No industrialist ignores the importance of establishing harmony among the investments across his production lines; over-investment on one section necessarily implies under-investment in another where improvements should be made. This will produce bottle-necks and maybe the production line stopping, with well-known economic consequences for the company.
Electrical utilities in Argentina basically link two functions in the unbundling market – distribution and electricity trade for their small customers. This trade function, which consists of buying electric energy in the bulk market and selling it to customers, is most of the time considered as a part of the general business and not as an independent business.
Metering is part of this trade business, but as far as investment levels and maintenance resources are concerned it competes with distribution, which is usually considered the core business. Nevertheless the ‘last mile’ is gaining new relevance as the customer front-end and the place where the utilities’ value chain could grow.
In a ten year period of energy abundance, when generation costs decreased from around US$28/MWh to US$14/MWh and customer rates decreased from US$107/MWh to US$79/MWh (based on 2001 rates, before the economic crisis and currency devaluation), it did not seem reasonable to invest in electricity control devices to help with energy management. We knew about the energy crises in California and Brazil, of course, but the scenario said that Argentina had enough energy reserves.
But things change – and as Mr. Murphy and his law suggest, often at the worst possible time.
The energy crisis came together with the economic crisis and the devaluation of the local currency by 237%. The government froze public services rates; electric utilities – without increased rates and with higher costs – limited their investment plans to the minimum needed to keep the electrical network operable. The concession contracts renegotiation proposed by the government was systematically postponed until “next year”, from 2002 to 2003, from 2003 to 2004 and from 2004 to 2005. Obiously, therefore, investments were postponed too.
Even though this panorama seems pessimistic, it is not; this is only a chapter in history, and future investments will be necessary. This time utilities should not lose sight of adequate “last mile” investments, which will allow them to be more efficient and flexible – not only in periods when energy is restricted, but also as an aid to those who struggle to pay for electrical service. For such people offers of demand control programmes, prepayment meters and so on will be welcome.
From the point of view of business management, investment in reliable metering systems spread along the low voltage lines will allow efficient control of technical and non technical (including fraudulent) losses. This will assist with investment decision-making, because utilities will be in a better position to calculate future profits.