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Prepayment Metering System

1Contents

• History of prepayment in South Africa

• Overview of the Manage Revenue Value Chain: Prepayment

• Overview of the Prepayment Metering System

• Benefits to the utility & customers

• Critical Success Factors

• Sustainable Prepayment System

− Cost indications

• Concluding Remarks

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• In 1988 Eskom developed the "Electricity for All" concept

• Customers had to be supported by limited Eskom resources.

• The system had to operate with minimal managementintervention and optimal maintenance.

• The standard billing system required a lot of day-to-daymanagement to process accounts and to maintain connectionsand disconnections.

• Many of the areas where potential customers reside hadalmost no infrastructure.

History of Prepayment in Eskom

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• There were no fixed addresses in the new informal settlementareas.

• There was high unemployment, no bank accounts and no postalservices

• Many customers did not understand bills

• Eskom ‘facilitated’ the development of the basic prepaymentelectricity system which is still in use today

• More than 5 million prepaid meters installed to date in SouthAfrica (Eskom and Municipalities)

− 3,6 million for Eskom

− increasing by approximately 250 000 annually.

History of Prepayment in Eskom (continued)

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4Prepaid experiences … ‘learnt the hard way’

Orange Farm ‘Informal Settlement’ – 70 kmsouth of Johannesburg was first project in1990

• Concrete poles were used

• Covered 11kV conductor was used

• 60 Amp meters installed in shacks

• Assumption that meters were foolproof

• Meters designed to go on a free supply mode when faulty or reached max life span

5Prepayment Value Chain

MANAGE REVENUE CYCLE KEY VALUE CHAINMANAGE REVENUE CYCLE KEY VALUE CHAIN (MRC VC)

RE

VE

NU

EP

RO

TE

CT

ION

PR

EPA

YM

EN

TP

RO

CE

SS

ES

CO

NV

EN

TIO

NA

L B

ILLI

NG

PR

OC

ES

SE

S

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6Prepayment Support Structure

Prepayment Development Department

BASC SLASLACash

Management

MRC VCPrepayment

SLA

• Research & Development• Key Management Centre

• CC&B – OVS Support• Financial Controls• Recon’s & Settlements

EnterpriseArchitecture

• Systems Support• Info Architecture

7High level overview of Value Chain

Vending Support Management

Online Online VendingVending

Manage Free Basic ElectricityPrepayment

MeterManagement

RevenueLoss

Off-LineVending

CashCashManagementManagement

MRC VC: PrepaymentMRC VC: Prepayment

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PREPAYMENT KPIs Western Southern Eastern N West Central North Total

Active CDU’s without Uploads (Never Uploaded) 2 1 1 0 2 0 6

Active CDU’s with last uploads more than a month ago 38 6 10 0 4 7 65

Active CDU’s - uploads in the last month but not in the past week 104 62 39 9 27 229 470

Total Number of New Customers 306 1,248 182 1,140 453 2,299 5,628

Number of customers blocked in online vending system 1 4 21 50 329 149 554

Resolved Unallocated Transactions 0 0 0 0 0 0 16,323

Sales Upload Errors (Number of files in error) 34 3 0 11 56 49 153

Customer, Accounts and Meter ToDo's

Allocated to Account Operations Personnel 12 0 2,902 0 17,204 0 20,118

Allocated to Customer Services Personnel 2,529 1,695 20,187 12,817 30,352 56,119 123,699

Transactional ToDo's

Allocated to Account Operations Personnel 3 0 0 0 1,019 0 1,022

Allocated to Customer Services Personnel 5,691 564 306 1,141 26,147 249 34,098

Key

Functionality Working Well / No Backlog

Potential Issues / Some Outstanding Items / Backlog to be addressed

Issues / Outstanding Items / Large Backlog to be a ddressed

Prepayment Balance Score Card

9Overview of the Prepayment Metering System

• Allows customers to pay for a credit token in advance

• Enables automatic switch off if credit in the meter expires

• This has the potential to:

– Increase cash flow for utility

– Lower operating costs and management complexity

– Prevent bad debts and recover arrears from billed customers (Convert billed customers to Prepayment System)

– Sustainable solution with community involvement

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10Prepayment System Components

• Prepayment is a strategic tool in managing revenue within a utility

• Management System– Computer system with database, management tools, reporting and security features

• Vending outlets– Computer based terminals where tokens are sold.

• Prepaid Meters– Electronic meter with display, keypad and disconnect switch

11Typical Prepayment System

Vending Systems(Dispense Tokens)

Utility ManagementSystems (SMS)

Prepaid Meters Installed in

customer’s house

(Credit Dispensing Unit)

Custom

er Data

Ven

ding

Tra

nsac

tions

Customer data card

Token / VoucherPrinter

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12Electrification

• 152 125 new connections in 2006/7

• More than 3,4 million households electrified since 1991

• Free basic electricity since 2003

– Free 50kWh to poor households

– 97% of local municipalities participating in this government initiative

– Improved the lives of more than one million people

Cumulative number of homes electrified

1,500,000

1,750,000

2,000,000

2,250,000

2,500,000

2,750,000

3,000,000

3,250,000

3,500,000

'2002 '2003 '2004/5 '2005/6 '2006/7

15Standardization of Prepaid MetersProprietary Meters• Different meters from different suppliers• Different tokens – proprietary tokens• Each supplier had own vending system• Different meter sizes• When meter fails, same product used to replace product that failed.

