NextierCurbing Electricity Theft with Technology, Law, and Behavioural Change
Power theft is a leading cause of the liquidity crisis in the Nigerian electricity market. These are the drivers of the challenge and how to address them.
By Osasu Eghobamien, Taiwo Ibiyemi and Teniola Tayo
Introduction
In 2013, Sustainable Energy for All (SEforALL) ranked Nigeria as the 165th out of 195 countries in terms of electricity supply. This ranking triggered a wave of reactions from Nigerian citizens and public officials. However, none of the protesters argues that Nigeria’s electricity supply industry is devoid of significant challenges. Indeed, one of the most critical challenges is the liquidity crisis in the market.
Distribution companies (DisCos) have argued that electricity theft is one of the leading causes of the liquidity crisis in Nigeria’s electricity supply market. The DisCos claim that a relatively large number of electricity consumers do not pay for electricity used, resulting in significant financial shortfalls. Power theft, which is a substantial component of the failure of energy accountability across the value chain, is the focus of this paper.
Power theft is the criminal practice that includes direct stealing of electrical power or the refusal to pay in full for electricity consumed. Any challenge to the total remittance of revenue collections back into the electricity value chain results in escalating financial losses to the sector. Nextier Power’s discussions with DisCos reveal that about 10 to 18 percent of the aggregate revenue losses are attributable to power theft.
Stealing Ways
Nigerians, knowingly or unknowingly, defraud the electricity supply market through various practices. Non-payment of electricity bills is one of the significant challenges faced by the electricity distribution companies. Several electricity consumers do not pay their bills in full. Analysis by Nextier Power estimates that about 22 percent of the financial shortfall in the electricity market is attributable to this challenge.
Manipulation of electricity bills is another way of defrauding the system. This practice typically requires the cooperation of utility staff to alter the bill amount. In most cases, the customer induces such action by offering a bribe to the DisCo staff.
Fraudulent customers may tamper with the electricity meters so that it does not accurately record electricity usage. The tweaking could be to make the meter read a different figure from the actual consumption (tampering) or not to read the consumption at all (meter bypass). In discussions with Nextier Power, one of the DisCos disclosed that about 50 percent of meters installed from 2016 to 2018 had been tampered with by mid-2019[1].
Illegal connections are another significant challenge. Across the country, electricity consumers openly connect to the national grid without prior consultation or approval of the electricity distribution company. In some cases, consumers defraud the utility through illegal partial connections. In this case, the consumers pay less than the electricity consumed because the smaller loads are legally connected through the electricity meters, and the larger loads (like air conditioners, refrigerators, etc.) are illegally connected by bypassing the meters. These practices are theft. Similarly, illegal reconnections constitute power theft, as well. In most cases, the reconnection occurs without offsetting the outstanding electricity bill that led to the disconnection.
Drivers of Power Theft
The long-held assumption is that the lack of prepaid meters was a primary reason for power theft. However, recent trends show an increase in the bypass of prepaid meters. A Nextier Power survey with various electricity distribution companies in Nigeria shows that, on average, 40 to 60 percent of installed meters are already being bypassed across the distribution companies. The critical drivers of power theft are discussed below.
Electricity consumers who are unwilling to pay in full for their consumption constitute a significant percentage of those who steal power in Nigeria. These customers assume that power should be a social service provided by the government and, as such, free of charge. They do not see electricity supply as a business venture that should generate profit. Their illegal acts are typically perpetrated with the connivance of former or current employees of the utilities. These employees are the ones with the requisite knowledge, resources, and access to either tamper with or manipulate meters, transmission lines, or power bills.
The Nigerian Electricity Regulatory Commission, in its bid to deter power theft, established the “Electricity Theft and Other Related Offenses Regulations” in 2014. The regulation outlines penalties for electricity theft in line with the power consumption or capacity utilisation of the culprit. A residential customer with a single-phase meter caught stealing power will be levied a penalty of N50,000 for the first incident and N75,000 for subsequent incidents. The penalty for a residential customer with a three-phase meter is a fine of N100,000 for the first incident and N150,000 for following incidents.
Effective implementation of regulations and laws is a primary challenge in Nigeria. There is a disconnect between the regulation and its enforcement. On the one hand, many of the customers are not aware of this regulation while, on the other hand, the utilities are unable to work with the law enforcement agencies to implement the rules.
Addressing the Challenge
Relevant stakeholders can address the challenge of power theft in Nigeria through technical and non-technical solutions. Appropriate solutions for curbing electricity theft should consider the potential for returns, proximity and location, effectiveness and management techniques and social orientation of the consumers.
Technical Solutions
Technical solutions include the deployment of smart grid solutions such as smart meters that ensure bi-directional communication between the consumer and the utility. Unlike conventional prepaid meters, smart meters can execute commands both physically and from remote locations. This characteristic allows for proactive and round-the-clock monitoring and control of the appliances. Such infrastructure that enables prompt detection of irregular connections and tampering will encourage consumer discipline.
Deploying smart meter technologies reduces opportunities for the interface between the electricity consumer and the utility employee, making it more difficult for them to conspire to steal electricity. Utilities in South Africa reduced their commercial losses from 7.12 percent in 2013 to 6.43 percent in 2016 by installing smart meters in areas with more pronounced non-technical losses.[2] This improvement resulted in a savings of about 1,728 gigawatt-hours of electricity annually or R1.4 billion ($85.7 million) in annual energy cost savings.
