Getting consumer buyin for prepaid utilities

Presenter: Roland Govender

Syntell Networks (Pty) Ltd

Overview

Who is Syntell? Some case studies:

Electricity (Cape Town) Water (Madlebe, Johannesburg,

Kannaland) Lessons

Background

Syntell among the first companies to develop prepayment systems

Current installed base: Over 100 municipalities Over R80m electricity sales per month 1.5m transactions per month 400,000 meters in Cape Town alone

Electricity: Cape Town

Early ’90s: Cape Town residents billed for electricity consumption

Issues familiar to most municipalities: High levels of arrears and bad debt Cycles of disconnection and reconnection High administrative costs

Prepayment pilot scheme initiated 1992

Cape Town key factors

Councillors and senior officials got first meters Rollout to Hanover Park implemented in

partnership with a marketing firm Meters on application only (voluntary) No charge for meters

Waiting list of 50,000 by 1993 200-250 installations daily

Lessons from Cape Town

Demand for meters closely linked to rollout of vendors

All new houses built with prepayment meters installed

Meters were installed free of charge until 2000: incentive to convert

SMS and Internet purchases offer additional convenience

What consumers like Monitor and control consumption daily Buy ahead to cover extended absences Tenants can’t leave with unpaid bills No need to admit a meter reader Accurate readings guaranteed Easier budgeting Buy units when there is cash, instead of

saving for lump sum payments

Issues

Losses went up by 2% because of tampering Managed with ad hoc inspection teams –

motivates residents to report “faulty” meters Prepayment discount desirable but not feasible

The picture today

Cape Town metro has around 380,000 meters installed

65% of all domestic consumers The reputation of the electricity

department has improved – helped by change in truck livery (“Energy Dispenser Response Team”)

Water 1: Madlebe

Semi-rural informal settlement near Richards Bay Nine public standpipes installed 1982 as a public

health measure after cholera outbreaks Prepayment meters attached starting in 1997 Residents who couldn’t afford to pay started taking

water from a nearby river The result was SA’s largest outbreak of cholera:

From August 2000 - February 2002 113,966 people were infected

259 died (compared to 78 in the two decades 1980-2000) 6,000 l per month free water allowance introduced

soon after

Water 2: Johannesburg Johannesburg Water launched Operation

Gcin’amanzi (‘conserve water’) to combat water wastage

Prepayment meters introduced as part of this campaign

First pilot project in Orange Farm; then Phiri in Soweto.

6,000 kl per month free; then supply is cut off at the meter unless more units are bought.

Vociferous and high profile criticism followed:

SECC March against Water Meters SN, 27 January 2006. Soweto Electricity Crisis Committee (SECC) and residents of White City Jabavu in Soweto marched to the offices of Johannesburg Water in Klipspruit on Wednesday demanding free access to water and the removal of pre-paid water meters.

The protest was against the installation of prepaid water meters in the homes of the residents of White City Jabavu, saying that the water meters go against the resident’s constitutional rights. Teboho Mashota, a member of the Soweto Electricity Committee, states that, “Water is not a commodity, it is a right.”

From “Nothing for Mahala” – a research report by Public Citizen, the Anti-privatisation Forum and the Coalition Against Water Privatisation

Water 3: Kannaland

“Well received…” First prepaid electricity meters installed Sept 1995 Subsequently combined water and electricity meters

installed in a new housing development Currently 1,500 prepaid meters and 4,500 billed

accounts New meters are installed in all new housing, and on

request by home owners Issue: During power failures water is cut off. The

municipality can either replace the meter or reinstall a conventional meter within 24 hrs

Lesson 1: Don’t target the poor

Installing first where arrears are highest makes administrative sense – but is a recipe for conflict and rejection

Perception that poorer households get unequal or unfair treatment leads to resistance

There are genuine advantages for wealthy users too -- sell these aggressively

Offer real choice, especially in the beginning. Application for meters should be genuinely voluntary and well-informed

Lesson 2: Don’t start with water

Access to clean water is essential to human health – electricity is a luxury by comparison

There are substitutes for electricity (eg paraffin and wood) – not for water

Some people genuinely can’t afford to pay Payment for access to water exposes deep

moral and ideological conflicts Water is a bad starting point for prepayment

If you MUST start with water

Sensitivity, consultation and creativity are paramount: be prepared for protest

Some speculative suggestions: Meter and release 6,000 l free allowance

daily rather than monthly Offer metered access inside people’s

homes or yards and unmetered access at communal standpipes

Lesson 3: Get the tech right Meters should very, very rarely break down

If they do break down, guarantee repairs within 24 hours

Online vending systems should very, very rarely be offline

What about a minimum service level agreement with customers?

Design meters for user friendliness -- especially for the elderly, illiterate, and the disabled

Lesson 4: Deliver on promises

Delivering

Convenience is one of the selling points – make sure you deliver

Vendors should be plentiful, easy to access, open at convenient hours – and always online!

Be creative about offering value added services Eg 24/7 SMS purchases in Cape Town

Lesson 5: No extra costs

Prepayment shouldn’t cost consumers more

Free installation drove early adoption in Cape Town

Prepaid users should never pay more per unit than billed clients – and ideally less. Why not pass on some of the savings?

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