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COMMERCIAL FEATURE Assuring revenue for South African utilities By Imraan Mohamed, Marketing Manager, Itron sub-Saharan Africa U tilities and electricity providers around the globe are faced with pressures on several fronts, including low margins and escalation of non-technical losses in South Africa. To deal with these pressures, most utilities have established programmes which could include a portfolio of cost optimisation, process optimisation and revenue management efforts. They put these measures into place to cover issues like the top 10 factors affecting utilities from the Deloitte Power Solutions Report. Itron’s professional services director Dean Villet was recently asked what surprises him about the industry he works in and his reply was that so few utilities in South Africa have taken a revenue assurance view on the world and seriously deal with issues at the highest level. “We find that service delivery is becoming a serious challenge for utilities, especially in certain areas of Africa where utilities are running up non-technical losses of up to 30%. This is really putting the sustainability of the industry at risk.” As an example, South Africa’s primary electricity utility, Eskom, reported a total energy loss of about 14,000 GWh during its 2011/12 financial year, of which between 25 and 40 per cent could be attributed to theft. Eskom’s other non-technical losses include faulty meters, meter tampering, billing and metering errors, customers not in the Eskom billing system and ghost credit dispensing units (stolen vending machines through which illegal prepaid electricity are being vended). To control non-technical losses, Eskom introduced prepayment meters with the goal of reducing power theft and 108 increasing revenue collection. However, the devices are still being tampered with as they are in the customer’s domain and are not being overseen by the utility on a regular basis. According to Villet, installation of prepayment meters was a typical solution in the mid-90s to deal with utilities’ issues around billing and the collection of billed revenue. “Today, smart metering is something that utilities can use to identify losses and, with analytics, establish where losses are happening. Smart metering is a step in the right direction, but revenue assurance needs a broader approach to deal with non-payment for services,” he says. “To adequately address revenue assurance and provide a broader approach to non-technical losses, utilities cannot focus exclusively on smart metering and technology solutions. Other key issues that need to be considered include staff and community mobilisation as well as an awareness of the legal framework and political climate in which the revenue assurance activities will take place. In addition, all sources of information need to be leveraged and a big-data approach adopted in order to ensure that problem areas are clearly identified and spend is optimised.” Revenue assurance is a key initiative to ensure the future success of South African utilities. In a time of increasing energy costs and demand, capital constraints, expectant investors and a diminished ability to simply recover revenue loss in the rate case, revenue assurance will grow in importance. With service delivery becoming a major challenge, specifically for African utilities, revenue assurance is crucial for the sustainability of the industry. ESI ABOUT THE AUTHOR: Imraan Mohamed has extensive experience in the electricity supply utility sector starting in 1994 when he was a senior engineer within Eskom’s transmission group. In 1999 Mohamed joined Schlumberger as the product manager for various metering portfolios and then progressed to become the R&D programme manager at Actaris. In 2008, he took up the reins as marketing manager of Itron sub-Saharan Africa where he is currently involved in the growth and retention of new markets. ESI AFRICA ISSUE 1 2014