Prepayment Metering
1 February 2005Dubai, UAE
Programme
• Overview of prepayment systems• System components• Tariff considerations• Encryption and standardisation• Implementing prepayment
What is prepayment?
A revenue collection and management mechanism whereby credit information is transferred between a point of payment and a metering device. The metering device supplies the pre-paid amount of service to the customer and then disconnects the service.
Which utilities?
• Electricity• Water• Gas• Telephone• Cellular
Early Prepayment meters
Fort Wayne K Series
General Electric IP2
Courtesy www.watthourmeters.com
Credit (Traditional) Vs Prepayment
• Traditional Metering– Use electricity– Read meter– Prepare bill– Collect money– Warn late payers– Disconnect non-
payers
• Prepayment Metering– Collect money– Transfer credit to
meter– Use electricity
Electricity becomes a consumer product
Why Use Prepayment?
• Revenue collection challenges• Customer service tool
Utility Revenue Collection Challenges
• Expensive internal processes• Difficulty in collecting payment
from some or all customers using traditional billing
• High turnover customers• Internal staff problems – e.g. Fraud
Customer Service Tool
• Customer is in control and can save money - monitor and understand consumption
• Customer can purchase electricity at any time and in any quantity - (budget)
• No unexpected bills (month end surprises)• Accuracy• No disconnection/reconnection fee• Privacy - no meter reading• No deposit• Prepayment can improve the relationship
between the utility and the customer
Win-win Solutions
• Prepayment can offer win win opportunities to both the customer
and supplier• However, it is important to
quantify, monitor and analyse the business case
• Models complex
Additional utility considerations
Lower operational costs No meter readings No billing No mailing
Improved revenue recovery
No credit control No bad debts or arrears No disconnection/
reconnection processes Improved cash flow -
money up-front Improved relationship
with the customer
• Possible reduction in revenue due to lower average consumption
Up-front system cost Implication of substantial changes
to certain utility processes Complexity of change management Management of the transition
period during which two systems (prepayment and conventional) will be operated in parallel
Customer reaction to the new system
Reduced flexibility in regard to tariff structures
Prepayment aroundthe World
• PP sites on all continents• Largest installed base is in UK and
in South Africa (approx 4 million pp meters each)
• Most other countries have installations ranging from 100 to 100 000 meters
System Overview
Tokens
Vending
SupportEquipment
ControlUnit
UserInterface
DisconnectionDevice
MeteringElement
Meters
Communication between Control Unit and User Interface
• Integrated Meter• Split Meter
– Wired interface– Power line carrier– Radio frequency
Meter features
• Emergency credit• Friendly credit• Lifeline credit• Self-decommissioning• Self billing• Energy information• Trip limits, power fail counters etc• Advanced Tariff functions• Water management functions
Prepayment & AMR
• Prepayment and AMR are complimentary• Communicating with the meter presents
opportunities– Token less vending– Tamper detection and management– Tariff configuration
• There are a number of systems on the market that combine these technologies
• Issue of cost vs benefit• Remote disconnect vs prepayment?
Token Technology
• Tokens are used to transfer credit and other information between a vending station (POS) and meter
• One way and Two way• Different types of tokens
– Numeric (Keypad)– Smart Card/Token
• Contact vs Non-Contact• Re-usable vs Disposable
– Tokenless
Token information
• Different functional types– Credit transfer– Commissioning (e.g. key change)– Management (e.g. tamper reset)
• Credit Transfer Tokens include the following information– Credit information (kWh/kl units, monetary units)– Token identifier– Checksums– Control/Miscellaneous
Token technology
• Each type of token technology has advantages and disadvantages. These advantages and disadvantages are often influenced by the environment in which the meter is being used.
