Mitigating Electricity Theft in Nigeria

 In Thinking Aloud

The electricity supply chain can be divided into 3 major parts; generation, transmission and distribution. Generation involves the production of electricity using appropriate technology from a primary source which could be natural gas, coal, nuclear material or renewable sources such as hydro and solar energy. Electricity is generated at low voltage and high current and channeled through a network of transformers and conductors over long distances to various locations where it can be used. This is known as transmission. At the various locations, the electricity is then broken down into smaller sizes and distributed to various households, businesses and factories for consumption. This is the distribution phase. The entire process involves the use of high power equipment and conductors which also consume some part of the electricity generated. The amount of electricity generated that can be delivered by the transmission and distribution network is known as the efficiency of the system. The more efficient the system, the less of power is lost and the more of it is available to be transmitted to the consumer. Power generated, but not delivered for consumption or not paid for by consumers are known as losses. Losses are divided into two categories; technical and non-technical losses. Technical losses occur as a result of power dissipation in components of the electricity system such as transmission and distribution lines and transformers. Non-technical losses are caused by actions external to the power system. They are divided into two broad types; commercial and collection losses. Commercial losses refer to energy received by the electric utility but not billed for. It comprises losses due to power dissipation in distribution lines, meter tampering, illegal connections and free users (customers connected to distribution lines but not known by the utility). Collection losses refer to energy billed for but not collected. It comprises billing errors, unpaid bills as well as collusion between utility staff and customers to alter bills. Most of the components that constitute non-technical losses can be categorised as electricity theft.

Electricity theft can be defined as the illegal use of electricity service with the intention to avoid billing charge (Smith, 2003). It is a problem for the electricity supply industry in many countries with huge consequences in loss of revenue and danger to life and property. In developed countries, it appears to be more controlled which is evident in low levels of non-technical losses (in some cases below 10%). However these small loss levels still account for large losses in revenue when the amount of electricity generated is considered. For example, in 1998, losses due to electricity theft in the US were estimated at between 1 to 10 billion dollars (Smith 2003). On the other hand, less developed countries are characterized with high non-technical and revenue losses. In 2012, electricity theft cost India USD 4.5 billion (Azim, Huzaifa and Samdani, 2012). According to the Nigeria power baseline report of 2015, Nigeria was estimated to have technical losses of 12% and non-technical losses of 34%, giving a combined total of 46% in aggregate technical and non-technical losses (ATC&C). Also, some regions of the country recorded ATC&C losses as high as 60% (including MDA debts) (www.nercng.org); with electricity theft responsible for as much as 50% to 60% of these losses as reported by former minister of power Professor Chinedu Nebo (Vanguard 2015).

Electric utilities have complained about the level of commercial and collection losses in the country. For instance, according to news reports, Port Harcourt Electricity Distribution Company (PHEDC) claimed losses of N233 million monthly in revenue (The Punch, 2016) and Ikeja electricity distribution company reported that 43,000 of 134,000 meters installed over a period of five years had been tampered with (www.nigeriaelectricityhub.com, 2014).

ATC&C losses in Nigeria by Distribution Company

Data derived from Multiyear tariff order (MYTO, 2015) available at www.nercng,org

These financial losses are critical to many electric power organizations. Lost revenue can result in lack of profits, shortage of funds for investment in power system capacity and improvement, and a necessity to charge more to consumers and expand generating capacity to cope with the power losses (Smith, 2003).

In contrast to the critical nature of electricity theft and the extent to which is occurs in the country, the number of prosecuted and punished cases are low. There is no legislation that specifically criminalizes electricity theft in Nigeria. As a result, utilities rely on their own measures to tackle the menace; nevertheless, devoid of institutional support their efforts often prove ineffective. An example is a recent report in the Guardian of April 1st, 2016. The head, Networking and planning of Ikeja electric co, a Lagos based distribution company, Mr Olalemi Adegbenro lamenting how the fact that electricity theft was not yet a criminal offence prevented them from adequately punishing offenders. According to him, when culprits were caught for offences such as illegal connection to power distribution lines or tampering of meters and taken to the police station, they only pay for what is regarded as the loss of revenue which is difficult to estimate and usually much lower than the actual cost of energy stolen. Other utilities have also adopted different measures to discourage the act.

