Bulk metering and fixed charge controversy
THE controversy over ‘bulk metering’ and the ‘fixed charge’ in electric utility charging for services, seems to have no end to it. While those who know the way the industry works watch with horror, many Nigerian newspapers report that, the Nigerian Electricity Regulatory Commission, NERC, has complied with a resolution of the Senate on billing by asking DISCOs to discontinue bulk metering forthwith.
On the issue of fixed charges, one of the newspapers said that the Nigerian Electricity Regulatory Commission directed electricity distribution companies (Discos) to “restructure their billing system to ensure that electricity consumers pay for only what they consume.” The Senate is perfectly right.
Senators have a duty to protect the people from abuse, and they did so, on the advice they trusted on both issues. As the Instrument and Meter Engineer of the ECN between 1966 and 1968 and the Senior Commercial Engineer in the Corporation’s Commercial Department from late 1968 to 1970, allow me to look at each of the advice on which the August body appears to have based its resolution.
The first point is that ‘bulk metering’ is a general term used in the industry for actions of connecting current, energy or power instruments to feeders, to determine electrical loads on particular feeders for control, load budgeting and management purposes. DISCOs will install such instruments all the time in spite of any resolution.
However, somebody has clearly used a woolly term, to make a point about energy metering for resale. Consider a hypothetical residential estate. If the various occupancies were as shop floors in a factory, an electric utility could meter all (bulk meter) at a service entry provided by the estate owner.
However, the meter installed would have a maximum demand indicator, to determine the factory load for fixed charging as provided in an appropriate tariff. Here, the hypothesis disintegrates.
Residential occupancies are no industrial loads. Rates for them have no maximum demand element and maximum demand meters are unnecessary.
Therefore, if a tariff in use has not provided for a type of metering, it is inappropriate and wrong to improvise. On investigation of the alleged bulk metering, a DISCO operative explained: “It is a historic practice.
The erstwhile monolith metered some estates in bulk and the estate owners raised individual bills for occupants of the estates. That has resulted in the abuse of occupants who were invariably charged exorbitant rates by the estate owners.”
That is clearly a case of Resale of Energy. I recall an internal report about Customer Service Policy in the ECN in 1970. The recommended policy on Resale of Energy was as follows: “Except by agreement with the Corporation, the customer shall not resell to or share with others, any service provided by the Corporation.
Each case of resale will be considered separately and appropriate action taken by the Corporation.” I do not think that that report ever became the written policy of the ECN, though the monolith was stoutly against resale.
In defence of that position, I remember that it once wrote to a company to stop marketing credit meters in Nigeria. However, what agreement did estate owners have with the monolith in the cases in question, before they started resale? Did both sides keep to the agreement? Investigate each case and sanction the offenders.
Every DISCO believes in the rule of law. They must look at the agreements between the monolith and estate owners and take appropriate action.
If its own customer service policy is different from what it sees in the agreement, it must demand compliance, if NERC has approved its own policy.
The issue of fixed charge would be amusing, if it did not show fundamental ignorance of the makings of this pricing method in electric utilities. Nigeria did not start it, though the country has practised it all the years she has operated electric utility services.
Ferns J L, Meter Engineering, 7th ed. (London: Sir Isaac Pitman & Sons Ltd, 1963) p.2, discussed the evolution of meters, metering and tariffs. I quote, “. . . Maximum demand began to assume importance because, it was a fair guide to the proportion of the undertaking’s fixed costs, for which the consumer was responsible.
Analysis had shown that the cost of supplying an electricity consumer contains the following components : Fixed Costs: Service to premises, share of distribution mains, share of substations, share of high-voltage feeders, share of generating stations (or bulk supply M.D. Charges).
Running Costs: share of coal, oil, waste, water, (or bulk supply kWh charges), share of maintenance costs of power stations, substations, and mains, share of wages of all employees, share of establishment expenditures, share of management expenses.”
Ferns commented earlier, p.1, “. . . there was a time in the early days of the electricity supply industry when consumers were supplied with electricity without the help of meters. . . .”
Therefore, metering and pricing have travelled a long way. Nigeria has no immediate alternative. Nor do I believe that a change is desirable because someone is forcing his or her lack of understanding of the issue on the nation.
The fact is that fixed and running, sometimes styled variable costs, in electric utility pricing, are notional. Great thinkers took decades to come up with these ideas in the late 1950s.
And they have made cost measurement and control in the industry much easier. Fixed and running costs are, therefore, component parts of the costs of every unit of electrical energy supplied and consumed.
Restructuring the fixed charge element is not only a pointless farce, it will make NERC’s work much harder. It gladdens the heart that lawmakers now rise at the hint of cheating.
Once they were mum when the monolith committed open fraud on the people, forcing them to pay over several years, for Meter Maintenance it never performed.
This time, someone may not have exactly cried wolf, but what sensational distractions that the country does not need! I would urge government and its agents not to do anything that undermines the proper management of our electric utilities.
Their roles are normative only. DISCOs are the frontline contacts and treasury of the electric utility industry. The three links in the chain that is the industry, depends upon them.
They need the trust of the nation and its people to function at the optimum. • Engr. S O Uwaifo FNSE is former Area Manager, ECN, and Eisenhower Fellow.