• Magnetic: Old technology• Keypad: Flexibility vs No Feedback/Bandwidth• Memory Device: Feedback/Bandwidth vs
Cost/Flexibility
Vending and management systems• Diverse implementations/topologies• Influenced by token technology choice• On-line vs Off-line• Use of third-party infra-structure• ASP model is a possibility• Vending infra-structure design and
management is the key to a good prepayment system
Simple
Offline vending points based on PC
PC based management station, with batch transfer of data
POS SystemIntegration
Switching Services Provider
Complex
Utility DatabaseEncryption
Server
Banking Systems
Web VendingMobile Phone
VendingATM integration
UnmannedVending Point
CustomVending
Equipment
Tariff issues
• Flat rates (straight line)• Periodic charges (fixed, service, min, variable)• Block rates (single and multiple, increasing
and decreasing)• Power/Current limits• Time of use
Credit transfer types
• Energy transfer– Transfer kWh from POS
to meter– Tariff conversion at
POS (periodic estimate)– Complexity at POS– Low cost meter, with
simple tariff engine– Low meter
maintenance & support requirements
– Limited functionality of meter
• Currency transfer– Transfer monetary value
from POS to meter– Tariff conversion at meter
(allocation unknown)– Complexity at meter– Rich functionality at meter
- clock, load profiles, TOU tariffs etc
– Higher levels of meter maintenance & support
Tariff implications
• Flat rates – easy for both transfer types
• Periodic charges– energy transfer - deduct at POS– currency transfer - deduct pro-rata on
hourly, daily and monthly basis at meter
Tariff implications
• Multiple block tariffs– conventional
• Pro-rate
– energy transfer• Average capping and forward allocation• Complex algorithm, requiring corrections• Good communications infra-structure required
– currency transfer• Tariff conversion in meter with clock• Tariff update may require visit to meter
Tariff implications
• Power limits– must be supported by meter– either currency or energy transfer
• Time of use– can only be done with a currency
transfer meter incorporating a clock
Tariff issues
• Tariffs are difficult to change• Meter comparisons:
Conventional PrepaymentInduction Energy Transfer
Static MF Currency Transfer
• Issues: Cost, Admin, Complexity, Flexibility, Arrears policy
Why token encryption ?
• Tokens rely on encryption for their security– token re-use– Illegal token generation/modification– Meter specific functionality
What is ‘encryption’ and what is an ‘encryption key’ ?
Algorithm or
method
Algorithmor
method
Plain Text
Cipher text
KeyKey
Plain Text
Encryption e.g. at point of sale
Decryptione.g. at meter
Encryption and encryption keys• Secret (Proprietary) vs Public systems
(eg STS)• Key management is an issue
– Prevent generation of tokens by hit & miss attempts
– Prevent generation of tokens from a stolen vending station
– Prevent tampering to modify the value of legitimate tokens
– To allow inter-operability of equipment from various approved manufacturers
Key management processes• Generating Keys• Transferring Keys• Verifying Keys• Using and storing Keys• Compromised Keys• Destroying Keys
Why standardise?
• Different systems not compatible • Level of cryptographic security not
consistent• Different maintenance and installation
procedures• Multiple sourcing and increased
competition• Minimise switching costs
Standardization process
• Token transfer and encryption• Meter functionality• Vending and support equipment• Key management
• Standard Transfer Specification (STS)• IEC standard
Implementing Prepayment
Pilot projects• Feasibility study• Pilot project 500 - 10 000
– marketing campaign (internal & external)– implement vending infra-structure– training– management processes– install meters
• Evaluation (Financial Model)• Go/No Go decision• Large scale roll-out
Finance/operation
• Funding– Self funded, Loan, BOT, Donor
• Operation– Utility managed– Partially outsourced– Fully outsourced
Some other questions
• Free choice vs forced use• Stigmatising prepayment - used as
means of supplying electricity to customers nobody else wants
• Prepayment vs self-billing and pricing– do prepaid customers receive a benefit for
paying early– do prepaid customers make a capital cost
contribution
• Regulators?
Marketing
• Target groups– Internal staff– Political players– Media– Community
representatives/organisations– Customers
• Customised plans are required
Prepayment Perception Mapping
Low High
High
(Champion)
(Subversive)
Low
Influence
Support
Support Threshold
6
2 3
5
4
1Mindset Shift Effort
Influence Shift Effort
Management processes
• The system relies on strong management– Database management– Audit procedures and reports– Cash management– Meter maintenance and inspection– Arrears – Revenue protection program– Revenue Intelligence – eg RAAP
Conclusions
• The concept of prepayment is proven to benefit both customers and utilities, and customer acceptance is high
• Prepayment systems are mature• Prepayment markets are growing
internationally• Innovation in prepayment is ongoing• Important implementation factors remain:
• careful system design (especially in terms of vending)• PR, marketing and customer service• staff training • ongoing, high quality management processes
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