Smart meters can work with varying technologies. Some smart meters are fitted with anti-tampering devices which alert the DisCos whenever tampering occurs.[3] Anti-tampering devices enable remote disconnection and reconnection by the service provider. Researchers have recently discovered the 5 hertz (5 Hz) Distribution System as another technology to curb theft. When included in a smart meter, the 5-Hz signal lies dormant until any form of tampering is performed.[4] Once a meter is tampered with or bypassed, the system modifies the frequency of power distribution and the consumer’s appliances either flicker continuously or stop working. Such a technology notifies the consumer that the utility has an all-seeing eye when is facilities are tampered with, and this acts as a disincentive for electricity thieves. There is a need for further research and commercialisation of these two technologies because they reduce the DisCos’ efforts and required resources for inspection and monitoring.
The required financial investment has posed a significant hindrance to the deployment of smart meters across the DisCo franchise areas. Although some Meter Asset Providers (MAPs) are deploying smart-ready meters, many of the utilities lack the requisite backend-monitoring infrastructure to maximise on the functionalities of the meters. Apart from the high cost of smart meters and their backend infrastructure, it may be necessary to upgrade the network infrastructure in the high-risk areas to ensure meter-compatibility with the distribution systems. Such activities also add to the cost of procuring and installing smart meters.
Implementing the right technology to curb power theft should involve strategic consumer segmentation. Smart meters that detect or prevent tampering are expensive and may not be cost-effective to be deployed to all customers. The utilities have to be strategic in selecting the areas to place the meters. It is difficult to quantify the exact energy and financial losses from illegal electricity consumption because such consumption is usually unpredictable. However, the right type of equipment will enable the utilities to identify the high-risk points and curb the losses.
Direct Transformer (DT) metering would help DisCos ascertain where to prioritise investments in smart meters based on consumption and revenues. Comprehensive customer enumeration is necessary to enable total DT metering across the DisCo franchises. Logically, large volume consumers with higher non-technical loss levels should be prioritised with the installation of smart meters. DisCos must be willing to make the necessary investments in identified high prone areas because such an approach reduces the costs of the workforce for physical audits and inspection of entire franchise areas.
Non-Technical Solutions
Non-technical solutions can work effectively to support technical solutions. These solutions can be implemented as primary anti-theft measures in areas of relatively low electricity consumption, where losses from theft do not justify costly infrastructure investments. Proper management, public outreach and education backed by behavioural and social studies, and enforcement of legislation are measures that should be in place to curb electricity theft.
In terms of adequate oversight, utility companies must review their human capital development practices to ensure that their staff do not facilitate power theft by colluding with power consumers. Such procedures should include rigorous recruitment, proper onboarding, training, communication of values and penalties. DisCos can also implement competitive reward systems for high performing staff. The DisCos can institute reward systems for their monitoring and inspection field staff. Their rewards can depend on the number of illegal connections and tampering identified or foiled, and should surpass the rewards from cooperation with consumers to tamper with connections. In effect, make good behaviour more rewarding than illegal acts.
Continuous public outreach is essential to educate electricity consumers about the consequences of power theft and its implications for power supply in Africa. As they directly interface with their consumers, DisCos are charged with continuously educating electricity consumers on such issues. Such engagements should be backed by targeted behavioural and social studies of consumers in selected localities to identify high theft-prone communities and ascertain the best channels of communication.
In low-consumption but high-density localities, empowering a group of locals to educate and empower others within their communities can reduce theft and improve collection rates. This approach is different (and probably more effective) than the physical monitoring of the network by the utility staff. This difference is because the locals have a better understanding of their communities, and their pleas will resonate better with their compatriots. This model worked in the Comoros where, in 2019, the World Bank collaborated with their National Electric Company to conduct gender-sensitive poverty and social impact assessment.[5] The audit identified patterns in electricity theft and refusals to pay electricity bills. This analysis necessitated the training of 100 local women to lead grassroots advocacy to raise awareness about the need to ensure legitimate electricity connections and bill payment. These community women exceeded the expected results. In three months, outstanding bills dropped by 79 percent with a reduction in electricity theft.
The regulator should enforce existing regulations against power theft. The non-discriminatory enforcement of existing legislation that criminalises power theft would deter other power consumers from theft. Suppose the regulator, in collaboration with the judiciary, enforce and communicate penalties such as fines and jail time. In that case, other consumers will be inclined to avoid actions that lead to the same penalties.
It is crucial that the Federal Government effectively communicates its commitment to eliminating power theft in Nigeria. This commitment is evidenced by the enforcement of existing legislation on this issue, including prosecuting the perpetrators of power theft, whether they are top public officials or top private sector executives. The government may seek to use some big-name defaulters to indicate its commitment to curb power theft.
Conclusion
Nigeria’s electricity supply industry loses a lot of revenue due to electricity theft, which constitutes a significant percentage of the non-technical (or commercial) losses. Power theft contributes considerably to the failure of energy accountability across the value chain. It does harm not only the utilities but also the consumers; as the former is deprived of the resources to maintain and expand the network. Other players in the supply chain (generation companies, transmission company, other service providers) are not able to fund their operations; resulting in inadequate power supply in the country.
Although there are different ways to steal power, many of them are driven by socio-economic determinants. The predominant factor is the attitude of the consumers and the utility staff. Therefore, the utilities should prioritise efforts to address these attitudes.
The point on attitudinal change does not negate the role of technology in addressing the challenges. Indeed, electricity industry stakeholders must adopt tailored data-driven technical and non-technical approaches to reduce power theft. A combination of technology, the law and behavioural change is required to curb the problem of electricity theft to ensure that investments in the industry will yield the expected increase in electricity supply.
