If revenue collection from electricity sales continues to fall in light of the ongoing pandemic, the impact could be devastating. This is largely because some municipalities in South Africa generate as much as 45% of their revenue from electricity sales.
Revenue management in South African municipalities has never been at as much risk as it currently is. Before the COVID-19 pandemic revenue collection was dismally low – a 2019 Municipal Report by the Auditor-General suggests that 60% of revenue reflected on the books of municipalities will never be paid.
Yet, as the financial realities of life in a post-pandemic world start making themselves felt, power theft and payment delinquency are increasing.
Viven Perumal, marketing director at Conlog, says: “We have spent a lot of time getting customer insights; looking at what customers were battling with and identifying challenges – from non-technical losses to billing errors. One particular issue noted is that billing and cash collection cycles are getting longer. Internally, we realised that many of our customers had similar problems and we have tried to address a number of these through a single offering. We believe that scale will ensure more clients benefit from our solutions.”
Prepaid meters have long been a gateway to revenue collection and management for utilities. Anything that can impact the accuracy of a meter or a subsequent bill will compromise revenue protection in one way or another. This can include errors in billing, inaccurate meter readings or outright tampering and theft. As a cluster of considerations, it is vital to therefore ensure that the meter is as accurate, robust and reliable as possible; that it remains 100% functional; that vending is facilitated seamlessly; and that revenue management and protection operate in tandem.
A fundamental objective for any utility is to keep non-technical losses as low as possible. Generally, non-technical losses in the region of 8-9% are considered acceptable. However, if you look at South African municipalities, and African utilities in general, this figure can vary from between 18% to 30% and can even be as high as 40%. In plain language, the higher the non-technical losses, the more debt the municipality or the utility needs to carry, the more the financial losses in the system continue to mount.
The risk of technology and cybersecurity
Two foundational elements in the management of non-technical losses are process and technology. From a technology perspective, as utilities across the world – and in Africa in particular – become increasingly digitalised, a growing concern is exposure to cyberattacks.
For many already financially compromised utilities, cybersecurity would be considered sufficient, but not outstanding. This is primarily due to the high cost involved. Cybersecurity is a moving target with utilities trying to defend multiple attack surfaces at once. The COVID-19 pandemic has already seen an increase in the number of cyberattacks and ransomware attacks worldwide. In addition to dealing with the threat of compromised critical infrastructure or consumer safety, utilities have a mandate to protect the privacy and data of their customers – and this can prove to be a very expensive exercise indeed.
As the rise of cloud-based applications has increased, utilities have started reassessing their position on cloud vs on-premise data centres. They have also started examining the role of cloud and specialist cloud services from both a cost and a security perspective. While previously it was felt that on-premise hosting would provide the best security, from a cost perspective, this is often not the case.
The high cost of on-premise systems, software and specialist staff have provided an opportunity for an increased array of ‘asa- service’ offerings, which are cost-effective, scalable, protected by sophisticated cybersecurity teams and regularly and remotely updated and maintained. Also, often these managed services include access to data cleaning, merging to databases and data analytics to provide deep insight into data-driven business decisions.
One issue noted [from customer insights] is that billing and cash collection cycles are getting longer.
Viven Perumal, marketing director at Conlog
It is not unusual for hackers to work to generate duplicate and fictitious meter tokens as a means of enriching themselves and defrauding the power company. Says Perumal: “We’ve come across a situation where one of the municipalities noticed there was a decline in the revenue collected. They were collecting less and less revenue, but they still had the same number of meters; something was not right.”
During their investigation, the municipality uncovered the most interesting syndicate, which was able to compromise a variety of meters. Perumal explains: “They were able to duplicate tokens and interrogate and control the meters in such a way that when utility staff came around to check the meter, with the touch of a button, everything operated correctly. Once the inspector left the premises, the meter was switched back into bypass mode.”
By undertaking an undercover investigation, the utility was able to discover this fraud and the syndicate members were eventually prosecuted. In some cases, meters sent to the warehouse were tampered with in situ, before being installed at a customer’s premises. The investigation did cause a complete rethink of the solution on the table for municipalities and of the supply chain security implications.
Conlog’s Crypto Vault software is an added layer on top of its cloud and hosted services offering. It has been designed to address and mitigate the risk of hacking, data cloning, token duplication and tampering. Crypto Vault mitigates much of the risk from such a scenario by securing the meter online and also ensuring that cloning, duplication and cyberattacks cannot unlock meters and gain access to any vending information.
The power of data
However, this process requires more than managing the physical meter. It entails utilising the power of analytics to dig deep into the data and provide insights into consumer usage and provide alerts when the data indicates that usage is dropping below that which is considered the norm for that particular consumer or customer cluster.
“We’ve been encouraging customers to digitise to beef up their security. But that’s not the only consideration. We know the challenge that African utilities have when it comes to debt management, cash collection and funding. We believe that by moving to a hosted service platform, we can help them address all of these challenges – without the outlay of significant amounts of CAPEX.
“We have invested in and digitised our infrastructure, but we can amortise this cost across several customers. This means we provide a service that is best of breed, fast and secure. We utilise state of the art IT encryption software and processes, and with our security team, we’ve got the skill and the expertise to monitor, to upgrade, to improve these systems,” says Perumal.
While the process and uptake of digital solutions were initially slow, more people are starting to adopt and consider digital solutions. For those that had already made the shift before the COVID-19 pandemic, some utilities were able to shift smoothly because the database, administrators, SQL engineers and all the necessary support staff were available remotely to keep the system running. Besides, this digital shift has enabled the swift implementation of protocols to support social distancing while continuing services for consumers.
Perumal concludes: “Utilities don’t need to continue operating in a situation where revenue collection and management is a daily struggle. Technology is available to help them – technology which not only takes the realities of their current financial situation into account but considers the consumers at whom it is aimed as well. For both consumers and utilities, we offer services and products that are secure, convenient and reliable.
“The timing is perfect for utilities to embrace the shift to digital, to do more with less, to improve efficiencies and their financial situation at the same time.” ESI
Conlog launched a new product range on 13 October 2020. Utilities interested in making the shift to digital are invited to reach out to the team to find out how the use of technology and managed services can increase revenue and reduce losses.