Prepaid metering in its simplest form refers to paying for electricity, gas or water before it is used. The consumer purchases credit and then uses the resource until the credit expires. The concept of prepaid metering is not new, having first been introduced in the form of coin operated gas meters in the United Kingdom well before World War II. Major change took place in the 1980s when electronic or numeric transfer of the credit was introduced. FLAT RATE TARIFF METER: In one form or other, this type of meter comprised the majority of the electricity prepaid meters in the UK for several decades until its replacement by its electronic token counterpart in the 1980s. Even today they are used by landlords as secondary metering.
A traditional electronic prepaid metering system operates on three levels. First are the meters which are installed at the consumer's home. The next level is the vending stations, situated at the utility's offices or at appointed agents. The communication between the vending stations and the meters is in the form of a token, which is used to top up the credit in the meter. Tokens also transfer or download information to the meter, and in some cases upload information (depending on the token choice) back to the vending station. At the top level is the System Master Station (SMS) or master client, which is necessary to ensure a common database for reporting and to provide total management, administration, financial and engineering control. The SMS communicates with the various vending stations via modem or other data link. Information on consumers, tariff changes and so on is communicated to the vending station and detailed customer sales are communicated back up to the SMS.
It would be interesting to see how prepaid has developed over the last 70 years from the primitive coin operated meter to the token-based systems and today's smart card operated systems.
FIXED CHARGE COLLECTOR - HAND-RESET TYPE: This was the simplest form of prepaid metering, consisting of the meter and a switch. At each visit the meter reader removed the coins and tripped the meter's switch. The consumer re-closed the switch by inserting the requisite number of coins.
Besides the above several other variations of prepayment meters were in use in different parts of the world for electricity at different points of time which all gave way to the electronic prepayment meters.
There are a number of reasons why a utility could consider installing a prepaid metering system. They include improved cash flow, no need for account posting or additional billing systems (1-2% savings), elimination of bad debts (5-12% average, with up to 40% in some developing countries), elimination of disconnection and reconnection fees, ease of installation, no need to access consumers' property (particularly for split meter installations) and elimination of inaccurate meter readings.
There are also advantages to the customer, including budget management, control of energy usage, no cost for disconnection/reconnection and no waiting for reconnection, no deposits.
Prepaid energy meters using keypad based systems, disposable card systems (one-way) and two-way smart card systems are in use in various parts of the world for over a decade.
1. Keypad operated Prepaid Meters:
Electronic prepaid energy meters came initially with keypad systems for inputting the credit. Security of keypad payment system is very low. The main reason is that the algorithm of key creation is stored inside the meter and is available to hackers. Keypad systems were created when highly secure smart card payments did not exist.
Although keypad systems are getting obsolete, it may still be cost-effective for remote villages, where two-way vending may not be feasible.
2. Smart Card operated Prepaid Meters:
With Smart Card operated system, customers purchase a reusable power debit card for the amount of energy they desire. These special, easy to use cards are individualized, keyed to each customer's meter and account number. The customer simply passes the card a few inches in front of the meter, and using an integrated card reader, the meter is reset to the number of kilowatt-hours contained on the card. The system works very much like a bank debit card. Because the meter is completely sealed and has no moving parts, maintenance is reduced and reliability is improved. Modern Smart Card operated meters are "stand alone", requiring no separate in-house keypad or onsite programming. The card captures transaction and power usage information, sending automatic input into the utility's accounting system at the sales terminal each time the customer purchases additional power. The card also captures data critical for load forecasting.
Disposable card type prepaid meters are also in use in certain utilities. The vending infrastructure for this scheme is much simpler, but it does not offer the advantage of capturing customer's usage data.
Smart card operated meters can be used either as prepaid or postpaid. In some countries, prepaid option is socially not acceptable. In such cases, each consumer is assigned 50-day credit. After each month, the consumer has to recharge a card to pay off his negative balance. After full payment, his 50-day credit is restored. Credit can be time-based or amount-based. Mixed option like 50-day but not more than certain kWh is also possible.
3. Prepaid Meter using two-way fixed network AMR
For meters installed with real-time two-way communication facility, the transaction data is stored on central computer and authorized in the same manner as for credit card terminals. Here security is not at risk as the credit information is stored on the central computer. However cost of implementing the AMR (Automated Meter Reading) scheme need to be justified on other merits than for prepayment advantages.
Smart Card Operated Prepaid Meters is the emerging leader in this segment for following reasons:
Detection of counterfeiting: Though security of smart card meters is extremely high, it is theoretically possible to break any card whatsoever, time being the only difference. It takes over a million hours to break the DES264 open-key random-base algorithm used in most smart cards (The same type of security is used for credit cards, electronic purses and GSM phones). Besides, such attempts can be easily detected by the utility. Each card is assigned its own number. Central database contains information of all the issued numbers. When numbers of used cards are matched against central database of issued cards, the utility will immediately receive report on unauthorized cards and cards with restored balance. Because meter ID's are known to utility, it can detect and prosecute those using counterfeit cards.
It is impossible to use counterfeit cards and not to be caught after the first reading of meters without only physically breaking the meter. Locks can be provided against tampering the card reader against coin and paper insertion.
Upgrade capabilities: Smart card operated meters use transparent card communication protocol that allows easily upgrading security of the card, or even switching to a different card.
Resistance to aggressive environment: In very high-humidity or very dusty environment contact-type card readers may lose their reliability. In such conditions, contact-less type rechargeable cards may be used. Contact-less cards are read by the meter through its cover.
Reliability: Card readers can perform up to 300,000 read-write cycles. Even if the cards are charged every week, in 30 years, meter operation requires less than 1,600 cycles. With external casing, physical and electrical insulation, smart card readers are very reliable and durable.
