Discos Losing 60% of Revenue As Estimated Billing Backfires

Discos Losing 60% of Revenue As Estimated Billing Backfires

As coronavirus induced lockdown takes effect in many states in Nigeria, Electricity Distribution Companies (DisCos) are reporting 60% loss in revenue due to the economic impact of the lockdown on households.

Everyone is cutting down on expenses, prioritizing survival as people’s means of livelihood have been halted by the lockdown.

The DisCos that used to rake in millions through estimated billing said it has become difficult for many to pay due to the crisis. The situation has resulted in 60% loss of revenue for the distribution companies since the majority of Nigerian households are not metered. Data from the Nigerian Electricity Regulatory Commission (NERC) shows that only 3,895,497, representing 40.26% out of 9,674,729 registered electricity consumers use meters.

NERC attributed the unwillingness of customers to pay to estimated billing, which is believed to be more of extortion.

“Thus, 59.74% of the registered electricity customers are still on estimated billing which has contributed to customer apathy towards payment for electricity,” NERC said.

The Ikeja Electric Distribution Company (IKEDC), had in March, as a gesture of goodwill, promised not to disconnect customers during the first phase of the 14-days lockdown. This has made it difficult for the company to disconnect as usual, households who failed to pay their bills.

The DisCos had earlier got into negotiation with the Federal Government to provide free electricity for Nigerians in the face of the lockdown in order to cushion the effects. But the parties failed to reach a deal as the Discos demanded N200 billion from the FG as payment for the electricity supply during the period of the lockdown, but the government distanced itself from the demand.

Metering has been a bone of contention in the Nigerian electricity sector for long, a situation that has existed to the gain of the DisCos as many households are placed on estimated billing. The MAP initiative was introduced in March 2018, to solve the continuous problem between consumers and DisCos over billing but it has failed to live up to expectation.

In February, the NERC rolled a new regime of billing for the DisCos, putting a cap on estimated billing. In a document titled: Order on the Capping of Estimated Bills in the Nigerian Electricity Supply Industry (NESI), signed by James Momoh the NERC Chairman, and Dafe Akpeneye, its Legal, Licensing and Compliance Commissioner, the Regulator said there is a limit to how much the distributors could charge, especially residential areas.

According to the document: “A consumer of XYZ Disco resident in White Acre under R2 (single phase) tariff class has an energy cap of 78 kilowat/hour per month and a tariff of N42 per kilowatt/hour. The maximum that XYZ Disco can invoice such a customer is 78kW/hr x N24/kWhr =N1,872 per month.”

The document added that customers should not be compelled to pay estimated bills if DisCos do not provide prepaid meters.

“The customer shall remain connected to supply without further payment to the DisCos until a meter is installed on the premises under the framework of MAP Regulations or any other financing arrangement approved by the commission,” it said.

Unfortunately, this new regime failed to take effect as DisCos continued with their old pattern. Consumers were forced through disconnection to pay high rates of estimated bills because the marketers count on them to meet up with outrageous targets.

Recent development has however, turned the table around, and the hunter has become the hunted.

DisCos across Nigeria are lamenting about their losses as the priority of consumers have changed from bills to survival. Moreover, many businesses have been shut down following the lockdown order, and the distribution companies complain that the volume of energy supply remains the same.

It is believed that the metering plan (MAP) that was introduced last year has been sabotaged so that DisCos will continue to issue outrageous bills to unmetered customers.

The MAP programme allows third-party investors to provide meters at costs segmented according to the capacity of the meters, and thereafter, get paid through customers’ retail payment for electricity. The process has been abused so that consumers who applied for the meters hardly get them unless they pay twice the original cost.

One of the reasons for the scarcity and high cost of meters has been attributed to the upward review of import levy on electricity meters from 10% to 45%, by the Ministry of Finance. The implementation went into effect immediately resulting in abandonment of thousands of meters at the ports.

COVID-19 has turned the tide with a huge implication for the electricity distributors, limiting their earnings to 40%. And the DisCos are expected to lose more in revenue generation if the lockdown is extended beyond the two weeks.

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