Revenue protection and a deregulated environment
Revenue protection is not a major management occupation in many utilities in the developed world today – but a quick analysis of the reality will show that it should be! It is understandable that the attitude of the old monopoly utilities was more relaxed – it was historically possible for them to pass losses from their bottom line to the top line by adjusting the energy rates. Competition is changing all that. In addition, the realisation that the problem of theft and fraud is much bigger than most utilities imagined is also helping to focus the minds of utilities today.
In developing countries, however, revenue protection is already a major focus. Not only are these countries desperately short of generating capacity, but the rampant losses due to theft and fraud have completely hamstrung utility operations. This has led to a serious rethinking by the utilities and governments which own and/or run them, as well as by funding agencies and private investors.
Some figures speak for themselves.
- The USA estimates that utility revenue losses on distribution are 4% of total revenue.
- The UK now recognises distribution revenue loss is £50 million per year.
- Pakistan lists 30 transmission feeders where all losses exceed 35%.
- India reports non-technical losses of greater than 10%.
In each of these cases, people from within the utilities admit informally to figures far in excess of those mentioned. The reasons lie in the complex measurement systems by which losses are computed.
Was revenue loss not a problem in the past? Why the sudden interest in the subject now? The changes affecting the electricity supply industry today have made the difference.
The biggest single change is in the direction of privatisation or deregulation. Old monopoly businesses are being unbundled, and overall the supply of electricity is becoming competitive.
The other major change is the availability of better tools to manage fraud and tamper. The advent of newer metering, meter reading and data processing technology has greatly helped utilities in the fight against revenue loss.
WHAT CONSTITUTES REVENUE LOSS?
Revenue loss can best be described as follows:
Total loss = technical losses + non-technical losses
where technical losses include the iron and copper losses in the system; and non-technical losses include all losses for other reasons.
Iron and copper losses are part of the total loss, as they influence the overall efficiency with which the distribution system is operated. In the case of an ideal distribution system which is always operated under optimum conditions to minimise losses, one would arrive at a figure of the amount of technical loss which cannot be avoided. Revenue loss in this context then becomes:
Revenue loss = avoidable technical loss + non-technical losses
The responsibility for the optimisation of load flows through the distribution system obviously lies with the distribution company. Indeed the technical losses are covered in the charges imposed on energy suppliers for the use of the distribution system (DUOS (Distribution Use of System Agreements) in the UK).
However, the technical loss or the avoidable technical loss component of the charges is not specified separately. This means that the efforts which the distribution business makes to optimise the load flows results in benefits which remain with the business. The customer is not likely to see any benefits unless the regulatory framework places demands on the distribution companies to reduce the DUOS year on year.
The key components of non-technical losses are:
- Unmetered supplies in distribution area
- Metering errors
- Defective and dead meters or defective connections
- Meter tamper leading to low registration
- Metering data related fraud
- Illegal connections to the distribution network.
The term ‘revenue protection’ focuses on the reduction of non-technical losses.
Unmetered supplies usually take the form of supplies to public service institutions such as street lights, public water works, supplies to the utilities’ own buildings and sometimes to other institutions, such as buildings for community use. They lead to difficulties in conducting energy balances, making the determination of real losses difficult.
Metering errors contribute to non-technical losses in two ways. One is errors and uncertainties in the measurement systems at the bulk supply points, which may understate the energy supplied to the area. The other is the understatement of the consumption of energy in the area. Defective or dead meters fall into this category. The problem is identifying such meters – statistical comparison of historical registration can be used, but is not all that precise.
Meter tamper is another well-known problem. Every metering engineer has a large fund of stories on this topic!
Metering data related fraud is also quite common. The phenomenon of a meter reader doing his round from the comfort of his home or his local pub is not unknown. Another common form of fraud relates to maximum demand meters, where the act of resetting the MD eliminates the evidence of the real reading.
Illegal connections from the distribution network can be blatant or subtle. The possibility of electrocution is a real one, but perpetrators seem to think the gains are more than the perceived risk. Besides, most communities have ‘experts’ in this area they can call on!
METERING TECHNOLOGY OFFERS SOLUTIONS
Experience in countries where modern metering equipment has been deployed specifically for revenue protection has been very positive.
In the case of unmetered supplies, the use of electronic meters allows energy readings to be frozen in time, thus eliminating time-based errors. The ability to perform electronic reads (including remote reads) ensures that the data can easily be used for energy balance computations.
It is acknowledged that electromechanical meters run slow with age. Most utilities will have a mix of meter types from a mix of manufacturers, with meters of different ages. Unless there is a conscious programme for renewal of metering assets, the registration of energy will be consistently low. Another reason for metering errors is under-registration of energy for non-linear loads, while loads causing harmonics pollution on the network also cause meters to run slow.
