NERC’s new meter pricing sparks divergent opinions among industry and consumers

On September 6, 2023, the Nigerian Electricity Regulatory Commission (NERC) announced a revised cost structure for the purchase of meters under the Meter Asset Provider (MAP) program.

Notably, the new pricing scheme excludes Value Added Tax (VAT).

The cost of single-phase meters has been raised from N58,661.69 to N81,975.16, while the price for three-phase meters has jumped from N109,684.36 to N143,836.10.

According to NERC, this price adjustment is authorized by Section 226 of the Electricity Act 2023 and Section 8(1) of the MAP & NMMP 2021 regulations.

These legislative frameworks empower the Commission to regulate and set the pricing for both single-phase and three-phase meters distributed by MAPs, taking into account all relevant costs and warranties.

NERC explained that the adjustment was made in response to changes in foreign exchange rates. The objective is to avoid potential shortages of meters, in line with the Commission’s commitment to phasing out estimated billing practices.

NERC emphasized that a significant portion of the components used in meter production is imported, making their costs highly susceptible to fluctuations in foreign exchange rates.

To accommodate the rising dollar rates, NERC approved the price modification.

This is aimed at ensuring that Meter Asset Providers can recover the reasonable costs associated with meter procurement and maintenance. At the same time,

NERC is committed to upholding a pricing framework that guarantees a sustainable return on investment (ROI) for MAPs.

This comprehensive price adjustment aims to address several challenges simultaneously.

First, it mitigates the risk of meter shortages, which would exacerbate the already problematic issue of estimated billing.

Second, it provides a more financially sustainable environment for MAPs, which are pivotal players in the electricity supply chain.

Lastly, it accommodates the realities of a volatile foreign exchange market, ensuring that meter pricing reflects true operational costs.

However, not everyone is on board with NERC’s lofty plans.

Consumer perspective

Reacting to the increase in meter prices, Dozie Igweilo, the Founder of QuadLoop, a circular economy startup based in Lagos, told Nairametrics that he holds skepticism regarding the anticipated surge in meter purchases following this price review.

His belief stems from the stark reality that a considerable portion of the populace struggles to afford these meters.

Thus, many Nigerians are likely to perceive the updated prices as exorbitant, potentially labelling it as an exploitation of their financial constraints.

He said: “In examining the renewable energy sector, it becomes evident that the pace of adopting sustainable solutions within the nation is notably sluggish, primarily due to the financial aspect. The impediment lies in the cost factor; a significant portion of the population finds it challenging to invest in these beneficial solutions, irrespective of their potential to significantly benefit the overall populace.”

Imoh Heavens, an Akwa Ibom resident told Nairametrics that the prevailing hardship in the country is the primary barrier preventing people from making purchases.

He however noted that even if the cost surges to N200,000, individuals will willingly opt for it over enduring exorbitant estimated bills from Port Harcourt Distribution Company (DisCo).

He said: “PH DisCo is often regarded as an unscrupulous entity, causing immense financial strain and even premature deaths due to the stress it inflicts. For instance, in Ibesikpo B, Akwa Ibom State, the highest energy cap for non-metered customers stands at 245.

“However, PHED staff (often perceived as opportunistic) intentionally bill at 425, exploiting the lack of knowledge among the populace regarding their actual energy cap. This revelation surfaced after analyzing a post by Nairametrics, unmasking years of exploitation targeting the impoverished.

“People are willing to liquidate their assets to procure a meter. If they delay for another year, their debts could skyrocket by N150,000-N200,000, since PH DisCo manipulates the energy cap. Frankly, this government appears more burdensome than its predecessors.

“They show concern but impose steep prices, contrary to market rates. Even reputable platforms sell quality meters for N8,000-N13,000, starkly contrasting the new N81,000 price. Anticipating positive change? Doubtful!

