The Indian power grid currently suffers from chaotic imbalance. “Finding a way” has resulted in frequent power outages and mass electrical theft, with both power distribution companies and customers suffering losses. Thus, there is a need to find a new, better way. Power minister R.K. Singh recently said, “Our intent is to electrify the economy”.As the country prepares to deploy 25 crore prepaid smart meters, a successful roll-out will be measured by the new balance it creates between discoms and customers. Fortunately, prepaid is a win-win solution that delivers balanced benefits for both.
Prepaid is proven
Prepaid services are utilised in many industries where customer payments create a running balance from which charges are deducted as services are rendered. The adoption of prepaid phones, retail appsand general use credit cardshas grown rapidly over the past decade. The continued adoptionof prepaid electricity worldwidedemonstrates that utilities are leveraging the technology to streamline their operations and increase customer satisfaction. India’s prepaid installation will be the largest in the world and will drive many discom and customer benefits.
Prepaid solves discom challenges
The prepaid utility meter was invented in England in 1870, gaining wider adoption in Europe in the 1970sand the United States in the 1990s. There is a strong list of utility/discom benefits proven over time:
- Reduction in electricity theft: India has one of the highest percentages of technical and commercial power losses in the worldat nearly 20%, largely attributed to theft and inadequate metering. This has contributed to massive discom debt and “overdues” to power producers. As IntelliSmart’s Anil Rawal recently stated, “Improving discom health is the most critical goal. With the adoption of prepaid meters, utilities get paid upfront for the electricity used. This, along with smart meter alerts, helps deter theft as it occurs versus investigating after-the-fact in a post-paid environment. The reduction in power losses alone significantly increases the return on investment. Yet, there are many more benefits that utilities will reap.”
- Improvement in financials: Not only do utilities receive full compensation for electricity used, but the timely upfront payments improve the cash flow and eliminates delinquent payments which often turn into unrecoverable bad-debt. Aged account receivables are eliminated and utilities see significant reductions in bad debt.
- Improved operations: Discomcall centersshould no longer be inundated with angry customer calls about power outages and lengthy payment arrangement negotiations. With smart meters, utilities receive automated alerts when a power outage occurs. With prepaid solutions, customers pay down the past due debt over time without having to negotiate a payment plan over the phone or in person. These “automated payment arrangements” enable a percentage of a customer’s payments to be automatically applied to outstanding debt. This eliminates call centre payment negotiations and collection activities, and establishes clear guidelines for paying debt over a manageable period. With the challenges we face due to COVID-19, there may never be a greater need for this.
Discoms can also eliminate spending on less informative mailed bills, which are replaced with daily balance updates and actionable alerts. With prepaid solutions, customers can always track their running balance online and no longer need to depend on printed bills. As customers become familiar with their digital prepaid account and convenient on-line payment methods, they will transition from non-digital payments to digital payments.
- Improved customer satisfaction: While customer satisfaction ranges widely across discoms, one recent study indicated that 40% of rural customers are dissatisfied with the State electric grid. Prepaid solutions align discom benefits with consumer benefits to achieve customer satisfaction. As we delve deeper into consumer benefits, studies in countries such as the US show customer satisfaction ratings approaching 90% or more. Although prepaid solutions do benefit utilities, there are many reasons for customers to be excited as well.
Customers win with prepaid too
There are few successful programmes involving both company and customer. Prepaid customers receive a range of benefits not typically available to post-paid customers:
- No security deposits or late fees: As customers pay ahead for electricity, there is no requirement for money upfront to start service and no assessment of late fees for delinquent payments.
- Easier budgeting with no surprises: Based on their payments, customers have immediate access to their prepaid balance and the estimated number days of use available. Customers can plan their budgets accordingly without being forced to guess what a month of variable electricity use will cost.
- Pay past due balances over time: Covid-19 has resulted in great hardships, including many overdue discom bills, which can be paid over longer periods with the built-in “automated payment arrangement”. This helps customers avoid disconnection for non-payment.
- Greater transparency leads to greater savings: Studiesindicate that showing customers what they spend each day on utilities makes them more energy conscious. As a result, Prepaid customers use 10 to 15% less electricity and have smaller bills.
- More convenient payment options: Prepaid solutions come with integrated, online payment capabilities, which eliminate the need to stand in long payment queues or mail-in payments.
- Financial empowerment: Prepaid gives control to the customer. Customers no longer fear what their bill will be or wonder what they spent on utilities yesterday. Prepaid solutions eliminate the uncertainty, and give customers the power to manage what they spend, track what they use and pay as frequently as they like. This is a leading contributor to high customer satisfaction ratings for prepaid programmes.
We live in unprecedented times with once unfathomable challenges. However, I believe in the power of human ingenuity and Indian resourcefulness. Though our power grid faces challenges, further exacerbated by the Covid-19 pandemic, the world’s largest prepaid smart grid will be a powerful advancement, by which both discoms and their customers will find a new, better way to win.
(MahiuddinLaskar is an independent management and implementation consultant for smart grid systems with the Lacaro Group. He has a master’s degree in business administration from the University of North Florida, and a bachelor’s degree in electrical engineering (with specialisation in computer science) from Indian Institute of Technology (IIT), Mumbai. Laskar has over 30 years of extensive experience in the utility industry, specialising in smart grids, large customer information systems and meter data management system implementation, management consulting and utility restructuring efforts. Laskar was instrumental in the planning and execution of one of the largest and most successful prepayment programmes in the US for the Jacksonville Electric Authority. MrLaskar is a recognised expert in the areas of large customer information systems, meter data management system implementation, management consulting and utility restructuring. He can be reached at laskar@lacaro.com)