Michele Marzola Vice-President, IBM Global Services Cape Town, May 17, 2005

© Copyright IBM Corporation 2005

Automated Meter ManagementStarts from pre-payment the transformational journey of African Utilities

Michele MarzolaVice-President, IBM Global ServicesCape Town, May 17, 2005

2© Copyright IBM Corporation 2005

Cape Town, May 17, 2005

In the World, Utilities and Regulators are facing four different challenges depending on the local economic scenario

Increase Demand Efficiency

And Reduce Outages

Peak Shaving and Creation of

Retail Competition

Domotics Integration

Eradicate Frauds,

Thefts and Bad Payers

Economy growth

GDP percapita



Automatic Meter Management (AMM ) helps dealing with all four issues at the same time

Increase Demand Efficiency

And reduce Outages

Peak Shaving and creation of

Retail competition

Domotics Integration

Eradicate Frauds,

Thefts and Bad Payers

Economy growth

GDP percapita

AMM



AMM creates an Intelligent Network with bi-directional communication

Two-way communication with

all customers

Intranet

MV/LVSubstation

Integration with SAP and creation of a powerful new series of applications handling customer

management and energy efficiency

ConcentratorConcentrator

Meters

Data Communication

Centre

A completly new network of intelligent meters

Customer Portals available for users, regulator and retailers New services,

including broadbandoptions



AMM is very distinct from AMR and drives the transformation of the Distribution business

Slows Down and Minimise the benefits of AMM

AMM(Benefits extended to:

-Remote customer mgmt.-Energy balance every 15 m.

-Flexible tariffs and DSM

-Power modulation

AMR(Benefits limited to

more efficient reading)

AMR does not have sufficientcapabilities to

transform the Business

Implementation approachEvolution Transformation

Client’sObjectives

Tactical(Meter reading efficiency)

Strategic(Revenue protection,Load management,Competitive Adv)



AMM will transform the Utilities Industry by the end of this decade. Utilities adopting AMM will be able to...

Execute customer requests in a few minutes.... Provide customers with precise, actual bills which contain a rich history of their

consumption, with suggestions on how to improve energy efficiency.... Design bespoke contracts which apply rates in synch with the actual cost of energy

and the price sensitivity of each customer... Accept new customers with just a phone call or an internet message, without any

need of phisical intervention of new meters.... Reduce outages by one order of magnitude... Eradicate thefts and frauds... Manage bad payers with both social responsibility and business integrity Provide Regulators evidence of service rendered to each customer.... Provide Regulators and Government the evidence of energy saved through the

elimination of frauds, thefts and the smoothing of peak demand...

AND ALL OF THE ABOVE AT HALF OF THE CURRENT OPERATING COSTS !!



AMM will help African Utilities to reduce the cost of commercial losses

Source: World Bank



Commercial Losses require different approaches for different customer segments

AMM enables flexible rates and can help people to pay, also using pre-payment

functionalities

AMM avoids wrong billing and

creates new services opportunity

AMM permits to identify endemic leaks

and help dealing with the political issues of these customers

AMM permits to identify key losses and provides ways

to bring behaviours back to law

Can Afford to Pay for Energy?NO YES

Willingness to Pay ?

NO

YES



The eradication of Commercial losses requires a systemic approach

AMM enables flexible rates and can help people to pay, also using pre-payment

functionalities

AMM avoids wrong billing and

creates new services opportunity

AMM permits to identify endemic leaks

and help dealing with the political issues of these customers

AMM permits to identify key losses and provides ways

to bring behaviours back to law

Can Afford to Pay for Energy?NO YES

Willingness to Pay ?

NO

YES

Identification of by-passes

Elimination of tampered meters

Elimination of faulty meters

Introduction of flexible

pre-payment



00,5

11,5

22,5

3

kW Peak TariffLow Tariff Low Tariff

Peak Tariff (Seasonal) ??

