Discos, Government, NERC, Regulation

It’s impossible to give all consumers meters now –Amadi

Posted: October 31, 2015 at 5:57 pm   /   by   /   comments (0)

The Chairman/CEO. Nigerian Electricity Regulatory Commission, NERC, Dr. Sam Amadi, recently granted an elaborate interview to Punch Newspapers, where in he spoke on several issues that really bother electricity consumers in Nigeria. We are honoured to present it to you. Enjoy;

Recently, electricity bills (estimated ones) have been more than doubled. Is the Nigerian Electricity Regulatory Commission aware of this development?

Let us understand it well. The tariff is what NERC approves for distribution companies to charge their customers. It does not change unless there is a tariff review, which is usually announced ahead and involves customer consultation. What the Discos send to their customers for electricity consumed is called electricity bill. This is the total unit consumed multiplied by the tariff for kilowatt/hour of electricity. So, when you receive a higher bill it is not that tariff has changed. It is that the distribution company is claiming that your consumption has increased. If you have a meter, there is no problem. Except your meter is bad or compromised, you are paying exactly what you consumed. Higher bill will therefore mean more consumption of electricity. This presumes that the Disco is billing you fairly. But if you don’t have a meter, then the story changes. It means that the supplier may be overestimating the customer. It does not mean that the tariff has changed. In that case, a customer should file a proper complaint to the Customer Complaint Unit of the Business Unit of the service provider. If the customer does not get justice, he or she should appeal to the Forum Office set up across the states to decide on such grievances by customers.

But the truth is that power has improved across the country. Many people inform me that they now have more regular supply of electricity. I just want such people to realise that if they now experience stable electricity, their bills will go up because they are consuming more. But if you are paying a bill calculated based on an illegal tariff, complain to us. NERC is determined to stamp out such behavior.

Dr. Sam Amadi, Chairman/CEO, NERC

Dr. Sam Amadi, Chairman/CEO, NERC

Some flats in Lagos that were paying about N4,000 to N6,000 before, are currently given bills of N16,000 per month? Is the commission aware and if yes, what has been done?

The commission can only be aware if people complain to us after they have complained to the CCU of the distribution companies and have not received redress for the wrong. We are not everywhere so we won’t know the sort of injustice that some consumers go through in the hands of the Discos. But some consumers have sent petitions to us and we have intervened and secured relief for them. Of course, we carry out periodic audits and random monitoring of the network and when we receive reports or discover such misbehavior or notorious service failure by the Discos, we sanction them. Early in the year, we carried out such audit of estimated billing by Abuja Disco and discovered malpractices. We penalised the Disco and asked it to write to all the customers they had overbilled through estimated billing and refund them. The Disco apologised publicly in the newspapers and refunded 32,000 customers up to about N50m. We have now issued similar queries to other discos where there has been similar service failure. We are reviewing their responses and after that we make our findings and sanction as appropriate. Today, this market is moving away from impunity and entering into the sunlight of accountability.

Recently, Ikeja Disco said customers who shortchange them with respect to paying bills do so at the detriment of those who pay regularly and live in the same area, as the amount was shared between the defaulters and the non-defaulters. Must the non-defaulters be punished alongside the defaulters?

This is a foolish and unfortunate statement. This is the reason we have queried them. And we will ensure that they pay like the Abuja Disco for such reckless behavior. What the company should be saying is that because it has unmetered customers and estimates those customers and that in estimating them, it resorts to lazy averaging. That is, after it has billed metered customers, whatever remains of the cost of power it supplied, it then shares it between the unmetered customers. So, the evil of estimated billing is that whatever you share, there will be relative injustice as some unmetered customers will pay more than they consumed. The answer in the long run is to meter all customers. But this is not doable in the Short-term. So, the more reasonable option is for the Discos to employ the highest rigour in estimating unmetered customers. We have helped them in this wise by providing a regulation on estimated billing that provides a formula for close-to-exact billing of unmetered customers.

Discos are responsible for collecting their bills from customers. They should employ all legitimate and fair means to ensure that those who receive electricity pay for what they consumed. It is irresponsible to transfer such burden on those customers who paid their bills. This is at the heart of my dispute with the Discos in January when NERC removed the collection losses from the tariff and required Discos to bring evidence to prove that those losses they want to transfer to customers are beyond their reasonable efforts. In spite of their blackmail, we stood our ground. The blackmail went up to the new government. But thank God the truth is clearer now. We should not allow Discos pass the debt owed by some customers to those customers who are regularly paying their bills. It is unfair and inefficient.

Is it fair for consumers to pay for electricity whether they receive supply or not?

