EMRC Says Nigeria Requires N354bn To Bridge Metering Gap
.GILBERT EKUGBE
To improve electricity metering in the country in this year, a group of energy experts, Energy Market and Rates Consultants (EMRC) has recommended a dedicated fund with at least N354 billion to bridge Nigeria’s entire metering gap.
This is one of the highlights of its latest report titled Nigeria Electricity Market Insights (NEMI) and published last month following its review of Nigeria’s electricity market.
EMRC after its review of the Nigeria Electricity Industry (NESI), explained that the Nigerian Electricity sector has numerous inadequacies while simple solutions are not enough in meeting customer’s needs.
EMRC proffers wide-ranging solutions including a review of the current import duty on meters; provision of subsidies to the MAPs/Discos (if the MAP regulation fails) to cushion the impact of the import duty hike, and a review of the local content requirement to meet current market realities.
“A Metering fund can be set up to close the gap within the stipulated time in MAP regulation. Unless there is a change like those proposed above, it is difficult to see metering improve in 2020. The cap on metering prices and the customs charges have undercut the MAPs’ business models,” EMRC added.
The report added that electricity tariffs should be reviewed every six months to gradually incorporate changes in macroeconomic parameters (inflation, exchange rate, gas prices) and generation cost, stressing that while tariff reviews have been conducted, none have been implemented since February 2016.
“For four years, retail tariffs have remained the same, even though market conditions keep changing,” according to the report that highlighted some of the sector challenges in 2019 to inadequate metering, tariffs and liquidity, the threat of large customer power supply switch, and upstream bottlenecks.
For many years, the lack of meters in the Nigerian Electricity Supply Industry (NESI) has led to customer dissatisfaction. Customers are hit with huge estimated bills and are unable to accurately determine their energy consumption and this led to the relief when the Meter Asset Provider (MAP) was introduced to solve metering problems. However, progress has been slow. Since the implementation of the MAP regulation on the 1st of May 2019, less than 100 thousand of the required five million meters have been installed.
The EMRC which identified the factors responsible for the slow MAP Implementation said the original intention was to allow customers pay for meters in instalments as part of their electricity bills under the Meter Service Charge (MSC), but stated that no mechanism was put in place to actualize the MSC option.
EMRC also flawed the huge hike in the import duty on meters in Nigeria from 10 per cent to 45 per cent, and the capping of meter cost at N36,000 and N67,000 for single-phase and for three-phase meters respectively, which have hindered MAPS.
“Together, these challenges have stifled the roll-out of meters. The requirement of 30 per cent of meter supply from local content (manufacturers) has also been a hurdle for the Discos. This initiative would have cushioned the impact of the import duty increase but the production capacity of local manufactures has not been established and most local manufacturers are also MAPs in Discos,” EMRC said.
The report said massive investment is needed to reduce losses and improve power supply, but however stated, customers are paying less than the service costs, pointing out that the lack of cash means this investment is not being made EMRC said despite the unfavourable tariffs, NERC has set a minimum mandatory payment (MMP) for the Discos in settling market invoices, stressing that the Discos are currently struggling to meet this MMP as the calculation assumes significant loss reduction has already been achieved.
Eight Discos defaulted on MMP in the first month and were immediately sent a Notice of Intention to cancel their Distribution License by NERC. However, six of the eight have made payments leaving two still defaulting.
EMRC said NESI currently has targets to achieve set grid milestones: 7000MW in 2021, 11,000MW in 2023 and 25,000MW in 2025, saying to unlock this stranded generation, it will be important for any future investment by TCN to be in areas where there is a proven and tested ability to accept more power.
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