Revenue protection “Just don’t get no respect!”


American comedian Rodney Dangerfield built his comedy routine around stories of the abuse he suffers from everyone – his pets, his friends, his wife and society in general. His complaints are always followed by the tag line, “I just don’t get no respect!” 

Dangerfield is not alone. REVENUE PROTECTION doesn’t get the respect it deserves. Perhaps the ‘abuse’ is different, but the lack of respect and recognition is not. Revenue protection is even a mystery for many regulatory commissions that don’t even understand what it is or why it is needed. 

Worse still, the energy-consuming public has no idea of the scope of energy theft and its personal cost to them. How many people would guess that energy theft in the US dwarfs the combination of all bank robberies and home robberies by 2000%! If the public realised this, it would demand far more aggressive activity by regulators and utilities to stem these losses. Ah, but the industry just looks the other way and pays lip service to the idea of revenue protection. Modest attempts are made to control the problem, but still revenue protection does not get much respect.

Why won’t utility top management give the revenue protection function the respect, the budget, the visibility it deserves? In most utilities this function can actually be a profit centre, returning more money than it costs (by a factor of up to 7 to 1) while creating a visible deterrent to thieves. Why, then, won’t utilities pay attention?

Theft of service through meter tampering or taps ahead of the meter amounts to roughly 1% of revenue in the US and Canada. This number is much higher in many other countries, but even 1% of revenue is a staggeringly large amount of money. 

For utilities with classical rate-of-return regulation, energy theft is treated as a ‘non-technical loss’ and is combined with technical losses to create a losses category that is simply recovered in the rate structure. Everybody’s rates go up to pay for the energy that is stolen by a few criminals. In this situation the regulated utility has little incentive to stop the losses. 

But utilities increasingly agree to operate under regulatory rate freezes, provided they can capture and keep (for their shareholder’s benefit) any savings that can be squeezed out of operations. Now the utility can presumably harvest the fruits of its revenue protection programme. It gets to keep the money! But even so, it is hard to find a strong commitment to identifying these incidents of theft and to recover stolen revenue.

One large US utility was preparing its business case for an automatic meter reading system, and was asked about the contribution to the business case from detection of meter tampering. The utility observed that there could be no contribution to the business case, because there was no theft of energy to be eliminated. No theft at all? How could that be? The answer was that there had been no reports of energy theft, therefore there was none. 

This utility had no revenue protection function at all. Meter readers were mostly outside contractors who received no instructions and no incentive for reporting visible forms of tampering. Management still believes that no revenue protection organisation is needed because there is no theft, and therefore there are no losses to recover. This same utility was not able to justify an AMR system. Surprised?

Ask around. When budgets are cut across all departments, revenue protection gets cut too – even though it was probably making money for the utility! Since most of the revenue lost to energy theft (but not necessarily the most incidents) is occurring in the commercial/industrial customer sector, why not go after those customers more aggressively? Ask around. You may be told: “Commercial customers are important revenue sources and we don’t want to embarrass or bother them unless it is absolutely necessary.” What about publicising an aggressive programme to detect and prosecute theft of service? You may be told: “We don’t want to make this problem more visible to the public, lest we make people aware of the chance to steal energy and thus create a bigger problem than we have now.” Ask around and you may be told: “We are not an instrument of law enforcement. We simply want our money back if we can get it easily.”

How about aggressive prosecution of offenders? “Well, we don’t want to clog the courts with these cases that seem much less serious than major crimes.” What about the bright light of publicity for offenders who are successfully prosecuted? Most utilities actually scrupulously avoid publicising their revenue protection activities or successful prosecutions. As a result, what is the downside for the first-time energy thief? It is simply the repayment of what he would have paid for the energy anyway – and then he is off the hook. But where is the deterrent? Where is the public anger at the subsidy each of us pays for a weak or non-existent revenue recovery programme. Where is the outrage? Where is the needed respect for revenue protection?

Wake up utilities! Wake up regulators! Do something before the public finds out what is happening!

The views expressed here may be unpopular, politically incorrect, heretical or simply humorous. The views expressed may be ideas that all of us have had but didn’t care (or dare) to articulate. The opinions expressed are those of the author alone, but are probably shared by many who have yet to say so.