A number of countries, including the UK and South Africa, have used prepayment metering to help in the cash collection process, but their experience has not been painless. New technological advances could make these problems a thing of the past, and bring benefits to metering companies and customers alike. The same package of technologies can also be used for other energy payment services, to reduce meter reading costs and support energy demand management.

As the energy liberalisation process has spread throughout the world, an increasing number of companies in different countries are implementing prepayment metering as a way of managing their poorer or transient customers, such as students and those in temporary accommodation.

Experience in the UK has shown that this approach can lead to extra costs and significantly increase the complexities of managing customers. The token-based prepayment metering technologies currently in use, be they card, smart card or key, were all designed before full energy competition was introduced and their ongoing use is leaving utility companies with a number of difficult issues to solve. Token-based technologies also represent a missed opportunity – the chance that, with flexible prepayment options, energy companies may be able to differentiate their offerings and attract new customer segments.

The main issues associated with the current style of energy prepayment, for both suppliers and customers, are:

Misdirected payments. Because the payment token contains the name of the energy company, when a customer changes supplier and uses the old supplier’s payment token by mistake, the revenue from the energy purchased is sent to the wrong company.

Customer experience. Prepayment is not a payment method of choice for most customers, and as such it has gained a bad reputation. Customers are forced to use sales outlets that support the energy token used by their meter, and these shops may not be conveniently situated or open when a customer needs energy. A lost card can mean that a customer is unable to buy energy and must call the supplier for a new device before more energy can be purchased.

Stigma. Those customers who do prefer prepayment as a flexible payment method are associated with the problems of other users, and as such are often not offered the discounts available to credit customers.

Statement inaccuracies. Meter data retrieved from the smart payment token is summarised in an annual account statement. However, this data can be well out of date by the time the statement is printed, leading to the customer being provided with misleading and incorrect information.

No direct access to the meter. The meter holds the energy prices for the customer, as well as any debts that are being repaid. Any change to those settings needs to be carried out either manually, or by data sent to the meter through a message written to the smart token. In all cases, action is required by a customer, who may not be proactive if his action leads to his paying more for energy.

Customer calls. Prepayment customers are three times more likely to call their supplier than is a credit customer. Each call will result in a costly action to be carried out by the supplier, be it the issuing of a new card or the triggering of a visit to the customer by an engineer.

Emergency callouts. Whenever a customer has an issue with a meter and cannot buy energy, they trigger an engineer call-out. Customers soon learn that an engineer will add emergency credit to a meter when he undertakes a visit, and this leads to a significant number of erroneous visits.

Theft. Stealing energy is unfortunately a fact of life, and some prepayment customers will steal energy if at all possible.

Most prepayment metering solutions were designed at least 20 years ago and do not now support current customer behaviour or utilise modern technology or processes. Clearly it is time for a change.

In the last few years of the 20th century, telecommunications companies radically transformed their payment tariffs with the introduction of their flexible and customer-focused Pay As You Go offerings. Customers have flocked to this new payment method, and the UK now has more consumers with Pay As You Go mobile (cell) phones than those on a monthly subscription. This is prepayment in all but name (in fact, energy prepayment in the US is known as Pay As You Go metering). How has it become such a popular form of payment management for telecommunication customers, while prepayment of energy is still stigmatised?

The answer is simple. Telecommunications companies have spent a considerable amount of time and effort marketing their products and building the sales infrastructure to support the needs of this new group of customers. Overnight they have expanded their customer base to cover people who would not necessarily have the credit rating for a monthly subscription phone. Customers are now happy to pay in advance for a mobile phone service – and indeed often demand it, as it enables them to budget and control their expenditure.

Pay as you go Energy Service

Could the experience of the telecommunication companies be used by utility companies to transform their prepayment customer base?

Pay As You Go mobile phones require the facility to transfer credit to a consumer’s phone; a similar process is therefore required for prepayment energy. If utility companies could remove the need to use a token to transfer credit to a meter, this would be achievable.

Meter technology has improved significantly over the last few years, with companies such as Iskraemeco developing a prepayment meter that now works using the normal GSM network. Communication between the central service and the meter is on-demand via SMS messages.

If Pay as You Go energy is to enjoy the same success as for mobile phones, it will also be essential to develop the processes, sales infrastructure and offerings that are enabled by the new metering technology. Crucially, it is only by integrating these hardware and software elements into a fully joined-up managed service (see Figure 1) – rather than applying them separately – that the real cost savings and customer benefits can be realised.

PAY AS YOU GO ENERGY SERVICE

The new metering technology, communications infrastructure and transformed business processes provide significant benefits to both customers and energy companies. Innovation will remove a significant number of the legacy issues surrounding the existing technology:

• Misdirected payments. The customer no longer needs a physical token to transfer credit to the meter. When a customer buys energy, the credits are sent to the meter remotely from a central service which decides where payments should be allocated.

• Improved customer experience. Customers can use the same sales infrastructure to buy energy as is available for prepaid mobile phones. Customers may now be able to buy credit online, through IVR, ATM or through high street shops, even possibly through TV shopping channels. The number of places available that sell energy will increase significantly over time; and in countries where prepayment is being introduced for the first time, energy companies will avoid the need to implement expensive infrastructure.

• Direct access to the meter. As communications with the meter are available on demand, meters can be read and configured remotely. If energy tariffs change, the meter can be updated with the new information to make sure the customer is always paying the right amount for his energy. Meter readings and debt levels can be taken on the day that an annual statement is produced, thereby guaranteeing that the information provided to the customer is accurate and timely.

• Reduced customer calls. With up to date accurate information a customer should have less need to call a supplier. When a customer does call, a call centre representative can be provided with the ability to interrogate the customer’s meter in real time online, thereby enabling him to understand and resolve the customer’s issue. If the customer requires energy, credit can be sold to them during the call and sent directly to the meter.

• Reduced emergency callouts. As the call centre representative has online access to a customer’s meter, the true reason for a call can be ascertained without the need to send a field operative to the customer’s house.

• Reduced theft. Providing the meter with a means of communication will enable intelligence to be built into the meter to detect attempts at energy theft.

Pay as You Go-style prepayment for energy can significantly reduce the cost-to-serve, as well as providing an improved service to customers. Increased flexibility will allow energy suppliers to differentiate themselves by offering innovative tariffs and services. These offers can be targeted to specific market segments, including those who want to manage their consumption and payments – and who expect the same levels of convenience that they can currently get with online banking and Pay as You Go for mobile phones.

For countries and companies which do not yet make wide use of prepayment, this technology offers the opportunity to skip a whole generation of metering and payment technology, and to move ahead of their competitors.

With the right marketing, customers may soon start asking for Pay As You Go energy tariffs, and preferring to pay in advance for their energy.