•Strong possibility of being locked into one supplie r

Standard Transfer Specification (STS) Meters• Standard Common Base • Standard tokens• Standard vending systems from different suppliers.• Faulty meters can be interchanged• Eliminated the possibility of being locked into one supplier

CurrentCurrent

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16Current Meters in use

Common Base

for all Meters

Meters from Different

Manufacturers

Different meters

fit onto the

‘Common Base’

17Installation of Prepaid Meters

Meter with built-in Ready Boardin a ‘Shack’

Meter installed outside the House for easy maintenance access

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• Know why you are implementing a prepayment system• Customers should understand your service philosophy • Set clear functional and technical specifications• Set criteria for manufacturers to qualify for tender• Validate and update customer database regularly • Keep the implementation process simple • Develop sound procurement strategy• Set a vendor selection criteria• Strong supporting structure• Vending management• Energy balancing

Critical Success Factors (CSF)

19Sustainable Prepayment System

- Customers- Vendors- Suppliers

-Internal-External

- Standard Protocols

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22(CSF): Engage Customers

• Customer education

• Communication with customers

• Continuous community involvement

• Accessibility to handle customer queries

23(CSF): Promote prepayment metering system

• Prepare a customer oriented marketing strategy before system installation. (Awareness campaign)

• Downplay benefits to the utility while highlighting benefits to customers

• Target different customer profiles

• Market the benefits continuously

• Solicit the support of influential Leaders to reinforce the benefits for customers.

Nelson Mandela

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25CSF: System Support Structure

Finance

TechnicalTraining

TechnologyEnhancement

HumanResources

ProjectManagement

RevenueProtection

Data

Maintenance

SupportStructure

26(CSF): Energy Balancing

Township/village

Sales in monetary value

are converted to kWh

Bulk/Stats Metering

Non-Technical Energy Losses = Energy Delivered - Sales - Technical Losses

* technical losses usually estimated @ 10% in Eskom

Distribution Line or B

usbar

Vs

Sales

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27(CSF): Vending Management

Introduction ofOnline Vending System

28Vending Strategy & Future Direction

We are here

Traditional Credit Vending

Up-front

Vending

Online

Vending

New Vending

Channels

High ShortagesUnder BankingRecon’s ProblemsHigh Fraud RiskHigh Revenue lossesGhost CDU’s

• Up-front Banking• Reduced Financial Risk

exposure• Automated energy units

top-up• Easy Recon process

• Electronic Banking• Own POS equip’nt• Reduced Risk• 3rd party Collectors• Increased footprint• < convenience

Step 1 Step 2 Step 3

• Internet• Cell-phone• ATM• Swipe-Machines • Scratch Cards • EasyPay-Vouchers

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29Online Vending System?

� The “online vending system”, simply described, allows a customer to purchase prepaid electricity via a remote terminal located in a supermarket store, ATM, cell phone or one of the existing vending stations.

� This system enables electricity to be vended from the main server in real-time.

� The system enables customers to purchase tokens nationwide from a central data base via a wide range of channels.

� This allows customer to purchase their electricity tokens from a broader distribution network.

� Promotes easy access, convenience and satisfaction

30Online Vending Infrastructure

Customer

Care &

Billing

System

‘Database’

SAP

Online

Vending

Server

‘Database’

Terminals

System Master Station

Offline Credit Dispensing Units

Sub Agents/ATM’s

National Agent - Server

TX & Data

Up/Download

Credit

Downloads

Secure Eskom Environment External to Eskom

TX

Uploads

TX

Uploads

CustomerData

Downloads

Bank BankDeposit

Firewall

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31Online Vending Model Configurations

Online Vending Server

Multi -Client Vending

XMLVend

Vending Client Server

Online Vending Terminals in all Regions

Gateway Vending

Region 1

Region 2

Region n

Pr o

pri e

t ar y

X M L V e n d

Vend ing Client Vending Client Vending Client

Client Vending

Vending Client

32Expansion of Vending Outlets

Retail Chain Stores Automatic Teller Machines (ATM’s)

Engage National Agents using Merchants

Contact Centre

Internet

� Meter number� Tariff Index� Supply Group Codes� Account number � Stand Number � Connection fee� Customer details� Arrears balance

Online VendingServer

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33Benefits of Online Vending

� Improved data integrity

� Improved tariff management

� Increased vending footprint

� Improved customer convenience

� Improved financial risk management

� Improved financial control and sales data

� Increased business opportunities for small business

� Customers able to purchase tokens nationwide from a central data base

34Prepayment Metering system: Cost indications

Item Costs in ‘R’ (approximate)

Costs in ‘$’(rate @ 7)

Comments

Std Common Base Meter (including the base)

420 60 Based on 2007/8 average costs

Std Split Meter: (Key pad and separate meter box)

720 103 Based on 2007/8 average costs

Credit Dispensing Unit (including Vending software)

42000 6000 Based on 2007/8 average costs

System Master Station (including software)

< 49000 7000 Based on 2007/8 average costs

Online Vending Solution (Similar to Eskom Model)

< 65mill 9mill Scalable according to requirements, size and local dynamics

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35Conclusions

• The key drivers for implementing this system should be clearly defined

• Customer requirements and local circumstances should be used to select the appropriate model and technology

• Prepayment solution is only as good as the company or utility’s management system

• Do not implement new technology until it is tried and tested

• Never implement a Proprietary System!

• Engage with other prepayment metering system users to learn from their experiences