Prepayment – new opportunities for utilities

A ‘central wallet’ provides a customisable and easily implementable solution for prepayment energy management.
Published: Tue 07 Jun 2016

The advent of smart meters has brought with it new payment options beyond the traditional monthly, bimonthly, or other periodic bill.

Traditionally prepayment (or pay-as-you-go in some countries) has been provided to bad-paying or low-income customers. But the growing acceptance of prepayment for services such as mobile telephony is driving growing interest from both utilities and consumers in its use for energy. Whereas in the past prepayment required a dedicated meter, smart meters permit ready switching between post- and prepayment.

“Prepayment for energy can open up a new way of business for utilities,” Ronald Hermans, product manager for alliances at Elster, commented to Engerati in an exclusive interview. “And for consumers it is about transparency regarding their energy consumption and spend, with the opportunity for attractive tariff models.”

Prepayment market trends

Illustrative of the growing interest in prepayment is its use for energy in more than 40 countries over the past two decades, primarily in Europe, Middle East and Africa (EMEA) regions.

In the UK, for example, approximately 16% of electricity customers are estimated to be on prepayment, and in India all new customers are connected with prepayment capability. In developing countries, the widespread use of mobile telephony makes prepayment a particularly attractive option, where transport and other services are limited. In many countries in Africa for example, more than 80% of adults have mobile phones – similar to the US.

A 2015 study from Navigant Research estimates the worldwide installed base of prepaid meters is expected to grow from 35.7 million in 2015 to 85.1 million by 2024. The region expected to show the greatest growth is Asia Pacific, where large numbers of conventional prepayment meters are still being deployed.

Hermans summarises the key benefits of prepayment for utilities as increased revenues, improved profitability and provision of an enhanced customer experience including avoided disconnects. For customers, the benefits are closer monitoring of energy usage, more effective budgeting for electricity consumption and avoided surprises due to high energy bills.

Prepayment challenges

While the concept of prepayment is straightforward, there are nevertheless some barriers that are perceived to its implementation, Hermans comments. These include some added complexity and integration requirements, especially in liberalized markets, and the need for possible further investment to increase market adoption and to transition customers from post- to prepay (and potentially back).

“Prepay is a break with the traditional utility model, but the challenges can be readily overcome and once the benefits are apparent it should become a key service offering for customers,” he says, commenting that this is the background behind a new prepayment management solution that Elster is bringing to market with Canadian monetization software provider Redknee.

“The solution is built on Elster’s expertise in metering and Redknee’s in payment for services to offer a configurable prepay energy delivery solution and it is intended as an off-the-shelf, packaged solution that can be easily implemented, embedded in existing utility operations.”

Prepay Energy

The solution, which requires an underlying advanced metering infrastructure (AMI) – either from Elster or another vendor –integrates Elster’s Connexo MultiSense multi-vendor data collection and Insight meter data management (MDM) systems with Redknee’s Connected suite prepay management system on a common interface.

Functionality provided by the central head-end and MDM systems includes meter control for command scheduling and follow up, data collection, storage, unification and validation, estimation and editing, and features such as usage point support, asset management and operation integration.

The Connected Suite comes with integration layers into the MDM and CIS, customer and account management, a top-up and vending module, rate plan and price management tools, customer interaction and self-care modules and reporting and analytics capabilities.

“The solution has a central wallet approach,” explains Daniel Franz, senior solutions manager at Redknee, pointing out that this has previously been deployed by the company in both the telecom and energy sectors. “In this approach smart meters with remote disconnect and reconnect functionality are integrated without the need to access the smart meter, use physical tokens, smart cards or keys to transfer credit to the meter. This is achieved with all customer accounts held in a central back-end system, unlike the traditional local wallet approach in which payment information is stored on the meter.”

The approach also enables providing customers with multiple engagement and payment channels, price plans and incentives – in effect, ultimately a strongly enhanced customer service is provided through web self-service and app self-service.

Stefan Henss, head of vertical markets at Redknee, adds that a central wallet approach is easier to manage, allows for changes to be made to the account instantly and is more tamper resistant, as well as being less expensive to implement and run.

Prepay Energy in practice

Hermans says that the Prepay Energy solution is aimed to the EMEA and Asia Pacific regions, and the companies are working towards the first implementations, which are expected within the coming weeks.

Both companies also have developed and aligned their product roadmaps for continued development and customization of the solution to best fit customers’ needs. It is also expected to find application for gas and water prepayment applications.

Further reading

Navigant Research: Prepaid Metering