Review of the Electricity Power Sector Reform Act (Amendment) Bill 2018

Introduction

The diagram above contains some of the major challenges facing the Nigerian Electricity Industry. In a bid to address one of these challenges, a bill to amend the Electric Power Sector Reform Act 2005 (“EPSRA” or the “Principal Act”) to prohibit and criminalise estimated billing1 by Electricity Distribution Companies (“Discos”) as well as provide for compulsory installation of pre-paid meters to consumers2 has been proposed (the “Bill”). This will ensure consumers pay for the actual energy consumed and prevent Discos from issuing electricity bills based on assumptions rather than facts.

Significant Provisions of the Bill

The Bill seeks to introduce new sections and amend some existing sections of the Principal Act. The new sections of the draft Bill are essentially aimed at achieving the following objectives:

  • prohibiting estimated billing and placing an obligation on Discos to install prepaid meters at consumers’ premises within thirty (30) days of receiving an application and the regulated fee for the prepaid meter. The consumers will have the option to pay for pre-paid meters through a Credit Advance Metering Implementation scheme. In addition, the Bill makes it mandatory for all electricity charges or bills to be based on prepaid meters; and consumers are not required to pay any bill without the meters first being installed at their premises;
  • placing an obligation on the Discos to inform the consumers in writing on the nature of the meter installed, tariff methodology and other services available to the customer upon connection;
  • criminalising and providing a penalty for the issuance of estimated bills and failure of the Discos to provide prepaid meters after receiving an application and payment from a customer. For the purpose of clarity, we have reproduced the relevant section of the Bill below:

“All cases of illegal disconnection, refusal of the relevant Distribution Company to connect a customer after application, un-metering within thirty (30) days of a customer applying for a pre-paid meter and estimated billing shall attract both civil and criminal liability and any officer found guilty shall be liable to a fine of N500,000 (Five Hundred Thousand Naira) or imprisonment for a term of 6 months or to both such fine and imprisonment as the Court may deem fit”

In addition to the above, the Bill recommends six (6) months imprisonment or a fine of N1, 000, 000. 00 (One Million Naira) or both for any person who contravenes or “frustrates” the implementation of the Bill when enacted into law.

Implementing the Bill

There is no doubt that having meters will guarantee accurate assessment of energy supplied and consumed. It will also aid the revenue collection of the Discos and resolve the irregularities associated with estimated bills. However, the practicality of enforcing or implementing the provisions of this Bill when passed into law without addressing some of the underlying problems that the Discos have faced in providing meters to consumers remains in doubt.

It is estimated that 4,740,275 electricity customers in Nigeria were unmetered as at 31st December 20173. The Discos have funding or liquidity problems which they have largely attributed to their inability to charge cost reflective tariffs and this has hindered their ability to provide meters. They are also dealing with infrastructure challenges, energy theft and meter bypassing. In addition, the Multi-Year Tariff Order places some restrictions on the amount Discos can spend on capital expenditure.

It is also important to mention that there have been prior regulatory interventions towards addressing the metering problem. For instance, NERC in 2012 introduced the Credit Advanced Payment for Metering Implementation (“CAPMI”) programme. However, this programme did not achieve the desired result. In 2016, the NERC directed Discos to conclude the metering of all maximum electricity customers in their network on or before November 2016. Recently, the NERC approved the Meter Asset Provider (MAP) Regulations4. The MAP Regulations create a procedure for Discos to work with MAPs towards meeting their metering obligations as specified by NERC. MAP provides for third party financing of meters and amortisation over a period of ten (10) years thereby removing the financial burden of providing meters from the Discos.

In addition to the above, it is a matter of concern that the Bill seeks to apply criminal sanction to any person who “frustrates” the implementation of the Bill when passed into law but does not define what amounts to “frustration”. Such ambiguity could lead to unintended draconian consequences.

Conclusion

There is no doubt that estimated billing needs to be eliminated. However, this objective may not be achieved by criminalising or penalising the Discos. Assisting the Discos overcome some of the challenges that have prevented them from complying with their metering obligations should precede any penalty or criminalisation.