Better Billing

Prepaid metering key to ensuring payment security

There is a growing focus on prepaid metering to improve revenue collection and billing efficiency. The recently unbundled utility of Manipur has taken up large-scale prepaid metering to reduce the state’s network losses of over 40 per cent. In Odisha, the state government directed utilities to install prepaid meters in government buildings, for temporary connections and for periodically defaulting consumers. High network losses also led to the Bihar Electricity Regulatory Commission (BERC) stipulating prepaid metering. Experience shows that utilities stand to gain from lower costs of billing and collection activities and an overall improvement in revenue management.

Features and benefits

Prepaid metering is a metering and billing mechanism where the consumer pays in advance for the contracted power supply. For the most part, these metering systems are standardised in functionality. The meters have the facility to connect or disconnect supply based on the credit amount available. The meter trips in case the connected load exceeds the sanctioned level. Consumers get recharge coupons from utilities for renewing credit balance, and can monitor usage through an in-house display unit.

Prepaid meters also have significant storage facilities. These meters can incorporate 64 different tariff structures, and any one of them can be activated by the utility, depending on the consumer category. They can record operational parameters such as phase currents, voltages, power factor, consumption in kWh and kVAh, and instantaneous load. Manufacturers also offer an MRI port in prepaid meters for data download.

Even with higher costs than standard electronic meters, prepaid meters offer key benefits. For the utility, they reduce the costs associated with meter reading, data collation and processing, as well as bill printing, distribution and collection. Further, they reduce the working capital requirements as payments are received in advance. In contrast, the usual billing cycle involves a credit period of over 40 days. The benefit of lower operational costs of prepaid meters is shared with consumers in the form of a 3-5 per cent rebate.

For consumers, the option of prepayment offers flexibility. The consumer can choose the frequency and amount of recharge on the prepaid meter. The prepaid option also allows the monitoring and control of power consumption, thereby acting as a demand-side management mechanism. In effect, the consumer’s relation with the distribution utility changes. The onus is on the consumer for the power consumed and timely recharge of coupons for continued supply. Consumers also tend to conserve energy in such cases. In Manipur, for instance, ongoing prepaid metering has reportedly reduced consumer load by 40-50 per cent.

Prepaid metering can be instrumental in the proposed smart grid power distribution framework. Such meters can be configured to operate as a two-way communication link between distribution utilities and consumers, and enable features like time-of-use billing, real-time pricing and peak pricing.

Implementation

So far, prepaid meters have been deployed for select segments such as temporary connections, government buildings and rented premises to improve collection efficiency. However, distribution utilities are increasingly considering a broad-based deployment of prepaid meters, covering domestic and commercial consumers in the low tension network. This is because of the focus on network loss reduction and cost minimisation. Utilities such as the Manipur Power Development Corporation are deploying over 60,000 prepaid meters under the Restructured Accelerated Power Development and Reforms Programme (R-APDRP).

Importantly, directives from state government and regulatory authorities have played a key role. In Gujarat and Delhi, for instance, there were government directives for prepaid metering. In West Bengal, which was the first state to have implemented prepaid meters, the directive came from the regulator. Recently, BERC directed the state distribution utility to deploy prepaid meters for government and residential connections. A few other utilities implemented it of their own accord. Tata Power Delhi Distribution Limited undertook prepaid metering much before the government directive. Similarly, Maharashtra initiated it on its own as a pilot scheme.

The implementation experience reveals some of the issues commonly faced by the utilities. The utilities point to difficulties in raising a supplementary bill for recovering fuel surcharges or other subsequent adjustments in tariffs. This is often perceived by consumers as double charging while for utilities, the constraint is that once the prepaid metering card is logged in, no adjustment can be made till the amount on that card is exhausted. This is not a problem in states where fuel supply adjustment has not been implemented. However, with an increasing number of state electricity regulatory commissions (SERCs) allowing fuel adjustment in tariffs, this issue needs to be addressed.

Complex tariff structures have also been cited as a factor hindering the implementation of prepaid metering. In West Bengal, the utility expressed its inability to incorporate the tariff structure involving fuel costs, electricity duty, cess, etc. in addition to the fixed and energy charges. This  prompted the SERC to simplify the tariff structure and notify flat rates for the categories billed on prepaid meters. As such, the recovery of taxes and duties becomes difficult for the utility, especially when the charges are imposed with retrospective effect. It is all the more onerous as duties and taxes are based on recorded energy consumption, which in the case of prepaid meters is not known in advance.

Prepaid metering has also been fraught with legal uncertainty. There are legislative provisions that specify norms for disconnecting power supply in the event of a payment default. Under the Electricity Act, 2003, prior notice needs to be given in case of a payment default. In a payment dispute, the act stipulates that the utilities should avoid disconnecting the line if the consumer deposits the claimed sum or deposits a sum equivalent to the past six months’ average. But with prepaid metering, disconnection is automatically done after a consumer’s credit account is exhausted. This appears as a violation of the stipulations of the Electricity Act, 2003.

To address this issue, the Forum of Regulators sought legal opinion. It was held that deployment of prepaid meters is not in violation of the Electricity Act, 2003 and that the respective SERCs can authorise prepaid metering in any consumer category. Nevertheless, there is a need to make appropriate amendments to the act, so as to make an exception for prepaid metering systems.

The way ahead

The challenges notwithstanding, the demand for prepaid metering is on the rise. While some utilities are initiating this as part of their business strategy, others are being driven by policy stipulations. The government-sponsored debt restructuring package for distribution utilities makes prepaid metering a precondition to avail of the package. Similarly, SERCs are stipulating the deployment of such systems in their tariff orders as part of the mandate for loss reduction by the utilities.

Though it was introduced for select consumer segments, prepaid metering could set the stage for smart metering at a later stage. Consumers tend to conserve energy in a prepayment set-up, mainly due to the visibility of their consumption. This facility could be extended further with the two-way communication mechanism of smart metering. Some of the key functionalities like time-of-day tariffs are present in the existing prepaid meters and can be leveraged for the planned smart grid framework.

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