Nigeria’s criminal code is old and in need of an update. The code; specifically, offences and punishments, Part 6, divisions 1 and 2, cover theft and vandalism respectively in various areas including the railway, aerodrome, mining and buildings but does not mention anything on Electricity theft. In 2005 the Electric Power Sector Reform Act (EPSRA) was passed and since then has been the legal framework for governing the electricity supply industry in Nigeria. The Act established the regulator (NERC) and also clearly defined the functions and operations of other players including generation, transmission and distribution companies. It also states the limitations of power companies and stipulates actions that are considered as offences by these companies and their corresponding punishments. However, the act neither recognizes electricity theft nor prescribes any punishment for it. The EPSRA prohibits unauthorized power generation, transmission and distribution. It defines offences that licensed generation, transmission and distribution companies may commit and states their punishments. It also has a section that protects the rights of the consumer ensuring that he receives standard services from his electric utility. However, the Act has nothing on illegal connection to power distribution lines by consumers, tampering with or bypassing a meter, non-payment of electricity bills or any other form of electricity theft.

A different approach to tackling the problem was observed in India. Electricity theft existed at levels that threatened the survival of India’s power sector with huge losses in revenue and damage to power infrastructure (Smith, 2003). In order to turn the situation around, the government first acknowledged that electricity theft was a major problem and hence lunched a comprehensive plan to control it. Consequently, in 2000, the Indian electricity Act 1910 was amended to make electricity theft a serious offence with stringent penalties. In addition, a separate law provided for mandatory penalties and imprisonment for offenders. It also allowed constitution of special courts and tribunals for speedy trials and recognized collusion by utility staff as a criminal offence. The Table below shows examples of offences and punishment under India’s electricity Act. Offences were properly defined and corresponding punishments were also clearly spelt out.

Offences and penalties for electricity theft in India (Niranjan, 2003)

S/N OFFENCES PUNISHMENT
1 Theft of Electricity Imprisonment for a term which may extend to three years or fine or both.

For loads Less than 10KW:

First conviction –Fine not less than three times the financial gains.

Second and subsequent conviction –Fine not less than six times the financial gains.

For loads more than 10KW:

First conviction –Fine not less than three times the financial gains.

Second and subsequent conviction – imprisonment for a term not less than six months but which may extend to five years and with fine not less than six times the financial gain

2 Theft of Electric lines and materials First Conviction- Imprisonment for a term which may extend to three years or fine or both

Second and subsequent conviction – imprisonment shall not be less than six months but may extend to five years and shall also be liable to fine which shall not be less than 10,000 rupee (N47,000)

3 Punishment for receiving stolen property First Conviction- Imprisonment for a term which may extend to three years or fine which may extend to 10,000 rupee or both (N47,000)

Continuous offence – Daily fine which may extent to 500 rupee (2,360 naira)

4 Negligently wasting Electricity Fine which may extend to 10,000 rupees (N47,000)
5 Penalty for maliciously wasting electricity or injuring works Fine which may extend to 10,000  rupees (N47,000)
6 Extinguishing public lamps Fine which may extend to 2,000 rupees (N9,400)
7 Non-compliance of directions by Appropriate Commission Penalty shall not exceed one lakh (N470,000) for each  contravention and in case of continuing failure with an additional penalty which may extent to 6,000 rupee (N28,300) for every day during which the failure continues
8 Non-compliance of orders and directions under the Electricity Act 2003 First offence- Three months imprisonment or fine which may extend to one Lakh (N470,000)

Continuous offence – Fine which may extent to 5,000 rupee (N23,500) for everyday

*Naira values calculated at 1 rupee to 4.7 naira

The results were a reduction in transmission and distribution losses by 12% within four years and the regularizing of over 2.25 million unauthorized connections. Similarly, North Delhi Power limited (NDPL) reduced its total losses from 53% upon take over in 2002 to 15% in 2009 (Tsavsar, 2016). The utilities also took steps that contributed to the successes recorded. These steps included implementing operational measures such as deployment of improved technology in their networks, performing energy audits, adopting the concept of social audits which inculcates the participation of the public in controlling theft and collaboration with non-governmental organizations for creating awareness.

