- A problem that will stop all prepaid electricity meters from working next year, unless they are updated, offers a great opportunity to recover revenue from the sale of electricity.
- Electricity meter fraud levels range from 5% to 70% of customers who do not pay depending on the area, a specialist said.
- The opportunity to recover revenue while fixing the problem has slipped away.
- For more stories, visit the Tech and Trends homepage.
A problem affecting prepaid electricity meters that will see them all go dark on 24 November 2024 unless updated offers a unique opportunity to clamp down on the rampant levels of meter fraud in the country.
But that opportunity has been misspent by many authorities who have delayed starting their update projects until the last minute.
To provide some context, a problem baked into the code of electricity meters will stop the approximately estimated 70 million meters in the world from working unless they are updated through a process called TID rollover.
There are approximately 10 million meters in South Africa, although the actual number could be higher than this. Prepaid electricity is the predominant mode of electricity distribution in the country.
Prepaid water and gas meters will also be affected by the rollover, but these vending methods are much less popular.
The problem has been caused by a Y2K-style date rollover issue as the tokens that users enter into meters are attached to the minute the tokens were bought, but there were only so many minutes that could be attached to the token before the 20-digit number that users enter into the meter became too long.
There happens to be enough minutes programmed into the meters to reach 24 November 2024, after which users will not be able to vend electricity unless their meters are updated.
Failure to update the meters will leave prepaid owners in the dark and unable to load electricity when their credit runs out. The revenue that authorities, such as Eskom and municipalities, will receive from the sale of electricity will fall to zero if no meters are updated.
Performing the update is reasonably simple. Two unique 20-digit tokens need to be generated and entered into every meter, and then it is ready to be used after the rollover date.
There are two ways that authorities can decide to perform the update. The first is to give the update numbers, known as key change tokens, to users themselves to enter into the prepayment meters.
The update is relatively simple to perform, but the issue is that many authorities haven’t started their projects.
READ MORE | Prepaid electricity crisis: 70 million meters may stop working next year
Eskom is responsible for updating 6.6 million meters, and told News24 earlier this month that they had rolled over 5 800 so far in a pilot project in Gauteng.
The South African Local Government Association (Salga) has a data tracker where municipalities self-report their level of progress in the project. Only 42 out of the 164 municipalities with licenced distribution zones indicated that they have started the rollover project.
But some municipalities have almost completed their projects and are reaping benefits beyond avoiding disaster next year.
Revenue recovery
Some municipalities have contracted designated task teams to visit every meter in their distribution zone to perform the update. At the same time, the contractors are able to check whether the customer with the meter has been paying their electricity bills.
Brian Hill, the director of Utilities World, one of the companies performing the audits and rollovers for municipalities, said that the amount of non-paying customers in the municipalities they have provided revenue management services for ranges from 5% up to 70% of total customers in the area.
He said this range was usually not higher than 20%.
Companies like Utilities World catch non-paying customers, reconnect their meters, and use a system to alert municipal authorities should the customer not pay their bills in the future.
Don Taylor, who is heading the rollover project nationally and who invented the first integrated prepayment meter, said there had been a significant increase in revenue for those municipalities who had performed revenue recovery operations at the same time as the update.
He said:
Those who are doing revenue protection actions at the same time as the meter reset are generally reporting a 30% increase in revenue. This not unexpected, given the high level of fraud and poor meter management practices in many municipalities.
A case study
Hill pointed to the Dr Beyers Naude Municipality in the Karoo as an example of a success story for recovering revenue while performing the rollover.
Delphine Thorne, who led the rollover project in the municipality, said that Salga made the municipality aware of the need to perform the rollover in 2015. She realised the need for it very early on.
“I immediately realised the serious impact should we not do it early enough,” said Thorne, who added that she could remember the preparations undertaken for Y2K in 1999.
She said that they had partnered with Utilities World, which didn’t charge them any upfront costs to perform the rollover and the audit. Utilities World was paid from the additional income that the municipality raised once the non-paying customers were made compliant.
“The reason we fund this kind of work is that the municipalities are generally financially distressed,” Hill told the Financial Mail last year.
He said:
They don’t have the money to do it themselves and I believe they are relying more and more on this type of partnership to improve things.
