectation is that the regulator should have unveiled the MAP scheme after completing all engagements and addressing all impediments to the scheme adequately. This assertion is not meant to imply that the regulator has not done enough, but given the intractable nature of the metering debacle in Nigeria, ‘how much is enough’. The regulator has its work cut for it!

We must be careful about the seeming practice by each NERC’s management to introduce different metering programs. We all know how Dr. Sam Amadi’s management birthed the CAMPI scheme, and we all witnessed how it fizzled out with that administration, even before the advent of this present administration. The MAP scheme has now emerged under the current management. However, there are pertinent questions; were critical lessons learned? Was the CAPMI program irredeemable? In what ways do MAP differ from CAPMI? These questions notwithstanding, it is the desire of all that this scheme works. The sustainability of this project depends on the ability of the regulator to conduct an extensive analysis of all the critical issues involved and ensure that lessons learned during the implementation of CAPMI are incorporated. Our interactions with the regulator revealed that they are open to suggestions from informed and well-meaning Nigerians. This is a positive attitude.

Metering is the revenue assurance mechanism for the DISCOs; it is critical to their survival and the survival of the entire electricity market. It is through the DISCOS that revenue is injected into the entire market. Therefore, if anything goes wrong with metering, the entire market will go south. It is our understanding that the regulator issued No Objection to 112 companies to participate in the procurement process for MAPs, but not all were issued with MAP permits. What we do not know is whether these companies are coming into the market with different meter technologies and this throws up the issues of technology proliferation.

The proliferation of technology may eventually be the greatest undoing of the MAP scheme for two reasons:

  1. A recent experience in Ghana (Ghana has just gone through with its power sector commercialization- not privatization) revealed that a few ‘yahoo boys’ were able to hack into the firmware of certain meter technologies, and for 700GHc they could load up to 3500GHc or 4000GHc worth of electricity for the customers depending on the negotiating power of the customer. Imagine what will happen to Nigeria if these ‘yahoo boys’ see the metering industry as another veritable opportunity to make quick illicit money. This scenario will be an absolute disaster, as it will further exacerbate the already deplorable revenue profile of the power sector and may encourage the DISCOs to revert to estimated billing quickly.

Some of the MAP providers are local meter manufacturers and may come to the market with some local experience in terms of tamper or fraud protection. However, I-WIN is encouraging the electricity regulator to streamline the technologies approved for the electricity sector in Nigeria. Granted that STS (Standard Transfer Specification) is a standard token encryption software trusted worldwide, there are other issues involved in meter firmware that a willing and incentivized ‘yahoo boy’ can capitalize on and do serious harm. The metering code review panel set up by the regulator should strengthen its interactions with local metering manufacturing companies to streamline and update technical requirements for these meters. Also, the panel should abreast itself of the emergent threats in the electricity metering industry.

  1. With the high proliferation of meters, it will be difficult to roll out an effective meter asset management program (MAM). MAM is a program that ensures that meters perform in a circuit as certified in the laboratory. This activity is not an everyday exercise but a programmed event that takes place once or twice a year and it is on a sampling basis. Sampling is an intricate exercise and when you have a substantial meter technology mix, we will be looking at a sample methodology that will ensure all meter types are captured. Thus making the meter verification/validation exercise complicated. Furthermore, the deployment of personnel and technologies to cope with the high proliferation of technology in the metering industry could be daunting.

It is the responsibility of the Nigerian Electricity Management Services Agency (NEMSA) to certify energy meters before they are deployed. Therefore, the task for meter asset management should be the responsibility of NEMSA. I-WIN will be following up with NEMSA to establish their readiness in this regard. The importance of this oversight function cannot be overemphasized as meter validation goes beyond the laboratory setting to include performance in-situ (on site). Hopefully, the low number of approved MAP permits by the regulator (10) may ameliorate some of these issues.

No power sector in any country survives without a robust metering scheme, just as no filling station will dispense fuel without a meter. It will be asking for absolute disaster to enter a filling station and the attendant tells you the meter is not working, but from the size of your car, it would take N20,000 to fill your car. That certainly will not work, but that is the exact scenario in the Nigerian power sector.

Once we get metering right, we have started the journey towards revenue adequacy in the Nigerian power sector. We employ the regulators (NERC and NEMSA) to make sure that they come up with solutions, technical and commercial, that will be enduring in solving the metering problem in the Nigerian electricity market.

NERC is a continuum. Therefore, it is not Sam Amadi’s management that failed through the CAPMI program; It is NERC that failed. NERC cannot afford to fail again.

 

 

About IWIN

The Independent Energy Watch Initiative (I-WIN), an enterprise of Energy ConServ and the Roundtable for the Growth and Development of Power (RODEP), is an online/web based power sector portal that strives to engage stakeholders and the Nigerian public on topical issues in the power sector.

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