NERC approves $21 billion meter purchase fund for discoms

The Nigerian Electricity Regulatory Commission (NERC) has announced the approval of N21 billion for Electricity Distribution Companies (DisCos) to supply meters to end customers.

The consent was included in NERC Order No.: NERC/2024/072 published on Friday on the operationalization of “Tranche A” of the Presidential Measurement Initiative under the Meter Acquisition Fund.

Order signed by NERC chairman, Eng. Sanusi Garba and Commissioner Legal, Dafe Akpeneye dated June 19, 2024, has effect from June 13, 2024 and “may be amended or repealed by subsequent orders issued by the commission.”

NERC stated: “The Commission hereby approves the use of an amount of NGN 21,000,000,000 (Twenty-one Billion Naira only) distributed in proportion to the DisCo contribution as Tranche A of the MAF program.

“Attached to this order as Exhibit 1 is a summary of funds available to each DiscCo for the purchase of end-use meters.”

NERC stated that DiscCos will purchase and install meters for customers under MAF free of charge.

“All meters that will be purchased and installed under MAF will be free of charge for DisCos customers,” NERC said.

According to the allocation schedule for disbursement of the first tranche of MAF attached to the Order, Ikeja Electricity Distribution Company has the highest allocation of N4.35 billion (N4,358,122,421); followed by Abuja Electricity Distribution Company (AEDC) with N2.99 billion (N2,990,745,647) and Eko Electricity Distribution Company N2.92 billion (N2,921,896,285).

Others are Ibadan Electricity Distribution Company, N2,516,469,752; Enugu Electricity Distribution Company, N1 726 893 467; Benin Electricity Distribution Company, N1 571 276 806; Kano Electricity Distribution Company, N1 568 029 563; Port Harcourt Electricity Distribution Company, N1 360 944 608; Kaduna Electricity Distribution Company, N1 220 367 039; Jos Electricity Distribution Company, N521,905,774 and Yola Electricity Distribution Company, 243,348,639
NERC introduced the Meter Providers (MAP) Regulations 2018, followed by the Meter Providers and National Mass Metering System Regulations
(“MAP&NMMR”) Regulations 2021 to address metering challenges in the Nigerian Electricity Supply Industry (NESI).

The regulations provide for several options for end-user metering, but interventions, while significant, have not closed the national metering gap, which currently exceeds seven million customers.

The inability of distribution companies (DisCos) to obtain financing in the form of debt or additional equity capital was identified as the main constraint in the acquisition and implementation of end-use meters and other capital investments.

In this regard, the Meter Acquisition Fund (MAF) program has been designed and approved by the Commission primarily to address the challenge of the creditworthiness of DisCos hampering the rollout of end-use meters in NESI by creating a credible revenue stream from market-based measures on the back of which long-term financing can be provided by utility companies.

NERC found that the management of the fund manager (FM) was based on terms negotiated by the DiscO and approved by the Commission.
According to the committee, the federal government has approved the Presidential Measurement Initiative (PMI) with the overarching goal of closing the NESI measurement gap within three years using smart metering technology for data analysis.

MAF will constitute one of the revenue streams to repay long-term measurement financing.

Continuing, the order revealed that “The Commission approved the deregulation of meter prices under the MAP program vide Regulation NERC/2024/040 in order to ensure efficient meter pricing while responding more quickly to changes in macroeconomic parameters.

“The Order provides that all meter prices under the MAP program will be determined through a transparent and competitive bidding process by eligible MAPs.

“On May 21, 2024, a competitive tender procedure was held based on the provisions of Regulation NERC/2024/040, in which a total of 24 (twenty-four)) MAPs from 12 DiscCos participated.

“A total of 44 bids were submitted for the 10-meter specifications.”

NERC said the use of MAF funds would accelerate meter deployment and close the current metering gap, thereby reducing commercial and collection losses for DisCos, improving service quality and improving customer satisfaction.

The Commission also noted that while NESI is expected to use the MAF revenue stream to raise significant capital funds for metering, it is necessary to accelerate the closing of the metering gap for all customers currently classified in Tariff Band A to protect revenues and facilitate demand management for affected customers.

NERC stated that DisCos will use the first tranche (Tranche A) of MAF program disbursements based on the contributions made by DisCos to the market in April 2024.
billing and attached to this Order as Exhibit 1, for the purpose of purchasing and installing meters for unmetered customers in the “A” band in their franchise areas.

NERC stated that DisCos will, within 14 days of the effective date of this order, conduct a transparent and competitive procurement process to determine the meter price, selection and engagement of MAP/LMMA for end-user metering under the MAF program.

The order also directed a report to be prepared giving details of the process undertaken for selection
The MAP/LMMA, including the meter price, the meter specifications and the list of customers to be metered, will be sent to the Commission for approval within 20 days of the date of entry into force of this Regulation.

She added that upon approval by the Commission, Disco will enter into agreements with selected MAPs/LMMAs on one of the following conditions:
“(i} In case an Advance Payment Guarantee (“APG”) issued by a commercial bank in Nigeria is provided by an eligible MAP/LMMA, 30 percent of the contract sum will be paid by the FM on behalf of Disco to the MAP/LMMA upon execution of the contract.
The next two milestone payments will be made upon completion of 60 percent of the contracted quantities and 100 percent of the contract, respectively, with the advance funds based on the bank guarantee being amortized against the payments.

“(i) If no advance payment is requested by MAP/LMMA, milestone payments will be made after verified installation at 20%, 60% and 100% of the contracted quantity of meters respectively. Seller may: at its discretion, defer payment until installation of the contracted quantities is completed.

“(i) DisCos will provide and/or complete all necessary resources and network capacity required by MAP/LMMA to install meters based on the installation plans.”