1. PREPAID ELECTRICITY REVENUE MANAGEMENT
Using technology and innovation to reduce prepaid
meter tampering
1
A. Mutono
MSC MOTI
30 August 2011
2. 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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3. 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
3
4. 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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5. Prepaid Meter Installations in Africa
5
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
6. 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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7. 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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8. 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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9. 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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10. 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
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11. 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
12. Key Survey findings
12
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
13. 13
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
14. 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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15. Recommendations: Frame work to reduce meter
tampering and improve revenue collections
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Implement Advanced Metering Infrastructure
16. 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
17. Short messaging Service (SMS): Implementing an integrated
approach to Customer relationship management
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19. Creating a frame work for operational efficiency at
Centlec
19
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
20. 20
• 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
21. 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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22. 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.