Computer based customer information systems and statistical analysis tools can be applied to help identify changes in patterns of consumption, which can lead to the identification of dead meters. As far as defective connections are concerned, electronic meters can be used as tools for automatic connection verification. They can also provide information on changes to connections, such as a blown VT fuse.
Modern electronic meters can provide protection against all known forms of tamper, either by making tamper impossible or by providing evidence of a tamper having taken place. However, it is often difficult for a utility to prosecute a fraudster successfully on the basis of this type of evidence. Experience where evidence gathered from electronic meters has been used in court action is so far mixed.
The increasing use of electronic meters is sure to give rise to new forms of tamper. Recent experiences seem to indicate, however, that a well designed electronic meter is proof to most forms of external interference. Unless the fraudster has real electronics design skills, so he can gain access to the inner circuit to perpetrate his fraud, any attempt will result in a stopped meter. Even when the inner circuit has been accessed it has been possible to identify when the circuit was tampered with, load profiles being helpful in pinpointing both the extent and the duration of the tamper.
The introduction of palm tops for the collection of data, local electronic reads and AMR technologies has reduced the likelihood of pub-based reading rounds, but has opened up a completely different avenue for fraud. Unless the entire data chain from the meter to the bill is protected end to end from unauthorised or accidental change, the chance of fraud remains.
Care is needed when implementing data security. For example, password protection of data access is a good idea, but if the meters are read using palm top computers then the system is inherently weak. Every palm top needs a copy of the passwords, and therefore becomes vulnerable to theft – much as the old sealing pliers were.
Illegal connection to the distribution network is by far the most difficult problem. Solutions lie with regular energy balances and linkages of revenue to feeders. Experimental software is now in use which helps identify feeders where this problem is common. One solution is to meter all distribution transformers; this method has proved useful in areas other than revenue protection.
RESPONSIBILITY FOR REVENUE LOSS
The question of who should be responsible for theft has exercised the minds of regulators for some time. While few have declared a policy in this regard, those who have have placed the responsibility with the distribution company. In the UK, the policy is clear – the distribution company is allowed to charge for the service of revenue protection as part of the DUOS. The state of California in the US has ruled along similar lines.
Based on the discussion thus far, the reasoning behind the decision to make the distribution company responsible is clear. Almost all the contributors to non-technical losses are directly in the control of the distribution company, provided it owns the metering asset. Problems can arise where the energy supplier installs its own metering equipment, but even then a suitable arrangement on costs can always be worked out.
REVENUE PROTECTION STRATEGIES
There are several steps which distribution utilities can take to minimise revenue loss.
- Optimise distribution systems to achieve greater efficiency and lower losses, which will improve the utility’s operating margins. Investments in SCADA and other network simulation and automation tools are the means to this end.
- Introduce effective energy balance estimates, and strive to do them in real time. Investments in SCADA can help, and specific investments in metering and data acquisition directed to energy balances should be considered.
- Determine the accuracy of the installed metering base. This is a relatively inexpensive exercise using modern in situ test equipment. Experience has shown that results reveal avenues of improvement, and that the effects of corrective action can subsequently be measured.
- Make effective use of customer metering data, both for correcting energy balances and for determining defective meters using statistical analysis.
- Use meters which are tamper proof or provide evidence of tamper, particularly for the larger loads and definitely for all transformer operated meters. This will help bring down both the incidence of tamper and losses caused by incorrect wiring.
- Stress metering data security. While codes of practice in the UK provide adequate protection to the security of data, the end to end protection is still weak. The choice of data collection techniques needs to be based on sound protection principles, supported by an IT infrastructure which keeps keys and passwords both secret and available.
- Institute management changes which bring revenue protection into the core operating strategies. Utilities which have adopted this approach have seen success.
- Create a vigilant anti-theft operation which works effectively to bring fraudsters to book. The work of this group also needs to be visible to customers. The apparent costs can be justified, not only by the amount of money recovered (which is visible) but by fraud prevention (which cannot be easily quantified).
Energy suppliers, particularly out-of-area suppliers, also have a responsibility for preventing revenue loss. Most out-of-area supplies in a competitive market will be to large customers. Selecting and installing meters which protect against tamper and provide information when connections are altered is the first step. Effective installation methods and installation checking methods are also important tools.
Regular data collection, assessment and validation, as well as sharing the data with the distribution company (if not already mandated by statute) are essential steps for an energy supplier.
The emerging structure in the electricity supply industry as deregulation and unbundling activities increase is destined to dilute efforts in the area of revenue protection. Positive action can be taken, however, as long as both the distribution utility and the supplier recognise they each have a role to play.