There are some 3.8 million customers in the UK with electricity prepayment meters, and some 2 million with gas prepayment. This article relates to the former and reviews the development and use of the current generation of electronic prepayment meters. The topic is complex and an attempt is made to give an overview with only such technical detail as is necessary for the understanding of the features – full details can be obtained from manufacturers. The views are that of the author, based on his involvement from a utility perspective.

COIN OPERATED METERS

The UK has a long history of the use of coin-operated meters, which allow a customer to pay for his electricity as he consumes it. By the late 1970s there were growing problems with coin operated meters.

  • They were unreliable, the average ‘life’ on circuit being typically 4–5 years before needing attention.
  • Although the customer paid in advance, the cash stayed in his meter until collected; hence it was not true prepayment from the utility viewpoint.
  • Cash was stolen from meters during burglaries, leaving the customer responsible for replacing it (and some customers ‘stole’ from their own meter). A meter might typically contain in excess of £100 between collections.
  • Staff collecting cash were targeted by criminals in robberies, to the extent that some collections had to be carried out using armoured vans.

The electricity industry (EI) therefore encouraged research into alternative methods whereby prepayment facilities could be given without involving cash at the customer premises. Papers from that time record trials of, for instance, plastic ‘coins’ which were crushed after insertion into the meter, and magnetic card tickets being developed by London Transport for the Underground system.

CRIME INITIATIVE

Developments were accelerated in the mid 1980s when the then Prime Minister – Margaret Thatcher – launched an anti crime initiative, which included the problems of theft related to coin operated meters. By then manufacturers were close to offering commercially viable new meters, but it was still early days and the industry was cautious about making any commitment to replacing the over 1 million coin operated meters. Eventually, around 1986-7, a commitment was given to government about the numbers to be replaced annually. In fact, the target was easily exceeded, to the extent that by 1993/4 there were very few prepayment customers still with coin operated meters.

One reason for caution was the need for (and cost of) a network of vending machines to support the meter base. Roll-out of new prepayment meters was helped by two major reports prepared by the EI around 1988 – one covering card and the other key technologies. Both concluded, taking into account benefits from cash flow brought forward (because these systems were ‘true’ prepayment) that only 200 customers were needed to support the viability of a vending point. 

EARLY DEVELOPMENT

The concept was a ‘token’ representing a monetary value, sold from or charged with credit in a vending outlet and inserted into the meter instead of cash. The cash handling had thus been transferred to the vending point, at which security could be managed. Some general features were common to all systems.

• Provision of a detailed display on the meter, including credit
remaining, to assist the customer’s use of the system. 
• Option for a value of ‘emergency credit’ to be available, initiated
by pushing a button, to allow continuance of supply for a short period to enable the customer to buy or recharge a token.
• Option to collect incurred debt, either by elapsed time or with 
consumption.

Around1986/7 three main ‘first generation’ token technologies were at the commercially available stage (see Table 1.)

Magnetic card The token was a paper card having a magnetic strip encoded with the cash value of the token and other data. There were two sizes - one having a 72 bit structure and the other 8 or 16 bit. On insertion of the card into the meter the value was verified, taken into the meter and magnetically erased from the card. Cards were purchased from utility outlets or from vending machines which encoded the value at the time of the transaction. The cards were not specific to a particular meter and were not particularly secure, so accountancy back up was essential.
Memory key

The token was an EEPROM encapsulated into a plastic key form. The customer took his key to a vending outlet, where it was encoded with the value of cash tendered. The customer then inserted the key and credit was transferred (not all the credit  needed to be downloaded at one time, hence some could be 'saved' for later). Other data encoded on to the key could trigger a change of rate or debt collection level. The key was specific to one meter, hence was much more secure that the magnetic card.

Optical card The token was a cut-down optical telephone card encoded with the cash value of the token and other data. On insertion of the card into the meter the value was verified, taken into the meter and thermally erased from the card.

The optical card system was relatively secure but expensive, and did not find favour with UK companies (hence not much is given by way of detail). It should be noted that, despite use of the past tense above, magnetic card systems are still in use, with slightly improved security, as are second generation key systems (see below). Some magnetic card systems have the card reader as a separate unit from the meter rather than being integrated with it.

Accountancy back up, applicable to low security systems, meant reading of the meter and reconciling consumption with the recorded purchase of tokens, to ensure that the customer was not using tokens which were forged, stolen or belonged to another customer.

Later developments – the current generation  

Advances in microelectronic technology saw both improvements to the systems above and the emergence of new systems (see Table 2).

Memory key The second generation key system became 'two way' in that the key captures a meter reading and other set criteria which are then taken back to the vending point - effectively becoming an AMR system. This obviates the need for accountancy back up. The system can also provide for two keys.
Smart card The token is a plastic 'credit' card conforming to ISO 7816, with embedded microprocessor. The system is sophisticated and can operate in four modes, ranging from full prepayment, through restricted credit to full credit (but with advance payment options).
Keypad The token is 'virtual', being a coded number which is generated when payment is made and later entered on to a key pad on the meter.

Approximate relative numbers of the systems are 1.5 million card, 1.8 million key and 0.5 million smart card. The key pad system is being introduced in Northern Ireland and now numbers some 100,000 customers. Although early systems used dedicated vending machines, all systems now allow for vending to be done under licence by third party EFTPOS terminals in selected retail outlets.

APPLICATION AND GENERAL EXPERIENCE

Coin operated meters were always seen as an alternative to disconnection of those customers unable to pay their bills, although not a fully satisfactory one due to operating expense. The fact that there are now 3.9 million prepayment customers, as opposed to no more than 1.5 million coin meter customers at peak, partly indicates that the new systems provide better benefit to both customers and the utility and partly relates to their use for other reasons. For example, credit customers found to have interfered with their meters so as to avoid payment may be required to have a prepayment meter fitted as a condition of continued supply. In addition the new meters are flexible as regards tariff and some 25% of meters installed support a two-rate heating tariff.

The Regulator, Ofgem, has cautiously welcomed these systems as an alternative to disconnection, albeit with some concerns that they may have a ‘stigma’ attached, cause inconvenience and that there can still be interruption of the supply due to customer self-disconnection. Where there has been criticism of prepayment systems, it has perhaps been made without proper understanding of how the systems work and the benefits which customers experience. Two major studies – one initiated by the Regulator himself – have concluded that there is high customer satisfaction (around 90%) with the systems and the budgeting flexibility they offer.

Another area of concern has been about how these customers fare in the UK’s competitive supply arena – do suppliers see them as less desirable and are there technical difficulties to prepayment customers changing supplier? As regards the latter, when the domestic market opened to competition in 1998, an obligation was placed on incumbent suppliers to offer at least one type of prepayment infrastructure to be available to any supplier in its area, hence removing potential technical barriers.

In summary, introduction of these meters and associated systems is seen by the UK EI as a major success story in maintaining customer support whilst protecting utility revenue, limiting the build-up of debt and recovering past debt.