BREAKING NEWS

NERC’S CONSUMPTION CAP TO CUT POWER SECTOR’S ANNUAL INCOME BY N12BN

07 Jul 2015

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 Dr. Sam Amadi, Chairman of NERC

Chineme Okafor in Abuja

A model framework developed by the Nigerian Electricity Regulatory Commission (NERC) to cap revenues accruable to electricity distribution companies in Nigeria’s electricity industry from estimated billing methods has revealed that the sector could lose as much as N12.532 billion from the proposed measure in one 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 has 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.”

It added: “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 further.

NERC also in the concept note clarified the counter measures it has developed against Discos’ possible double standard in application of the capping regulation. It in this regards 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.

Culled from Thisdayonline

About blackconnoisseur (382 Articles)
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