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PREPAID ELECTRICITY REVENUE MANAGEMENT Using technology and innovation to reduce prepaid meter tampering 1 A.Mutono MSC MOTI 30 August 2011
PREPAID ELECTRICITY REVENUE MANAGEMENT
Using technology and innovation to reduce prepaid meter tampering
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A. Mutono MSC MOTI 30 August 2011
Acknowledgements
• Academic supervisor: Prof R. Marcus • Field Supervisor: Dr. P Naidoo • Reading Committee:
Y. Kidane – Ntlangani Business solutions D Mukasa – Systems Engineer S. Twinoburyo – University of Pretoria G. Kyama – Human Science Research Council J. Mammadalizade – University of Pretoria
• Family members: A. Mutono and K. Mutono
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Why the study
• Involved in the industry • Theft of electricity is a growing phenomenon. • highlight and separate electricity revenue
collection as a key component • Debunk the legacy perception that electricity is
about engineers and electricians. • Alternative Cost recovery models • Impact on Socio and economic standards of
middle to lower income families of South Africa
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Statement of the problem and Background
Electricity utilities in South Africa are faced with the problems of meter tampering which causes financial losses, fatalities and injuries, denial of services and high maintenance costs both to the service providers and the public in general. • Government sources estimate meter tampering to be costing
the industry at least R625 million annually. Source: Minister of Energy Dipuo Peters July 2010
• Coetzee (2008) estimates the financial loss at 58% of total revenue.
Brand (2005) Heusden (2009: 238) advance that the introduction of prepayment meters in South Africa led to a rise in tamper rates.
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Prepaid Meter Installations in Africa
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Region Number of Prepayment meters installed
South Africa 6,300,000
Rest of Africa 2,000,000
Source: Rebecca Ghanadan (2009) Key factors that led to the growth of Prepaid Electricity in South Africa
• Abundant supply of electricity in the 1980s • Use of electricity as tool for social and economic emancipation • Need for an alternative cost recovery model. • Eskom’s coalition of innovators; system developers, standards,
procurement. • RDP and Growing urbanisation after 1994. • Demand management - Need for customers to manage the
consumption of electricity
Meter tampering Tampering of electricity meters is any action by customers to adjust or by pass their meters so that they can use electricity without paying for it. Self or hire technicians to tamper. Some of the ways tampering is done; • sugar and water • Insert pins into the meter • Cable bypass • Uninstall the meter;
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Related Studies Scholars have conducted studies on electricity theft but not particularly on prepaid electricity meter tampering; Mouton (2004) proposes a remote check meter device that is able to remotely check the status and consumption of the meters without entering the residency. Hearn (2006) suggests that the sale of prepaid electricity should be conducted online via internet, which will remove weaknesses of the currently used prepaid electricity vending systems. Subramoney (2009) advocates the need for the industry to adopt a standard interface protocol specification to facilitate prepaid sales from a centralised server.
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Empirical Context of the study
This study addresses a combination of everyday issues; • revenue management, • customer relationship management, • accounts management, • consumer behaviour and, • the overall social and economic environment.
The study is of interest to the following; • Electricity utility companies • Policy makers and Public officials • Electricity customers • Academics • Prepaid systems and solution providers
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Objectives of the study • To describe the environment within which meter
tampering is taking place and efforts by utilities to combat the tampering;
• To explain the negative effects and consequences of meter tampering;
• To predict potential consequences if tampering is not combated
• To provide solutions which have the potential to reduce meter tampering and improve revenue collection for prepaid electricity service providers.
• To highlight the importance of electricity to human progress
• To set the scene for further research in this area
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Research Approach Case study: Centlec Data and information gathering techniques; Primary data • Survey Questionnaires. 40 customers. Random sampling • Interviews with Centlec members of Staff. Interview guide to
two members sampled from the following departments; Finance, Meter inspections, Sales systems, Engineering, Customer care, Executive management, Mangaung Local Municipality and Prepaid systems service provider.
• Interviews the two Eskom Managers based in Bloemfontein • Observation Secondary Data Published literature on the prepaid sector Journals Media reports 10
About Centlec
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Est. 2002 by Mangaung Local Municipality
Customer base • 200,000 residences • 4400 businesses • 19 towns
• Jan - June 2009, 33,445 prepaid customers did not purchase electricity credits – R33 m lost
• Executive Report to the board blames meter tampering
Key Survey findings
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Response Percent
Yes 75
No 25
Total 100
Whether customers know of anyone who has tampered their meter
Response Percent
Yes 35
No 65
Total 100
Customers’ view on whether their prepaid purchases are a fair reflection of their consumption levels
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Response Percent
Yes 40
No 60
Total 100
Customers said they were happy with the Prepaid electricity service
Response Percent
Yes 35
No 65
Total 100
Whether they would desire to change from a prepaid meter to a credit meter
Key study findings
• Un stable electricity tariffs : Annual rises of between 25 to 30% since 2008
• Unit rates for electricity differ at certain points of sale: at the Municipality a unit is 0.82 while at some supermarkets the same unit costs R1.80
• Centlec reports a prepaid customer base of 158,000 customers and yet the transaction database only has 144,469 active customers.
• The customer database features missing fields, in some cases, there was only a meter number without the user’s details
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Recommendations: Frame work to reduce meter tampering and improve revenue collections
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Implement Advanced Metering Infrastructure
Funding smart meter installations through private sector investment
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Centlec Revenue Potential
Item Description Unit Total
Total Revenue from Prepayment Electricity Sales Dec 2008 R12,000,000
Total Number of prepayment customers 144,000
Key Revenue Indicators
Domestic customer tariff as at 1 Dec 2008 R0.53
Average monthly sales per customer R85.71
Average kwh consumption per prepayment customer KWh 161.73
Eskom Estimate for prepayment customer usage* KWh 350
Expected average purchases per single Centlec customer R185.50
Potential Revenue
Total Monthly Revenue collections R25,970,000
Installation of intelligent solution
Potential revenue improvement after eliminating losses R13,970,000
Short messaging Service (SMS): Implementing an integrated approach to Customer relationship management
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Extending the Vending foot print: Introducing a virtual token
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Creating a frame work for operational efficiency at Centlec
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Technology
Customer service
Customer sa4sfac4on
P r e p a i d E l e c t r i c i t y
Revenue
E c o n o m i c
situa4on
E l e c t r i c i t y
Tariffs
Token Purchases
Leadership
and
management
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• Annual Prepaid sales R 144 million • Customers with no transactions 32976 • High levels of meter tampering • Limited points of sale • High tariffs • Lack of investment funds • Poor customer records • Poor revenue management
Current state
• Installation of smart meters • Customer audit • Extend point of sale network • Real time revenue management • Introduce Social tariff • Customer feedback management
Value Intervention
• Annual Prepaid sales of R300 million • Stable tariffs • Customers become managers • Fraud elimination and loss reduction • New integrated model of utility management
Realised State
Impact of the operational efficiency model on Centlec
Recommendations for further study
• Further study on the transformational aspects of prepayment electricity provision.
• Review the impact of deregulation, customer options and co generation.
• To investigate alternative cost recovery models like the cooperative model implemented by TVA
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Takeaway
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The study reveals a broad over view of the prepaid electricity sector in South Africa, offering insights into the dynamics affecting prepaid development and sustainability. Particularly it shows the challenges faced by government and other institutions in delivering services in a highly contested space influenced by economics and politics. As an entrepreneur it amplifies the sense of urgency and provides the agency to take part in efforts to design and implement systems, and solutions that add value and reduce the cost of delivering electricity services in Africa.
Thank you
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