Implementing a prepayment system

The concept of prepayment metering is not new, having first been introduced in the form of coin gas meters in the United Kingdom well before World War II. Major change took place in the 1980s when electronic or numeric transfer of the credit was introduced, and used to transfer other information too.

A traditional electronic prepayment metering system operates on three levels. First are the meters which are installed at the consumer’s home. The next level is the vending stations, situated at the utility’s offices or at appointed agents. The communication between the vending stations and the meters is in the form of a token, which is used to top up the credit in the meter. Tokens also transfer or download information to the meter, and in some cases upload information (depending on the token choice) back to the vending station.

At the top level is the System Master Station (SMS) or master client, which is necessary to ensure a common database for reporting and to provide total management, administration, financial and engineering control. The SMS communicates with the various vending stations via modem or other data link. Information on consumers, tariff changes and so on is communicated to the vending station and detailed customer sales are communicated back up to the SMS.

ADVANTAGES OF PREPAYMENT

There are a number of reasons why a utility could consider installing a prepayment metering system. They include improved cash flow, no need for account posting or additional billing systems, elimination of bad debts, elimination of disconnection and reconnection fees, ease of installation, no need to access consumers’ property (particularly for split meter installations) and elimination of inaccurate meter readings.

There are also advantages to the customer, including budget management, control of energy usage, no cost for disconnection/reconnection and no waiting for reconnection, no deposits and the ability to pay back debts.

FOCUSING ON SUCCESSFUL IMPLEMENTATION

A prepayment metering system is not simply a different brand of meter – it also replaces the billing system, the reading of meters and the administration of revenue collection. Implementing such a system means a change of mindset, a change in the way the revenue collection is managed, a change in IT procedures, a change in customer service, a change in metering and a change in consumer behaviour. All parties need to buy in to the system and understand the benefits.

It is also necessary to plan the implementation of the project in advance. Detailed programme schedules, including resource allocation, distribution of responsibilities and the setting of realistic milestones, are essential for success.

PRACTICAL GUIDE

Marketing

Most consumers view anything new with suspicion, particularly if they are not given a choice. The marketing department’s task is to put together a package which best suits the consumer’s needs.

Consumers can be divided into two major categories – new consumers and retrofit consumers. As a rule new consumers are easier to market to, since it is not necessary to re-educate them as far as account payments are concerned. With new consumers, the marketing focus should be on the benefits of electricity and how to purchase it.

Retrofit customers are unlikely to become enthusiastic users of the system unless they have chosen to adopt it. It should never be forced on them, or installed as a penalty because they are bad debtors. Instead the benefits of the system should be promoted and consumers given the opportunity to convert.

The marketing or customer service staff should be consulted while a tender specification for prepayment metering is being developed. Different systems offer different consumer features, ranging from the choice of token to consumption information such as present and past consumption rates, emergency credit, TOU tariffs.

Whichever system is chosen, the location of the vending stations is of particular importance. Customers will never accept the benefits of prepayment if it is inconvenient or difficult for them to buy credit.

Billing

Because a prepayment metering system includes a meter, it is often the metering people who write the tender specification for the whole system. They will obviously evaluate the system based on the technical competence of the meter. However, it should also be remembered that the meter is just the instrument which measures consumption and ensures payment. The entire customer payment system is of equal importance. After all, the reason for implementing any metering system is to ensure an efficient means of revenue collection. The collection of revenue and the management of both the revenue and the consumers is vital.

The IT and financial people should therefore be called in to evaluate the customer registration database, as well as the management, financial, audit and vending modules that come with the system. There are many issues which must be resolved prior to installation.

The first is to ensure that the new system is compatible with any existing systems. The ultimate size of the customer base and the ability of the database to handle growth should be established, as should any additional hardware requirements.

Then it is necessary to determine how much data on each consumer and vending station will be required. The more data collected at the time of registration, the more powerful the management and reporting system. For example, if one grades consumers on their estimated usage (by income, area, number of appliances) one can run a report to see if any consumers are buying significantly less than others in a similar position. From this spot checks on meters can be conducted to determine possible fraud. The utility may also wish to do phase or energy balancing, and by recording details such as what transformer the consumer is connected to at the time of registration one can compare electricity sales to actual energy flow through the transformer.

Decisions also need to be taken as to whether emergency credit will be offered. If the answer is yes, then maximum amounts must be established, as well as the means of repayment. For example, do consumers have to pay back the emergency credit before being able to be reconnected, or will they always have access to power after paying off a portion of the debt? A similar decision is required for ‘friendly credit’.

There are many other aspects that need to be resolved, such as ensuring that there are the necessary controls and procedures for collection of revenue from vendors and the transfer of data between SMS and vending station. Both internal and external vendors should be carefully selected, and a communication programme aimed at both vendors and consumers should be planned.

Training

A prepayment metering system is new not only to consumers but also to all the utility staff, and internal training along the following lines is essential.