Data transfer: Rechargeable cards can be used for transfer of data between meters and central office. Information about energy consumption is stored on the card and transferred to central office during recharge. Cards are very reliable, with storage time of 10 years. The drawback of rechargeable cards is a necessity to install a large number of recharge terminals so that customers can conveniently access them.
Implementation of Prepaid Metering System
A prepaid metering system replaces the billing system, the reading of meters and the administration of revenue collection. Implementing such a system means a change of mindset, a change in the way the revenue collection is managed, a change in IT procedures, a change in customer service, a change in metering and a change in consumer behavior. All parties need to buy in to the system and understand the benefits.
It is also necessary to plan the implementation of the project in advance. Detailed program, schedules, including resource allocation, distribution of responsibilities and the setting of realistic milestones, are essential for success.
Marketing & Training: Most consumers view anything new with suspicion, particularly if they are not given a choice. The marketing department's task is to put together a package which best suits the consumer's needs.
A prepaid metering system is new not only to consumers but also to all the utility staff and a comprehensive internal training is essential.
Important points to be considered in this context are:
- Installation teams must be trained not only on meter installation but also on training the customers to operate and maintain the meters.
- Training of customer service staff to operate the Help Desk, the completion of the registration of new consumers etc.
- Training of vendors, so that they can give the customer good service and create the image the utility wishes to portray.
- Training of the SMS manager, supervisors and operators.
The success of any system relies on the acceptance of all the players within the utility as well as on consumer acceptance. Training and education will assist in communicating the benefits to all staff members.
Maintenance Management: Before the system has been installed, procedures should be in place on how to manage it from a maintenance point of view. The following issues should be considered:
- What happens if a consumer claims to have lost a token? This is more of a problem when using SMART cards than dispensable tokens. All tokens can be re-issued without any security risk, but there is obviously a cost involved. What that cost is, and who bears it, needs to be decided before the start of the project.
- What procedures will be followed if a meter fails? Apart from the actual replacement of the meter, the utility must decide whether it supplies a certain amount of credit with a replacement meter, and whether this credit is charged for. One consumer in South Africa used to complain regularly that his meter was not working, and the maintenance team regularly replaced the meter without testing it. The result was a high maintenance cost to the utility and a consumer who enjoyed the benefit of regular free credit.
- What procedures will be followed if a vending system fails? If the vending stations are situated far apart, a back-up vending station should be available.
- What procedures will be used to back up and archive data? Good housekeeping is required for any database.
- What procedures will be used to avoid the risk of meters being bypassed? (It is difficult to fraud a solid state meter in any other way). Controls should be set up regarding the sealing of meters. For example, will the seals be numbered and the number recorded? Does the installation staff have to sign for seals?
- What are the necessary controls and procedures for collection of revenue from vendors and the transfer of data between SMS and vending station?
- What are the selection criteria for internal and external vendors?
The success of a new prepaid metering installation depends to a very great degree on the thoroughness of the pre-planning phase. This includes seeking acceptance from both consumers and utility staff, and putting in place the necessary procedures for a smooth implementation.
Customer Education: With prepaid meters consumers are in control of their electricity budgets; they decide for themselves how often they wish to purchase electricity and to what value. Customer education assumes top priority for success of the scheme. The points to be considered here are:
- Consumers must know how and where to purchase credit.
- Consumers must be able to enter the credit successfully into the meter.
- Consumers must be able to read the meter so they know when they need to re-purchase credit.
- Consumers must know how much credit they have available at any time.
- Consumers must know how to clean the meter.
- Consumers must know what to do or who to contact if they experience problems with the meter.
The positive aspects of the system should continually be reinforced. It is important that consumers see prepayment as a benefit rather than a means of punishment.
Brochures should be available at each vending site. Vendors should be trained both in the use of the vending equipment and in the use of the meters and the benefits of the system, so that they are able to promote it.
A television and video should be set up at the vending site if possible. A number of prepaid meter manufacturers provide marketing and training videos which can be used to show the consumer how to use the system and what the benefits are. A help line should be set up which customers can use if they are unclear on any issue.
Regulatory and Ethical Issues associated with Prepaid Meters
Automatic service interruption has always been an integral part of prepaid electric service. But over the years electric service came to be regarded as a right more than a privilege in every society and hence regulators and law makers have found it difficult to accept the automatic disconnection feature of the prepaid meters.
In the USA, regulatory rules evolved to protect customers of investor-owned utilities from service interruption. Before terminating service to a customer whose payment is seriously past due, the utility must pursue an array of measures to secure payment. Prepaid electric service with automatic disconnection when the prepayment runs out is incompatible with the protective measures, and as a result only a few thousand customers are being served through prepaid metering in the US, mostly in municipal and cooperative utilities. Where as in UK there are more than 3 million prepaid electricity meters are in use today. ESKOM has installed about 2.6 million key pad type prepaid meters in South Africa during the past 10 years.
Widespread concern exists about the growing use of pre-paid water and electricity meters by private companies and governments. The meters are considered efficient and cost-effective for companies, which experience no lost revenue because users are cut off when they use all the credit they have paid for. But the public health impact of prepaid meters, particularly prepaid water meters can be devastating.
In some countries there have been protests against use of prepaid meters. Pre-paid water meters were declared illegal in the United Kingdom (U.K.) under the U.K. Water Act of 1998 after water cut-offs were linked to increased cases of dysentery and other diseases related to lack of clean water. Being efficient on one end only leads to a backlog of expenses on the other end when people who can't afford clean water get sick from drinking dirty water and then seek services at public health clinics.
In developing countries, ethical issues in use of prepaid electricity meters should not be treated as an injustice to the society at initial stages of development. However, caution may be exercised while choosing areas for deployment of prepaid meters.
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