Power Credit

Use of prepaid meters to reduce inefficiencies in revenue collection

In the power sector value chain, the distribution segment is particularly important as it is the source of revenue generation. However, its performance has been marred by issues like underpricing, undercollection and high distribution losses due to power theft and technical reasons. Prepaid meters, a fast emerging concept in the metering space, can be deployed to overcome these issues to a great extent. Since such meters are based on the pay-before-use concept, they can help utilities significantly improve their collection efficiency.

Even if a utility’s collection efficiency rate is satisfactory, its debtor days could be alarmingly high. Debtor days are the average number of days required for a company to receive payments from customers for invoices issued to them. At Tata Power Delhi Distribution Limited (TPDDL), for instance, the average number of debtor days is 21. For many discoms, it is even higher. Prepaid meters can help lower debtor days by controlling the collection cycle and thus streamlining the management of the revenue cycle.

Policy instruments like the Electricity Act, 2003; the National Electricity Policy; and the National Tariff Policy have focused on the use of prepaid meters and advocated their implementation through state electricity regulatory commissions.

Basics of prepaid meters

A prepaid meter works like a bank – on the simple principle that as long as credit is available inside the meter, services will be made available to the consumer. The level of credit will be deducted as per the tariff programmed by the utility. Prepaid meters have a provision of emergency credit that can help consumers recover credit during the transition period. Various payment solutions like coins, tokens, keypad systems, bar codes, coupons, memory cards and smart cards are available. TPDDL and discoms in states like Manipur and Rajasthan use keypad-based prepaid meters, which have a telephone-like keypad for recharging credit.

There are various advantages of prepaid metering for utilities, such as reductions in arrears and disconnection procedures, reduced paperwork for meter reading and billing, minimisation of risks, and increased energy conservation by making people aware of their consumption patterns.

Components of keypad-based prepaid meters

A keypad-based prepaid meter consists of a centralised coupon generation server for preparing coupons. It comprises a prepayment energy meter (either single phase or three phase), along with a consumer interface unit, token printer and internet connection. For example, TPDDL’s current metering system consists of its own SAP, with coupons generated by meter manufacturers, which are paid for by TPDDL.

An important component of a prepaid metering system is the coupon vending software or the common application programming interface (Common API). Different meter manufacturers use different kinds of software for coupon generation. However, regardless of the meter manufacturer, utilities are not required to deploy different kinds of software. They can employ Common API, an international standard interface that can be used to communicate directly with integrated services digital network (ISDN) equipment. For instance, TPDDL uses Common API along with the internet cloud and a firewall. In India, prepaid meters are required to comply with standards like Indian Standards (IS)-13779 and IS-15884.

Challenges with existing meters

A major issue in the existing prepaid metering system is related to the interoperability between various makes of prepaid meters. Interoperability implies the ability to exchange and use information in a large heterogeneous network. In the event of a manufacturing agreement with a vendor being annulled, the utility is generally incapable of managing the existing prepaid meters because the coupon generation software is vendor specific. Hence, the scope of interoperability is limited. Another challenge is with respect to costs as prepaid meters entail higher costs in comparison with post-paid meters. They also entail add-itional expenditure like maintenance costs and coupon generation costs. Each time a consumer purchases a coupon, the utility has to pay for the “per coupon” transaction. Therefore, the maintenance cost for coupons is recurring in nature. More costs are involved if a consumer claims to have lost the token or smart card, or if the prepaid meter fails to work.

In addition, prepaid meters have operational issues that arise from the crew not being conversant with their working. There is a lack of know-ledge regarding coupon entries and the management of the metering system, among other things. The sales and accounting procedures associated with prepaid meters are also different, and utilities face procedural problems in these two aspects due to certain conditions imposed by regulators. There is a problem if the regulator stipulates that a reading-based bill has to be generated, since the prepaid meter has its own logic for amount deduction. Hence, the post-paid/reading-based bill will never match the amount consumed according to the meter. Another concern with prepaid meters relates to the provision of subsidy on the basis of the number of units consumed. If the consumer utilises a certain amount of units within a limit, per unit subsidy can be availed of. However, since prepaid meters charge units as per pre-specified/retro reading-based tariff rates, it becomes difficult to avail of the subsidy.

Summing up

Power theft, illegal tapping and collection issues in post-paid metering systems have increased the importance of prepaid meters. A major concern at present is whether the current prepaid metering system can continue in the same format. The concept of prepaid meters needs to be understood as a process and not as a device. The process runs on similar lines as a mobile services plan, in which users do not require separate hardware for a prepaid or post-paid plan. However, the existing system of prepaid meters is distinct from the above example.

In the current scenario, if a utility installs a prepaid meter and the consumer requests for a transfer to a post-paid meter, the utility has to fulfil a host of modalities like setting up a new connection, providing a new meter and preparing a final bill. If the meter is self-sufficient, it can take care of the prepaid or post-paid service on its own, based on consumer or utility requirements.

A prepaid metering system can be improved by taking meter readings at regular intervals and simultaneously preparing an interim bill. The bill amount should be automatically debited by signalling the meter. A similar process can be followed for crediting a certain amount.

Based on a presentation by Neeraj Kumar, Deputy Head of Group, Commercial Department; and Hemant Kumar, Manager, TPDDL, at a recent Power Line conference

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