Order on the Deregulation of Meter Prices for Meters Deployed Under the Meter Asset Provider Scheme

The recent Order on the Deregulation of Meter Prices for Meters Deployed Under the Meter Asset Provider Scheme (the Meter Price Deregulation Order or the Order) was issued by the Nigerian Electricity Regulatory Commission (NERC) on the 29th of April 2024. It presents a significant investment opportunity in the Nigerian electricity supply industry (NESI), particularly in relation to last-mile meter supply and installation business.

Currently, the lack of adequate metering has been a major challenge in the Nigerian electricity supply industry, leading to significant collection losses for electricity distribution companies (DisCos). The introduction of the Meter Asset Provider (MAP) scheme was aimed at bridging the metering gap and improving revenue collection efficiency for DisCos.

With the deregulation of meter prices under the MAP scheme, the cost of procurement and installation of meters which were previously regulated by NERC will, with effect from 1st of May 2024, now be deregulated. This will liberalise the market for meter supply and installation and allow for increased competition and private sector participation in the metering aspect of the electricity value chain.

Here are some interesting takeaways from the Meter Price Deregulation Order:

1. Open Market Pricing: The Order has deregulated the pricing of meters under the MAP scheme, allowing for open and competitive market pricing determined through transparent bidding frameworks. This creates an opportunity for investors to leverage economies of scale and competitive pricing strategies to gain market share.
2. Choice for End-Users: End-use customers now have the right to choose their preferred meter provider from a pool of authorized vendors. This promotes healthy competition among MAPs, incentivizing them to offer competitive pricing and quality service delivery to attract customers. Investors and micro-lenders may also collaborate with MAPs to offer vendor financing to willing customers.
3. Diversification of Meter Types: The Order allows for the deployment of various meter types, including basic electronic meters, smart meters, Internet of Things (IoT) meters, DIN Rail meters, and current limiters. This diversification presents opportunities for investors to specialize in different meter technologies and cater to varying customer needs. We envision that bidirectional meters may soon join the host of mentioned meter types considering that some States which recently assumed regulatory power over electricity operations in areas within their States may develop options for net-metering as a way of fostering renewable energy and demand-side electricity generation.
4. Nationwide Operation: The Order has lifted restrictions on MAPs operating in specific DisCo areas, allowing them to operate nationwide, subject to meeting the respective DisCo’s requirements. This expands the potential market reach for MAPs and provides opportunities for MAPs and investors in the meter business to spread their business operations across different locations in Nigeria.

It is important to note that there is to be a monthly bidding process among MAP permit holders in relation to eligibility to offer meter supply and installation services as discussed above. NERC has undertaken to manage the bidding process in the interim and as such, it is necessary for prospective investors to properly consult professional advisers on how to obtain the MAP permit and MAP permit holders to consult on how to participate in the monthly bidding process.

It is also important to note that capitalising on these opportunities requires a well-planned investment strategy, leveraging expertise in meter manufacturing, supply chain management, and customer service delivery. Investors can explore partnerships with experienced meter manufacturers, local content providers, and technology companies to develop competitive and innovative metering solutions. At the preliminary stage, it is crucial to conduct thorough due diligence, market research, and feasibility studies to understand the specific requirements and dynamics of each DisCo’s licence area, as well as the competitive landscape.