Interview with Jose Antonio Valdez, VP and Head of Marketing and Customer Solutions, Meralco
The Manila Electric Co. (Meralco) – the largest distribution utility in the Philippines, with approximately 5.1 million customers – is currently drawing up its advanced metering infrastructure roadmap, with prepay as the first service. The Philippines’ Energy Regulatory Commission has approved a 40,000 meter pilot, and Meralco has tapped GE to integrate Orga Systems’ billing system with Ecologic Analytics’ meter data management system.
“We are looking at the benefits of prepaid electricity mainly for the middle to lower social economic groups, whose consumption is not too big but whose cash cycle makes paying a post paid bill difficult,” explains Jose Antonio Valdez, the company’s VP and head of marketing and customer solutions.
These people generally don’t have credit cards and are paid daily or weekly, Valdez continues. “Over 99% of telco service is prepay, and consumers are also used to buying products such as shampoo and others in sachets,” noting that for the personal care companies over 70% of their sales are now in this form, compared with around half a few years ago.
“People prefer to spend according to what is in their pockets and they don’t want bill shock. The water bill is around $5-10, but the electricity bill is above $20. So we believe prepay electricity makes perfect sense, and we want to ride on the same telco platform to enable users to purchase credit with an SMS 24x7.
“Literally they can say let there be light!”
Another issue is credit risk, with over 70% paying just before they are going to get cut off, Valdez says. “So prepay empowers customers to manage their consumption, and in a way provides fiscal discipline.” He adds however that Meralco’s savings on bad debt and collection logistics is not significant because collectors are out sourced and generally minimum wage. “We’ve done the business case, and we are doing this mainly for customers. Prepayment makes perfect sense for this market, and that’s why we’re offering it.”
These customers account for about 40% of the total customer base, with subsidized low income customers accounting for another 40%. Out of the remaining 20% or so, Valdez says Meralco is planning to offer home area network (HAN) functionality.
“I’ve seen some graphic user interfaces and I am happy with some of them,” says Valdez. “For this group it’s more of a lifestyle thing. You can see your consumption at 15 minute intervals on your iPad and even get a breakdown by room and appliance.
“Then bundle with app with time-of-use, and as a thinking cyber citizen, I will know that with that functionality I will have better control of my appliances. Beyond appliances however, as a hardworking executive, I can become a better parent as I know when my kids are watching TV or studying; or I can also tell if my senior parents down the street have awakened.”
Meralco is planning a multi-year rollout, and it has engaged in discussion the Department of Energy, the Energy Regulatory Commission, and other stakeholders in the industry to seek their views.
One of the issues that is currently under debate is how smart grid development should be funded – whether by a form of stimulus incentive such as in the United States, or performance-based mechanisms for the utilities, or allowing the costs to be included in the rate base.
Besides smart metering, what other elements will Meralco’s smart grid program include?
“We are piloting a number of network application projects, including volt/VAR optimization, fault location isolation restoration (FLIR), enterprise asset management (EAM), and other network related programs to be able to prove the business case for smart grid in general,” says Valdez.
“We are also very keen on outage management and I look forward to the day when I get an automatic SMS when there is an outage, and when the system will be back up.”
Valdez concludes: “The driver for smart grid is to sustain the country’s economic development. With 2012’s impressive 6.6% growth and the buoyant forecast for 2013 onwards, the country needs to balance economic growth with a sustainable power infrastructure. Smart grid allows customers to save, and manage consumption especially during peaks; and allows the utility to allow renewables in its grid, and provide a more reliable and responsive network especially to our commercial and industrial customers. Now seems to be the time to invest and dovetail the robust economy with an enlightened power infrastructure.”