“PH DisCo adds to the burden, inflating the price to N81,000. I bought mine to escape exorbitant bills. We are in an era where the government exploits the vulnerable, a departure from past hopes for the public good.”
Shola Ogunniyi, the Managing Director at Hacom Energy Limited told Nairametrics that since the deregulation of the FX rates, the landing cost of meters and other ancillary fees have surged above the NERC regulated prices.

Consequently, the price increase for single and three-phase meters is inevitable, however, the price increase is further reducing the ability of consumers to purchase meters.

He said: “It is unfortunate because while the country is struggling to close the over 7 million metering gap a weaker currency and lower purchasing power is hampering the progress recorded. If we look at the metering ratio in the country, we will observe that only DisCos in the South and Abuja Disco are recording good numbers in their MAP projects.

“Most Northern DisCos are struggling to meter their customers because of the higher poverty index in the north. While it is understandable that the global economies are experiencing higher inflation, Nigeria is also trying to prune overhead costs and move Nigerians and the Nigerian economy from all forms of government subsidy or intervention.

“It is very important to note that in reality, a large percentage of the country cannot afford to compete with international prices of life support items like meters and electricity because of the Naira-Dollar parity. In summary, in an import-dependent country like Nigeria, a weaker Naira always translates to lower purchasing power and emphasizes the need for government support or waivers on major essential commodities which include electricity meters.

“We need to take deliberate actions to curb energy poverty in Nigeria.”

Meanwhile, Geoffrey Kunda, a therapist, told Nairametrics that Nigerians have no option but to purchase the meters at the new prices because the country is in a state of helplessness. He said:

“We find ourselves in a state of utter helplessness, where the collective will of the masses has been deeply fractured. The pertinent question to ponder is: what alternatives are available to the people in this predicament? In the absence of viable options, even with the escalated pricing, the populace finds itself constrained from expressing dissent and is compelled to proceed with procuring the meters as a proactive measure to avert potential challenges.”

Industry perspective: MAP activities had already ceased in some areas
A source within NERC told Nairametrics that the review was necessary because of the current economic conditions of the country coupled with the foreign exchange (FX) issues that have increased costs for metering stakeholders.

He stated further that the latest inflation figure – 25.80%, according to the latest consumer price index (CPI) data released by the National Bureau of Statistics (NBS), makes the price review even more justified.

The source said: “NERC had no choice but to review the prices, the meter manufacturers and other stakeholders are also a part of the general populace and are running a business where they expect to make a return on the funds spent to run the business. The inflation rate, increased logistics costs, and the foreign exchange issues in the country affect their business too.”

Echoing this sentiment, Odion Omonfoman, the Chief Executive Officer of New Hampshire Capital Limited told Nairametrics that the meter price review was inevitable and perhaps unduly delayed by the regulator, based on the MAP Regulations issued in 2018.

According to Omonfoman, the delay by the regulator in reviewing the meter prices led to a lot of MAPs and meter manufacturers stopping meter procurement, production, and installation for customers who had made payments for their meters.

He said: “Given the floating of the Naira and other macroeconomic factors, the Regulator had no choice but to finally review the meter prices. If the prices had not been reviewed, all metering activities under the MAP scheme would have ceased, as it was no longer economically and commercially viable for MAPs and meter manufacturers to continue to meter customers at the old meter prices.

“Unfortunately, customers who desire to be metered under the MAP scheme would have to find a way to buy the meter at the new prices.
“This is because there is a looming tariff increase within the next 3 months, which would mean they may continue to suffer higher electricity bills and underestimated billing practices. Besides, if the FX situation worsens, the meter prices will go even higher.”

A possible way out

While addressing the current downturn of the Nigerian economy in relation to the affordability of prepaid meters by the general populace, Omonfoman suggested that to help customers access the meters at the new prices, distribution companies (DisCos) and MAPs can devise a payment plan where customers can pay for the meters under an instalment basis.

He said: “Perhaps a 2 to 6-month payment plan for customers who may not have the entire capital. Banks can provide financing or help DisCos and MAPs structure such financing for electricity customers to pay for meters.”