He said that prior to the audit, 20% of customers in the area hadn’t purchased electricity in the previous 90 days and, after the audit, 13% of customers hadn’t purchased in 90 days.
Hill said that the municipality’s income increased by 20% from the year before the audit was performed, compared to the year after.
Thorne said the revenue that the municipality raised from the sale of electricity had increased from R3.9 million to R4.9 million per month following the audit and update.
Dr Beyers Naude completed their rollover project in 2019 and it took around nine months to completely finish updating the 11 000 meters in the area.
She said that load shedding was now eating into the revenue that the municipality received from electricity.
Rian Knoesen, an executive at Visual Revenue Management, a company that is also performing the rollover and helping municipalities recover revenue from services, told the Financial Mail that Polokwane was earning in the order of R10 million more per month after an audit was performed to recover revenue.
The Salga dashboard states that Polokwane is 74% of the way through its project.
It is not known what the revenue recovery rate will be if an audit is performed on meters that Eskom are responsible for. A large portion of the meters that Eskom serve are in historically disadvantaged communities.
In debt
Roughly 80% of municipalities do not pay Eskom what they are owed for the electricity supplied, according to energy expert Matthew Cruise from Hohm Energy.
He added that roughly 30% of municipalities do not pass along any revenue at all to Eskom.
The revenue that municipalities raise from the sale of electricity is a critical component of their balance sheest. Cruise said this generally accounts for between 30%-80% of their overall revenue.
“[Electricity revenue is] their bread and butter,” said Hill.
He added:
How some of them are surviving, especially with a 70% bypass rate, I have no idea.
He said that they might have industrial customers of electricity that sustain the balance sheet.
Marli van der Woude, Treasury’s revenue policy coordinator, told News24 earlier this year that poor revenue collection practices were one of the primary reasons municpalities did not pay Eskom.
READ MORE | Cut power to consumers that don’t pay, Treasury tells defaulting municipalities
One of the primary reasons municipalities do not pay Eskom is because they are not collecting, and coupled with that is a consumer culture of non-payment.
Municipalities are supposed to pay Eskom from the revenue they raise from the sale of electricity, but “the money is not really used for that purpose by local municipalities”, said Cruise.
One of the reasons municipalities do not pay Eskom is because they are not collecting sufficient electricity revenue.
Any additional revenue that municipalities receive from the sale of electricity is meant to maintain the distribution network and substations owned by them.
Cruise said that the failure of municipalities to pay Eskom for the electricity rendered to them was one reason that Eskom pointed to when needing bailouts from government. There is roughly R56 billion in outstanding debt owed to Eskom by municipalities.
Last minute
Hill said that many municipalities were starting their projects too late to be able to facilitate a revenue enhancement project at the same time as performing the roll over
He added:
It’s now too late for the municipalities to suddenly get excited about a big revenue enhancement drive.
“Especially the bigger ones, with 40, 50, 60 thousand meters – you’re never going to get to all of those meters in time.”
Hill said that his company was proposing a hybrid approach to their customers to deal with the dual issues of electricity non-payment and performing the rollover update.
He said that good citizens who were paying for their electricity should be provided with the update tokens to insure that they could still buy electricity come November 2024.
“In the meantime, we do more of a targeted approach for the delinquents.”
Revenue recovery projects don’t need to be completed at the same time as the rollover, but the opportunity to do both at the same time was a success for those municipalities who went that route in good time.
Threat
Riccardo Pucci, a TID rollover project coordinator at the Standard Transfer Specification Association (STSA), said that the revenue recovery problem would be worse than it had ever been before if authorities failed to update the meters in time.
He said:
You are going to get record numbers of meter bypasses. That’s essentially what’s going to end up happening. If the revenue protection problem was an issue before, it’s going to skyrocket. And the customers won’t know. They are just going to say, ‘Well, it stopped working. I’m just going to bypass my meter.’
Earlier this year, News24 spoke to a qualified electrician who wished to remain anonymous, who said that while bypassing a meter was highly illegal and could result in fines or even jail sentences, a qualified electrician could do it in an hour or two.
Peter de Jager, who led the communication drive during Y2K, agreed with Pucci.
“Unless this is fixed, your electricity theft problem will be higher than it’s ever been,” he said.