Energy theft with a spin on change
The utility industry is changing. Prices are escalating again, electricity and gas shortages are commonplace, drilling has been curtailed, not enough power is being generated – and did I mention deregulation? In addition the electricity and natural gas industries lose 1% to 2%, if fortunate, of their throughput to ‘unauthorised usage’. For larger utilities, with meters serving millions of customers, one half of one percent of theft equates to a total of more than 50,000 meters being tampered with at any given time, just in Southern California. Energy theft is a serious matter and the methods, motives and players are changing all the time.
Several years ago, most utilities believed the reason for energy theft could not be attributed to high prices. Now the pendulum has swung the other way, and many are experiencing an increase in energy theft because of the increased price of energy.
Why would someone risk life and limb to pilfer energy? The reasons are so many I can’t name them all. The most interesting thing to me, though, is that the greedy are as likely to steal as the needy. In one small island country, it was reported that 50% of government officials were involved in pilfering energy. I can understand how the needy may be persuaded to steal; yet being needy is not a reason to take energy from a utility without paying for it.
Revenue protection is not just energy theft. It includes company errors made by office and field employees, returned cheques, fraud and billing errors. Proactive measures include implementing a revenue protection programme, extending amnesty for customers and employees, providing specialised training for employees and installing security devices on the ‘cash register’ – your meters.
Several companies offer cash incentive rewards to employees who detect energy theft. It appears this business is growing and has a life of its own.
Deregulation ushered in yet another change in the utility industry. This change encouraged pyramid schemes, slamming and several get-rich-quick schemes. To add insult to injury, organised crime has taken notice of the illegal profits associated with the energy theft business. We have also observed an increase in marijuana growers and methamphetamine labs.
Several departments within utilities, such as Risk Management, Corporate Security and Legal, are responsible for determining if an energy theft case merits prosecution. They consult with the revenue protection departments to determine the appropriate action. After a theft is detected and the investigator is notified, several actions may occur. They include photos, evidence collection, reports and customer contact, and this type of case may eventually end up in a court of law.
Let’s not forget the safety aspect of energy theft. Many customers have suffered injuries from explosions and electrical shock, increasing the costs of energy theft even more. As we strive towards a strong customer satisfaction index, we must strike a balance between company image, safety and revenue recovery. Sometimes this is more difficult than one would think.
As a first step in dealing with energy theft, we should ask the question: Is it a critical problem? When we examine this issue, we find 80% of positive theft cases are found in the residential segment and 20% in the commercial and industrial segments. However, 80% of revenue lost to theft is from the commercial and industrial segments.
Early detection and effective disposition of unauthorised usage results in extra revenue for the company and acts as a deterrent to those who might be encouraged to follow the example of the unauthorised user. In addition it provides greater safety, because potentially dangerous conditions are corrected before damage to property or injury to persons occur.
In most companies, field personnel are responsible for detecting unauthorised use, recognising potentially hazardous conditions and documenting them. Suspected commercial and industrial theft is becoming more of a priority, because of the substantial amount of energy involved. When incidents of unauthorised use are discovered, photographs are taken; however, the installation is left undisturbed unless a hazard exists. If it is hazardous, photographs are taken and the hazard is immediately eliminated.
Today’s energy marketplace has experienced radical changes and is no longer stable. The most visible ‘sign of the times’ in the utility industry is the lack of an adequate supply of electricity and natural gas. This is not because of depleted resources; rather, it’s because of the lack of exploration and generation. The supply cannot keep up with the demand.
Many think this dilemma is unique to California, but research and news reports indicate it has the potential to spread to other parts of the world as well. To make matters even more complicated, most new electricity generation is moving towards natural gas to power the generators. In California, a law was passed stating all new electric generation plants will be natural gas fired.
This raises two concerns: is there enough pipeline capacity to accommodate the anticipated increased load, and will it eventually raise the price of natural gas even higher? And it brings us to another interesting point – the integrity and honesty of the utility customer. Fortunately for some utilities, theft rate is not a major factor. However, many progressive corporations spend millions to combat theft. The sad reality is that honest customers are crossing that thin line between honesty and dishonesty because of accelerated energy rates.
For many years the industry did very little to detect, prevent and investigate theft of service. Then a change occurred when companies around the world implemented revenue protection or anti-theft programmes. Conversely, even though some achieved success, the need to cut cost and downsize left them with fewer resources. Now we find ourselves in yet another energy crisis. Companies have experienced price in-creases and witnessed a dramatic increase of reported incidents of theft, mainly because of the so-called energy shortage.
Another change is taking place because many companies are unable to stop the theft. This will undercut the foundation of the energy business and create an unhealthy, unsafe atmosphere between once valued customers and utilities. The struggle between the perpetrators and the utilities must be addressed and resolved. Many disenchanted customers have pointed a finger at deregulation as the culprit. However, the problem is more complex than this – we know deregulation is working satisfactorily in many places. We need to look closer at government policies and procedures in the future. Many of the problems that beset the industry could and should have been avoided. Several California companies are facing bankruptcy, while the unpaid, uncollected energy bills stagger into the billions. A profound change in the way business is conducted is on the horizon. We need to encourage positive change with a proactive revenue protection approach. All utilities should train their employees to embrace change and to work towards the goal of a stable industry.
The change I see for the future of revenue protection is the introduction of proactive anti-theft programmes. This means that companies should not wait for someone to expose a potential perpetrator; the company should create a sophisticated type of profile to identify problems in their service systems.
The advanced technology available to us today will enable utilities to change from a reactive mode to a proactive approach. The bottom line could be held hostage by unchecked energy theft. Most companies around the world are involved in some type of cost cutting measures. Advanced computer technology and a dedicated workforce is a short answer to addressing the energy theft problem.
Nonetheless, a cultural change in the industry is in the pipeline for the near future. We must continue to anticipate change, since the goalposts continue to move. California lawmakers thought they had anticipated the obvious changes, and a major battle was lost. However California will win the war because of lessons learned during the change process. New changes are unfolding all the time, and it is important to monitor them. Make sure that the proactive revenue protection programmes you implement are productive, and that the industry has not dictated yet another change in methods of operation, leaving you behind.
When necessary, don’t be afraid to change. Many times we choose not to act because of fear, confusion and complacency – just to name a few reasons. This could prove to be detrimental.
From a revenue protection perspective, as the frequency of theft increases, we must take innovative measures to combat the losses. It is no longer business as usual. Will you move with the times, or will you be left behind? What would you do, if you were not afraid?