In the United Kingdom (UK), the punishment for electricity theft also appears to be equally severe. Fitch and Graham (2000) even argued that the penalties for electricity theft in the UK were actually life threatening. In addition to affordability, their argument was on the basis that the cold weather of the region made it dangerous to live without electricity which provided the much needed heat needed to keep warm and stay alive. In their opinion, disconnection from electricity supply, which was a common penalty for electricity theft in the UK, was tantamount to a death sentence. Section 13 of the Theft Act 1968 and schedules 6 and 7 of the Electricity Act 1989 are two laws that define and punish electricity theft in the UK. The theft act makes dishonest abstraction of electricity (malicious wastage or diversion, using without authorization) an offence punishable by imprisonment for a term not more than 5 years, (12 months in case of summary conviction) or a fine not exceeding the prescribed sum or to both. The electricity act also makes damaging electrical plant, lines or meters and interfering with meters criminal offences. Where such an offence has been committed, the utility may discontinue the supply of electricity to the offender until the matter has been remedied. Charges required to “remedy the matter” include repair or replacement costs associated with equipment or meter damage, the costs of any disconnection and reconnection and payment for electricity used but not metered. The utility may also include other charges such as administrative charge, warrant charge, charge for visit and re-seal charge.

From the examples above, whether it is the UK or India, when caught, stealing electricity appears to be more costly for the culprit than paying regular electricity bills. Both societies came up with their own unique approach to solving the same problem. Nigeria must do the same. We must recognize the danger that electricity theft is, create adequate penalties in our laws and ensure that these laws are enforced. In addition, non-technical losses are included in the Multi-Year Tariff Order (MYTO). A summarized version of the model is shown below.

The cost of electricity (tariff) is proportional to the level of losses. This implies that the more people steal electricity, the higher the tariff honest paying consumers pay for electricity. More specifically, honest paying consumers also pay for electricity stolen by electricity thieves. Intense effort should be made to sensitize the public on the consequences, both personal and societal, of electricity theft. Someone is more likely to report a thief when he realizes he is going to bear the cost of the stolen product. Platforms that allow consumers report acts of electricity theft with confidentiality should be created and made accessible to the public.

When every stake holder in the electricity supply industry- the government, the power companies, the regulators and the consumers- play their part, Nigeria may stand a chance in reducing the menace known as electricity theft.

 

REFERENCES

Alam, Yasin and Gain, (2014), “A Review of Losses in Distribution Sector and Minimization Techniques”, International Journal of Advanced Research in Electrical, Electronics and Instrumentation Engineering, Vol. 3, Iss. 10, pp. 12430-12437

Fitch and Graham (2000), “Electricity and gas theft”, University of Leicester, https://www2.le.ac.uk/departments/law/research/cces/documents/ETHEFT.pdf, accessed 01/11/2016 by 11:25pm

http://www.nigeriaelectricityhub.com/?p=1762, “43,000 Installed Prepaid Meters Already Tampered with- IKEDC” retrieved 25/05/22016 by 2:17pm

Nigeria Power Baseline Report (2015), the Advisory Power Team, Office of the Vice President, Federal Government of Nigeria in conjunction with Power Africa

Niranjan R. S. (2003), “Introduction to the electricity Act 2003”, http://tlaindia.org/wp-content/uploads/2015/07/UNIT-14.pdf

Smith T. B. (2003), “Electricity theft: a comparative Analysis”, Elsevier Journal of Energy Policy, Vol.32, pp. 2067-2076

Nigeria Electricity Regulatory commission, http://www.nercng.org/

Tsavsar (2016), “Poor revenue collection an impediment to electricity distribution in Nigeria”, P.M News Nigeria, http://www.pmnewsnigeria.com/2016/04/16/poorrevenuecollection animpedimenttoelectricitydistributioninnigeria/retrieved 07/11/2016 by 1pm

Vanguard (2015), “Solve electricity theft to save the power sector”, http://www.vanguardngr.com/2015/03/solveelectricitythefttosavethepowersector/, retrieved 04/11/2016 by 2:23pm

Image Source: Spark online

 

 

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