People should only pay for what they consume. This is the design of the electricity market. The NERC regulations are clear on this. This is why they require that every customer must be metered before they are connected to the electricity network so that every customer pays for just what he or she consumes. Now the problem is that long before the reform started, we have accumulated a metering gap of more than 50 per cent. That means that more than 50 per cent of electricity consumers in Nigeria did not have meter to record their electricity consumption. As soon as I was appointed as the Chairman and CEO of NERC, one of the major policies I adopted was to focus on metering. I had to know the extent of metering and the metering gap that had to be bridged before every consumer has a meter. I set up a fact-finding committee headed by the renowned human rights lawyer, the late Bamidele Aturu, to go through the whole country and establish the extent of metering gap. That committee found that more than 40 per cent of electricity consumers did not have any type of meter. The committee also found that the Discos were not enthusiastic to provide meters for their customers because of the perverse incentive of raising more revenue through estimation.

We tried to deal with this by mandating in the Multi Year Tariff Order 2 that the Discos should complete metering of their unmetered customers within 18 months. After eight months, we conducted an audit and discovered that not much had been done in this regard. In our meeting with the Discos, they gave the reason that the increase of electricity workers salaries by over 100 per cent on account of the privatisation had wiped off the Capex (capital expenditure) required to finance metering. This is partly true because in a rush to privatise, the government yielded quickly to outrageous demands of the workers. This approval for salary increase and regularisation of casual workers meant that the cash-strapped Discos did not have enough revenue to finance ambitious metering plans. This deplorable situation moved NERC to rethink its metering strategy. But there is no need crying over spilled milk. Clearly, the government-owned Discos had no incentives to be creative in their operation. We need to think out a creative strategy that could fast track metering of the consumers. This is the reason we introduced the CAPMI (Consumer Advanced Payment Metering Initiative) which allowed customers to pay for meters and be refunded instead of waiting too long before the Discos are able to raise finance and meter everybody. Even if the Discos have access to the amount of finance required to meter all their customers, there will still be a long wait before everybody can be metered. Therefore, CAPMI provides succour to those customers who will have to wait for too long. The key point of CAPMI is that every person who pays for meter is refunded with interest through energy credit. So, invariably it maintains the cardinal principle that meter is free to a customer who is paying for electricity that is consumed. There should be no extra payment that does not go to payment for energy. Therefore the CAPMI payment is converted to payment for fixed charge and amortised through a rebate on fixed charge.

Sample of Pre-Paid Metre

Sample of Pre-Paid Metre

Is it true that the heightened over-billing by Discos is because they have been mandated to meter customers as soon as possible?

Discos have to meter their customers as soon as possible and in an aggressive manner. It is only a foolish Disco operator who does not appreciate the importance of metering to its revenue protection strategies. The customer also needs to have a functional and foolproof meter to make sure he pays for what he consumes. So metering ensures equity and fairness on the two sides of the market divide. NERC insists that Discos must meter their customers. We appreciate that the metering gap exists before the new owners took over the network and cannot be bridged in a few months or even in a year. But Discos must show that they are seriously bridging that gap. So, far they have not done so. And now the regulator is holding their feet to the fire. That should not be a reason for illegal hike of tariff. The tariffs in the market remain as approved by NERC. If a customer suspects that he or she is overbilled, then let the customer lodge a protest first to the Disco’s Consumer Complaint Unit CCU and if unsatisfied with the outcome, then appeal to the NERC Forum Office in the Disco service area.

Before consumers with new prepaid meters can buy units, they have to start with the payment of 30 per cent of their outstanding. Why is this so and what are you doing on behalf of the consumers?

I am not aware of this development. You can always lodge complaints to NERC through our various contacts: Facebook, Twitter, email and postal address. But always remember that disputes between customers and service provider are not unusual. What is clear is that NERC has provided an effective redress mechanism. And whenever we find that an operator is negligent or fraudulent, we punish them severely. Note how we sanctioned Abuja Disco and it paid over N50m to compensate over 32,000 customers that were overcharged. This has not happened in the Nigerian electricity market before. Ikeja Disco is now sanctioned N131m for failure to inform its customers of the CAPMI meter purchase option. The new face of Nigerian electricity market is one without impunity, where service quality and service accountability are the watchwords

Discos also divide the outstanding bills for consumers in installments to ensure that they are fully exploited even when prepaid meters have been given. What are you doing about this?

When you have a prepaid meter, your bill is based on how much you consume and there is an automatic billing. Once you recharged, you are billed on your customer class and based on units that have been consumed. There should be no mystery here except someone is tampering with the device.

Nigerians believe they are being exploited by Discos and have lost hope in NERC to protect them because they believe that you connive with them.

Yes, there is some degree of exploitation going on, especially with regards to estimated billing and failure of Discos to meter customers. This is part of the corporate governance problems and crisis of corporate culture and value which privatisation was supposed to cure but which it could actually exacerbate if post privatisation regulation is not rigorous and smart. At NERC, we know this. I wrote a book on this aspect of privatisation before I became the Chairman of NERC. So, we recognise that without proper regulation, the expected behavior of such market entities is likely to be to deceive and manipulate their customers. Two renowned Nobel Laureates just authored a book on the manipulative character of unregulated markets. This is why we are vigilant and ready to intervene when we see asymmetrical and detrimental engagements. We want to respect the right of the Discos to operate and be profitable. But we will also fulfill our responsibility to intervene to protect public interests and further the development of an efficient electricity market

Consumers want more explanation (public hearing) from NERC. How is the commission tackling this?

