Revenue leak forces Kenya Power to rethink pre-paid meter system

Flashback: Former Kenya Power MD Joseph Njoroge (right) with then Actaris CEO Christophe Viarnaud display a digital pre-paid electricity meter in 2009. Figures from the company’s March debt collection sheet shows a number of its customers on the pre-pay system could be tampering with meters. PHOTO | FILE |

What you need to know:

  • Smart meters will be linked to a server and will communicate directly to the firm
  • Figures from the company’s March debt collection sheet show a number of its customers on the pre-pay system could be tampering with meters, leading to these discrepancies.

The failure of the much-touted pre-pay billing method to minimise consumer default, six years after it was launched, may have forced Kenya Power to rethink its payment strategy.

When pre-paid meters were introduced in 2009 to great fanfare, the electricity distribution firm said the gadgets would eliminate the risk of non-payment as customers would pay before consuming electricity. and eventually the system would eliminate the need for meter readers, it was said.

Indeed, their installation appeared to show promise, with unpaid bills dropping from Sh10 billion in 2010 to Sh8 billion in 2012.

Motivated by the back-to-back three-year drop in unpaid bills, the company, at the release of its financial results in June 2012, said it would completely phase out post-paid meters by this year.

“The company aims to install 500,000 meters by 2013 and to complete the programme for existing customers by 2015,” it said in its 2012 annual financial report.

By then it had installed 164,117 pre-pay meters, representing 8 per cent of its 2.03 million customers.

It told its shareholders that it would cost Sh13 billion to move all consumers to the pre-paid system by this year.

Though expensive, said the company’s then CEO, Mr Joseph Njoroge, the move was the best shot the company had in minimising unpaid bills.

But last Friday, the firm made an about-face on the pre-paid metering system , coming up with new measures to reduce its now ballooning unpaid bills.

In its new plan, pre-paid meters would be relegated to rural areas, with the expected introduction of smart meters to curb electricity fraud and soaring meter reading costs — the very reasons prepaid meters were introduced.

“On a single street, it costs Sh2,000 to send a meter reader on a motorcycle per day,” the company’s managing director, Mr Ben Chumo, told the Sunday Nation.

“Smart meters will be linked to a central server and will always be communicating directly to us as the customer consumes electricity. So we will have accurate meter readings for every consumer at all times, eliminating the need to send meter readers,” he said.

Mr Chumo said the company had no problem with revenue collection; its main challenge is meter reading. For this reason, 500 college students would be hired as interns to work part-time as meter readers during school holidays to supplement the 722 staff hired by the company for this purpose.

According to the company’s customer billing sheet seen by the Sunday Nation for March, the number of customers using prepaid meters had risen to 925,133 by last month from 164,117 in 2012.

The amount of unpaid bills had also risen from Sh8 billion in 2012, to Sh9 billion in 2013. When announcing its financial results in June last year, the country’s only electricity distributor said it was owed Sh14 billion in unpaid bills.

“We are not losing. Debt can accumulate so we are not insinuating that there is something wrong between us and our customers,” said the firm’s CEO. “Our tariffs are regulated so if there are any efficiencies, they must be dealt with internally.”

But scrutiny of the company’s debt collection sheet for March reveals glaring inefficiencies in the prepaid meter system — which the company is thought to be silently dumping despite the massive financial investment.

Of its 3.17 million customers, 2.9 million are domestic consumers (91 per cent of total consumers). Of these, 1.6 million are on the postpaid metering system while 925,000 are on the pre-paid metering system.

In March, the company made Sh2.8 billion from post-paid customers, who cumulatively consumed 160,558 GigaWatt hours (GWhrs) of electricity. From prepaid customers — who cumulatively consumed 40,047 GWhrs — it made Sh0.7 billion.

Using March figures, this would mean one post-paid domestic customer consumed 12 GWhrs of electricity and on average paid Sh1,432. And each prepaid customer consumed an average 23 GWhrs and paid roughly Sh756 to the power company.

RAISED QUESTIONS

This raises questions of how prepaid customers, who consumed almost twice as much electricity per customer, ended up paying almost half what the postpaid customers paid on average to Kenya Power.

Figures from the company’s March debt collection sheet show a number of its customers on the pre-pay system could be tampering with meters, leading to these discrepancies.

“We do not want to go out there and say our customers are tampering with meters because we respect them,” said Mr Chumo.

“We have certain challenges and we are old enough to accept when we have them.”

Signs that customers were losing faith in the prepaid metering system were first noticed in January last year when Mr Chumo, who had just been appointed, announced they were discontinuing the system in urban areas.

Traditionally, the company releases its financial results in June. With slightly over a month remaining, it remains to be seen whether the new initiatives will help it lower its huge unpaid bills backlog on time.