Prepaid Energy Meters – ‘Electrifying’ Prospects

Published: 19 Nov 2004

Srivatsan M.R., Research Analyst, Asia Pacific Energy Practice

 

Energy meters, the only direct revenue interface between utilities and the consumers, have undergone several advancements in the last decade. The conventional electro-mechanical meters are being replaced with electronic meters to improve accuracy in meter reading. Asian countries are currently looking to introduce prepaid electricity meters across their distribution network, buoyed up by the success of this novel methodology in South Africa. The existing inherent problems with the post-paid system and privatization of state held power distribution companies are the major driving factors for this market in Asia.

Over 40 countries have implemented prepaid meters in their markets. In United Kingdom the system, has been in use for well over 70 years with about 3.5 million consumers. The prepaid program in South Africa was started in 1992, since then they have installed over 6 million meters. Other African counties such as Sudan, Madagascar are following the South African success. The concept has found ground in Argentina and New Zealand with few thousands of installations.

The prepaid meters in the market today are coming up with smart cards to hold information on units consumed or equivalent money value. When the card is inserted, the energy meter reads it, connects the supply to the consumer loads, and debits the value. The meters are equipped with light emitting diodes (LED) to inform consumers when 75 percent of the credit energy has been consumed. The consumer then recharges the prepaid card from a sales terminal or distribution point, and during this process any changes in the tariff can also be loaded in the smart card.

Benefits of Prepaid Meters

Improved operational efficiencies: The prepaid meters are likely to cut the cost of meter reading as no meter readers are required. In addition, they eliminate administrative hassles associated with disconnection and reconnection. Besides, going by South Africa’s experience, prepaid meters could help control appropriation of electricity in a better way than conventional meters.

Reduced financial risks: Since the payment is up-front, it reduces the financial risk by improving the cash flows and necessitates an improved revenue management system.

Better customer service: The system eliminates billing delay, removes cost involved in disconnection/reconnection, enables controlled use of energy, and helps customers to save money through better energy management.

Market Drivers

Power sector reforms: The upcoming competitive and customer focused deregulated power distribution market will force the market participants to make the existing metering and billing process more competent. This is likely to drive the prepaid market.

Increasing non-technical losses: Metering errors, tampering with meters leading to low registration and calibration related frauds are some of the key components of non-technical losses. India reports greater than 10 percent of non-technical losses. It has been reported that prepaid meters control non-technical losses better than conventional ones.

Opportunities in the emerging electrifying markets: Most of the Asian countries do not have 100 percent electrification; hence new markets are being created by the increasing generating capacity. Prepaid systems can be more easily introduced in such new markets rather than the existing ones.

Market Restraints

Consumer behavior: Consumers have not had any major problems with the existing post-paid system, and hence it is likely to be difficult to convince them to change over to prepaid system. Consumers might not appreciate the concept of "pay and use" as far as electricity is concerned because it might be perceived as an instrument to control common man’s life style.

Initial investment: Utilities might be discouraged by the huge initial investment, which includes the cost of instrument, marketing campaign, establishing distribution channel, and other management costs.

Rapid technology changes: The rapid technology changes happening in the metering market are expected to delay the decision to go for prepaid system.

Uncertainty over the success: Prepaid system is not as proven a concept in all the markets as South Africa; hence there is bound to be uncertainty over its success, if implemented. The success of the system depends on the commitment by utilities and for this they need to get convinced on the real benefits of prepaid meters

Recent Initiatives

  • The Sabah Electricity Sdn Bhd (SESB), Malaysia, has awarded a contract to a local manufacturer to supply 1,080 prepaid meters

  • Countries such as Thailand, Bangladesh, Singapore, and Iran have been showing increased interest in adopting prepaid system

  • In India, the State of West Bengal has decided to introduce the smart card operated prepaid energy meters in remote islands of Sunderbans. In Mumbai, pre-paid power is provided by the Brihanmumbai Electricity Supply and Transport (BEST) Undertaking.Tata Power plans to introduce pre-paid electricity in Delhi. Tata Steel is likely to install prepaid electricity meters at its employee township in Jamshedpur.

 

Conclusion

The monopolistic power distribution market in Asia is gradually transforming into a competitive marketplace. Differentiation in service is going to be the key competitive factor to improve market share in the deregulated power markets. Prepaid meters with their advantages over conventional ones are likely to help power distributors to differentiate and offer value-added services to consumers. Encourgaing consumers to opt for prepaid meters on a voluntary basis and offering tariff or non-tariff incentives to those consumers who prepay their power charges, would help the utilities to implement this sytem.

Please contact us if you would like to find out how Frost & Sullivan can help you better understand and maximize opportunities in Asian prepaid energy meter markets. 

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