PREPAYMENT EVOLUTION

Key features of a proven revenue management system
By Ben Meyer and Sagie Moodley, Contour Technology (Pty) Ltd

The revenue management environment has been privileged to receive specialised attention by information and communication technology (ICT) companies that have targeted customer service delivery. Consequently, there has been an improvement in the ‘immediacy’ of data, catering for political and social changes, leveraging 3rd party services as well as an improvement of system security and reduced financial risk.
These system improvements were necessary for this industry to remain competitive and find a road map to global acceptance. Contour Technology’s involvement and evolution of this industry is discussed below.

OFFLINE VENDING – THE START
Offline vending infrastructures were used to support the sale of prepayment tokens to the installed base of prepayment electricity meters. The points of sale or credit dispensing units (CDUs) are operated independently or are linked directly or via a system master station (SMS) to a mainframe (Figure 1).
South Africa has used this type of payment infrastructure for over 10 years and there are several reasons for change:

  1. CDUs were difficult to maintain with high support costs. 
  2. Reliable GPRS network coverage is now available throughout the country and encourages online vending. 
  3. Revenue loss caused by illegal vendors operating stolen CDUs.
  4. Bank rolling of funds by vendors. Deposits are made late and are insufficient. 
  5. Vendor credit reconciliation procedure is complex and time consuming.
  6. Incompatibility between supplier terminals.
Figure 1. Off-line architecture.
Figure 1. Off-line architecture

ONLINE VENDING – BUSINESS PROCESS IMPROVEMENT
These problems can be addressed by using on-line capability for the effective management of distributed point of sale (POS) terminals. With a central database the supply authority has improved service delivery both in-house and to customers. Contour Technology has been involved in on-line vending systems for over 5 years and has established a pedigree in this industry. A typical architecture is shown in Figure 2.

Figure 2. On-line architecture.
Figure 2.  On-line architecture

Transactions are recorded at one central database the moment they occur. The central control of critical data decreases the financial risk and opportunity for unallocated transactions and also eliminates the loss of data, discrepancies and fraudulent activities. Furthermore this type of system is flexible enough to support future metering and client server-based applications from third party suppliers.

On-line systems, however, require redundancy of the key components of the vending system to ensure 24/7 availability. Contour has a specific product range and a proven track record of more than 5 years of 24/7 on-line prepayment, arrears collection and revenue management, which are superior to anything currently offered in the market place.

Electricity basic services support tariff (EBSST) – Government policy
Supply authorities across the country have different policies with respect to issuing EBSST tokens, which Contour has implemented for Buffalo City Municipality, Nelson Mandela Metropolitan Municipality, eThekwini Municipality and others. In addition to STS, Contour Technology is able to provide certain proprietary EBSST tokens on-line, removing the need to replace existing proprietary meters.

ARREARS COLLECTION – MULTIFUNCTIONAL TERMINALS
The collection of municipal arrears in Buffalo City Municipality is a success story that Contour Technology is proud to be a part of. In this municipality between R2.5 million and R3.5 million (US$0.4 million and US$0.6 million) of arrears is collected every month. Arrears collection requires integration of the municipal financial and prepayment systems and may include a multitude of third party vendors. Consequently, a costly 24/7 network infrastructure is required and needs to be maintained by experienced staff.

Many concerns over control and ‘consumer ownership’ exist in the regional electricity distributor (RED) environment. The solution must:

  • Be cost effective
  • Allow the municipality to retain its consumer database and their business rules
  • Allow 3rd party vendors
  • Provide arrears collection, and
  • Provide a reliable vending platform.
  • All these needs can be met using the Contour online facility.

KEY MANAGEMENT CENTRE – IMPROVED SECURITY
Presently, Eskom is the custodian of the Standard Transfer Specification (STS) Key Management Centre (KMC) and all STS secure modules must be sent to Eskom for initialisation by the Centre. The KMC is another innovative Contour product and represents our ability to provide highly specialised skills in this market.

CREDIT AND TARIFF MANAGEMENT SYSTEM – REDUCING THE FINANCIAL RISK
Contour Technology has written the up-front vending specification for Eskom and is the sole supplier of end-to-end credit and tariff management system (CTMS) products to Eskom, these being:

  • STS key management centre
  • CTMS security modules
  • CTMS CDUs
  • System master stations, and
  • CTMS management stations.

Prior to CTMS, credit management was not secure and was limited to loading of credit into the security module by the vending application under instruction from the SMS. The units of credit loaded into the security modules are kilowatt-hours. The vending process allowed the vendors to sell electricity on a credit basis. This resulted in the vendor being able to sell electricity and not pay the full amount over to the supply authority. Even if the amount was paid later, it had severe cash flow and business process implications for the supply authority. A lot of effort was required to reconcile vendor deposits.

Inefficiencies in the way the vending process was applied exposed the supply authority to financial risk. Implementation of up front vending as a solution improves the cash flow to the supply authority and eliminates credit reconciliation problems. Up front vending requires the vendor to pay the supply authority in advance of any electricity sales made, similar to purchasing any other stock. In this way, the responsibility of insuring and handling of cash is transferred to the vendor. The problem of stolen (ghost) CDUs is now completey eliminated. Other systems have been proposed to protect against module theft, e.g. removing the keys from the secure module when it is idle. Because it is a simple matter to reload the keys, security of such systems is easily compromised. Only CTMS will protect against revenue loss.

Figure 3. CTMS system.
Figure 3.  CTMS system

Associated with this requirement is a need to improve the credit and tariff handling of the security module. This implies changes in the way tariffs and credit are transferred to the CDUs to ensure protection of the supply authority’s revenue streams.

With the CTMS system, management can only be performed at a registered CTMS station and only CDU secure modules keyed for this station can accept the new secure tariffs and credits. The secured tariff and credit files may be downloaded via a text file to registered SMSs controlled by the CTMS management station.

The text file may be transferred via diskette or email to the SMS. Authentication of the tariffs and credit ensures that the individual records cannot be altered. The SMS then loads the tariffs and credits by processing the received files. Physical access to the CTMS station is restricted as it is the functionality provided by this terminal alone that governs the protection of the supply authority’s revenue streams.

The vendor purchases the amount of electricity stock he wants to sell by depositing this amount into the supply authority’s bank account. The bank electronically informs the supply authority’s financial system mainframe of the deposit. The mainframe in turn instructs the CTMS management station to transfer the appropriate amount of credit to the relevant CDU, via its controlling SMS. The vendor is now automatically issued with additional credit for this amount.