AMM will introduce flexible rates and enable Demand Side Management

00,5

11,5

22,5

3

kW

AMM records individual load profiles with 15 minutes intervals

AMM enables the design of tariffs for optimal energy usage

AMM introduces the very innovative capability to curtail the power supplied to specific customers at

any time

0

5

10

15

20

25

30

35

40

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Marginal cost 1 Marginal cost 2 Marginal cost 3 Marginal cost 4

AMM permits to bill the real value of energy with dynamic adjustments any 15 minutes



New tailored tariffs permit savings of more than $ 100 per annum to customers willing to move their consumption patterns

Price: -16%

MonTueWedThu Fri Sat Sun

19:00

Price:-22%

0:00

24:00

3 kW

1:00

minimum “Blu time” consumption: 26%

minimum “Blu time” consumption: 26%

MonTueWedThu FriSat Sun

Up to 80 € of saving per Customer p.a.



Both Utilities and the customers will benefit from the much easier pre-payment process enabled by AMM

1 2 3 4 5 6 7 8 9 10

months

€

Examples of possible pre-payment systems

•Bank transfer, ATM

•Cheque

•Debit or credit card through call center

•Pre paid through mobile phone

•Cash through supermarket collection

•Vending (including kiosk in post offices, etc.)

•POS device on the electronic meter

Curtailment process for bad payers

Consumption path for a pre-paid card

Area =

Anticipated cash

More payments options for the

customer

More personal financial planning

options for the customer

Credit updated in Billling system



The massive installation of new electronic meters creates a fraud–free installed base

New meters are preciseFraud meters are removedIllegal connections are eliminatedAgeing assets replacedStandardized meters and meters boardsUp to date meter database built

Network asset monitoring

Customer Information

System

Information system (AMM)

Information system (AMM)

Final report:

•Consumption database update

•Type and number of illegal situations

• Connections ageing

Final report:

•Consumption database update

•Type and number of illegal situations

• Connections ageing

• Expected consumption by customer type and builling history

•Asset description (n.a.)

• Expected consumption by customer type and builling history

•Asset description (n.a.)

•Meter initialization

•Meter initialization

Illegal connections removed Asset renewal

Platform standardization

Platform standardization

•Consumption reading

•Meter’s picture

•Consumption reading

•Meter’s picture

Meter data repository



Once operational, AMM permits to have constant monitoring of energy distribution yield

MV/LVSubstationConcentratorConcentrator

Meters

ENERGY BILLED

Total Energy Invoiced

≠

Technical Losses(Joule effect, ...)

(Mathematical models)

Commercial Losses

• Theft• Fraud• Wrong measurement

Energy Balance every 15 minutes

(Syncronous reading between meters and

transformer



Already during the first weeks of operations the quantum leap in energy efficiency can be measured

100 %

Sistematic meter replacement removes all types of frauds at time 0

New meters installation

Asset renewal will reduce technical losses

Energy billed

Other losses

Technical losses

time

Kwh injected in the grid

90%

0

Revenue OK !



Only a complete AMM roll-out will permit to control the full energy balance, with the capability of detecting any new fraud attempt

LV

MV meter

MV meter

LV

MV meter starts calculating user load

profile

Dedicated substation apparent yield can already be

calculated

Detected unbalance

Detected leakage

Detected leakage

tampering



AMM is the only systematic solution to eradicate frauds

“1000 Inspectors with 1000 dogs” can visit any account at least once a year..– If they were to know where to go...without political biases– If they are let in...– If this does not create political repulsion against the Utility....– Frauds can be reinstalled a day after the visit...– Evidence about frauds may be insufficient to recover past losses– ....and why could not the readers execute this fraud eradication program before?...– ..and would anyone replace a dum old electromechanical meter with a new, still dum,

electromechanical meter bound to be tampered soon?