  • Training of installation teams (not only on installation but also on how to educate consumers)
  • Maintenance training
  • Training of customer service staff to operate the Help Desk, the completion of the registration of new consumers etc.
  • Training of vendors, so that they can give the customer good service and create the image the utility wishes to portray.
  • Training of the SMS manager, supervisors and operators.

The success of any system relies on the acceptance of all the players within the utility as well as on consumer acceptance. Training and education will assist in communicating the benefits to all staff members.

Maintenance management

Before the system has been installed, procedures should be in place on how to manage it from a maintenance point of view. The following questions should be considered.

What happens if a consumer claims to have lost a token? This is more of a problem when using SMART cards than dispensable tokens. All tokens can be re-issued without any security risk, but there is obviously a cost involved. What that cost is, and who bears it, needs to be decided before the start of the project.

What procedures will be followed if a meter fails? Apart from the actual replacement of the meter, the utility must decide whether it supplies a certain amount of credit with a replacement meter, and whether this credit is charged for. One consumer in South Africa used to complain regularly that his meter was not working, and the maintenance team regularly replaced the meter without testing it. The result was a high maintenance cost to the utility and a consumer who enjoyed the benefit of regular free credit.

What procedures will be followed if a vending system fails? If the vending stations are situated far apart, a back-up vending station should be available.

What procedures will be used to back up and archive data? Good housekeeping is required for any database. It should also be remembered that a system is only as good as its management. If for example non-technical losses are a problem, then the utility should run exception reports on a regular basis and use this data to do spot checks on consumers.

What procedures will be used to avoid the risk of meters being bypassed? (It is difficult to fraud a solid state meter in any other way). Controls should be set up regarding the sealing of meters. For example, will the seals be numbered and the number recorded? Do the installation staff have to sign for seals?

The success of a new prepayment metering installation depends to a very great degree on the thoroughness of the pre-planning phase. This includes seeking acceptance from both consumers and utility staff, and putting in place the necessary procedures for a smooth implementation.

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SAMPLE MARKETING PLAN FOR NEW CONSUMERS

When an unfamiliar system is introduced, the marketing efforts should focus on two aspects. First the benefits should be outlined, ensuring that users buy in to the system. And second, users should be told how to use the system for best results.

Prepayment metering – or metering through electricity dispensers (EDs) – is no exception. The first step in the marketing programme could be to introduce the phrase "electricity dispenser". The term "prepayment" is perceived by users to have value for the utility only, and is often regarded negatively. Thus the use of the term EDs is preferred.

OBJECTIVES OF THE PLAN

This marketing plan has two major objectives – telling users how to use the product (education) and what the benefits are (acceptance of the product).

Education

  • Consumers must know how and where to purchase credit for their ED.
  • Consumers must be able to enter the credit successfully into the ED.
  • Consumers must be able to read the ED so they know when they need to re-purchase credit.
  • Consumers must know how much credit they have available at any time.
  • Consumers must know how to clean the ED.
  • Consumers must know what to do or who to contact if they experience problems with the ED.

The benefits

  • Consumers are in control of their electricity budgets; they decide for themselves how often they wish to purchase electricity and to what value.
  • Consumers will not be physically cut off by the utility if they forget or are not able to pay for their electricity. In addition, they should know they will not have to wait for the utility to reconnect them, and they do not have to pay a reconnection fee.
  • Consumers will have convenience of purchase; the vending units will be sited according to their convenience.
  • Consumers will no longer receive an account which they may not previously have understood.

The positive aspects of the system should continually be reinforced. It is important that consumers see prepayment as a benefit rather than a means of punishment. The fact that modern systems represent the latest in electricity technology should also be communicated.

GETTING THE MESSAGE ACROSS

The next step is to decide on the vehicle to be used to convey the message. If the initial project is in the form of a test site, the mass media is ruled out on the grounds of expense. Instead brochures should be developed and individually mailed or hand delivered to each home. They should also be handed out at community discussions.

These brochures should be supported with posters which are put up on the noticeboards of apartment buildings, in the lifts and other suitable places. The brochures and posters should follow the same theme, with the posters being used to present the big picture and the brochures providing more detailed information.

A form of community presentation is most important. If the apartment block has a committee or leader (either informal or formal) it is important that this person or group is visited and the concept and the benefits carefully explained.

Brochures should be available at each vending site. Vendors should be trained both in the use of the vending equipment and in the use of the EDs and the benefits of the system, so that they are able to promote it.

A television and video should be set up at the vending site if possible. A number of prepayment meter manufacturers provide marketing and training videos which can be used to show the consumer how to use the system and what the benefits are.

A help line should be set up which customers can use if they are unclear on any issue.

All advertising should be supported with press releases. Articles with photographs should be published in local newspapers which focus on subjects such as

  • The first/hundred/thousandth consumer to be connected
  • Latest technology in electricity payment.

Any added value services such as the ability to buy credit over the telephone should also be stressed.