There is need for more and more public hearings. I believe in open government. I am a prisoner of openness. This is why I made NERC the first public agency in Nigeria to fully embrace the Freedom of Information Law. We voluntarily made the mandatory disclosures. We are also the first, and may be, the only public agency in Nigeria to have openly declared a code of conduct. The event was witnessed by the representatives of the Minister of Power, the Attorney General of the Federation and numerous civil society groups. All staff and commissioners openly declared commitment to a code of conduct that mandates disclosure of gifts and avoidance of conflict of interest situations. We have held several Consumer Assemblies across the country. In the present tariff review process, we have held more than three public hearings on the issue. We scheduled another public hearing for October 13, 2014. NERC is a model of a consultative and accountable regulator. I have gone further than anyone I know in Nigeria today to open everything we do in NERC to the public. It is not enough. We continue to do more. The people need to know more and more about the electricity sector, especially its pricing policy. We will continue to improve our responsiveness in this regard.

Some Nigerians have reasons to believe that your officials and members of the senate committee on power are on the payroll of Discos, and this is why they look the other way when Discos exploit Nigerians. How do you react to this?

I am sure you don’t take this sort of allegation seriously? To paraphrase Mr. President: I belong to all and I belong to none. I am a son of Chief Gani Fawehinmi. I am proud of that parentage. I am under obligation to the memory of the dead to continue to uphold the heritage of defending the interest of the people and never to profit from the suffering of the people. I am a very honest and clean public official. I have not collected any kobo from anyone for any favour. NERC staff members have received attestation for exemplary honesty and professionalism. I am proud of them. I can’t speak for any other institution. But I have confidence that the National Assembly has no business with such allegation. Speaking for myself, I am crying out to be probed on this claim. As a public officer, my motto is taken from Isaiah 45:13-14: “I have stirred him up in righteousness, and I will make all his ways level; he shall rebuild my city and set my exiles free, not for a price or reward, says the Lord of Host.”

A Transmission Substation

A Transmission Substation

Are there penalties against Discos at all as we don’t often hear that they are penalised for wrongdoing?

There is always penalty for breaking the law or falling below standards. What happens is because of the infancy stage of the market. We had to try to incentivise and nudge the Discos to higher performance. This is the role of a regulator at the founding of a new market. Now we have set the stage. We have now commenced rigorous implementation of market rules and sanctions. We now penalise misbehaviour. We have sanctioned Abuja and Ikeja Discos. We have commenced process for sanctioning other Discos. The Transmission Company of Nigeria is being queried now for failure to obey market rules and legitimate instructions of the regulator. We are recreating the character of the electricity market in Nigeria through reasonable, fair but emphatic actions.

Power generation hit an all-time high two months ago despite struggles to make it cross 4,500MW for over one year. What happened?

We have entered a new era. You call it body language. But the most important point is that NERC had always focused on driving improvement. But the new government has brought discipline and urgency that have aligned with our steadfast focus on effective regulation. We are also learning fast. In the past we had assumed that the utilities and other participants in this market would do the reasonable thing. We had focused on leadership and less on management. But now we are focusing on management. We don’t just make regulations; we go to the field and gather intelligence on how these entities are sabotaging the regulations. Hence, we are now firing on all cylinders. We have travelled far on the learning curve. We are now a much more matured regulator. The result is the improvement you are seeing. We thank God that this government’s body language of discipline and anticorruption has met with NERC’s commitment to zero tolerance for corruption. This new government suits our mentality and we are moving fast and steady towards reliable and adequate supply of electricity

You targeted 5,000MW by September and 6,000MW by the end of 2015. But instead of power to rise, we saw it drop by about 300MW in the past two weeks. It looks like more failed targets.

We are working hard to get to the target. We regret that we have witnessed setbacks like the fire incident in Kanji Hydro Power Plant and the breakdown at Egbin Power Plant. These were unforeseen but we are working hard to rise up and pursue the target. Even if we don’t get there at the end, we will be close. The idea of reasonable target is to stimulate more and smarter efforts. We are achieving that.

Your meeting with Community Electric du Benin delegation showed that Nigeria sells power to other countries. Nigerians see this as stunning considering the fact that we don’t have enough power to meet our needs, but sell to other countries. Is it reasonable to sell power to other countries considering our electricity plights?

We don’t live on an island to ourselves. Maintaining good neighbourliness is strategically important to statecraft. I have experience in foreign policy as a former special assistant to the foreign affairs minister. Nigeria has a treaty obligation to supply power to those countries. A regulator cannot brush aside these consular commitments. I can only insist that these countries pay cost reflective tariff so that the generators in Nigeria receive full value for the power they supply to the grid. I can also advise government to reconsider these obligations when that need arises. But right now, there is no need for such extraordinary action. Our focus should be to continue to improve quantity of power available domestically by increasing the supply of gas to power plants and better water management by the hydro plants while we diversify to other renewable energy sources.

 

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