...but the cost of this program would waste more than half of the benefits, besides requiring € 6 per meter (per annum?) to renew the assets

AMM will insure a continuous monitoring of energy efficiency, with an auditable track record of consumption patterns and would also help to improve the technical losses, besides eradicating the commercial losses



The curtailment functionality of AMM ensures minimum social supply to all, instead of outright cut-offs

1 2 3 4 5 6

Full power availability

Minimum allowed for key social

reasons

Illustrative Example

Po

wer allo

wed

-80%

-60%

-40%

Increasing shortage of supply brings to a selective stop of home

appliances

-20%



AMM permits to monitor the availability of the distribution grid

Concentrator(CBT)

GSM Network

Concentrator(CBT)

GSM Network

Concentrator(CBT)

GSM Network

AMM

Telegestor

e

AMM

Telegestor

e



..and transforms the way to handle critical situations

Generation capable of coping with increased demand However, the capacity of two large transformers was stretched to the

limit until they burn out The black-outs following this event caused disruptions evaluated to

exceed $ 650 M AMM could have curtailed demand and balanced the throughput of the

two transformers, avoiding a major capital loss, insuring continuos services and sparing two weeks of havoc to a major town

IMPACT OF THE HEAT WAVE IN SEVILLA IN 2004



AMM creates benefits for all stakeholders

End user benefits from a better service with more

customised tariffs

Utilities benefit from a reduction in customer

management processes costs

The Economy benefits from better energy management



AMM offers great benefits for customers…

No charges made for the new meter, however it is a great opportunity for the utility to upgrade paid-up equipment and services….and rational customers may be willing to pay $ 100 to obtain rate savings

Never need to answer the door to a meter reader early in the morning or to wait in all day for one to arrive

Able to activate, or change, their energy contract immediately

Billing always aligned with actual consumption

Information to identify the best tariff

Power curtailment will permit most appliances to operate during energy shortage periods

A cost-effective gateway into the home for new value added services such as alarm monitoring, fire detection, lighting management, intelligent buildings management



… and for the wider economy

AMM allows economy to grow even with a stalled generation supply

AMM will ensure that each kWh of energy is delivered where it is most needed - less pollution

Reduce peaks and outages, sustaining economic growth - - The Swedish regulator estimates that AMM will increase GDP by 0.03%

Ability to plan network investments according to the real consumption patterns

Strong monitoring of network availability and efficiency



The return on investment for an integrated distribution company is impressive, with a four years pay-back

Total investments

Annual savings

Savings on purchasing of old meters

Field operations

Readings

Revenue protection (thefts/failures)

Other

TOTAL SAVINGS € 500M

Plus:-Accelerated Return on RAB

-Increased Market Share-Increased Bonus for better Service



Thanks to AMM, even the most efficient utilities will be able to cut its process costs by 33%

1 2 3

Meter-to-Cash cost per customer per annum

BaselineOperating Cost

FutureOperating Cost

Total New Net Cost

- 65%

- 33 %

- 27 % Compared with

European Average

Case Study 2



AMM creates a Net Present Value of $ 105 per customer just out of Operational Savings...

AMM Value Creation (Sample)

Benefits Investments

Net Present Value

$ p

er

cu

sto

me

r

AMM Operations

Infrastructure

Revenue Protection

Operations

CustomerManagement

Network

NPV$ 105



The Value of AMM is in the integration with the operating processes, not in any single component of the technology

Value for the Utility

Offering evolution

ElectronicMeters

ElectronicMeters

Electronic Meter Installation

Electronic Meter Installation

Business Process

Outsourcing

Business Process

Outsourcing


SystemsRenewal


SystemsRenewal

Business Transformation

Business Transformation

Project FinancingProject

Financing



In Summary......

AMM Solutions exist and deliver new important functionalities to Utilities

Regulators are highly favouring the adoption of AMM technologies

The business cases for a variety of Utilities around the world show a pay-back period between 2 and 7 years, with Net Present Value created per customer up to $500

Risks are identified and are manageable

The full achievement of AMM benefits requires the integration of the entire solution supported by a full business transformation programme



Questions?

Documents

Michele Marzola Vice-President, IBM Global Services Cape Town, May 17, 2005