More than just software, prepaid billing remakes the business.
It revamps operations and changes the customer relationship.
There are no technical impediments that stand in the way for prepayment meters in North America. Whatever roadblocks do exist lie more with the state legislatures and with the culture of gas utilities and consumers."
Those comments come from Janet Penz, product manager (diaphragm meters) for Schlumberger Industries, speaking from her new Canadian office in Mississaugua, Ontario.
That picture tends to mesh with answers we received from other vendors and manufacturers when we asked them to comment on prepayment billing. Overall, they emphasized several points:
• Restructuring. Pay-as-you-go metering can revamp the utility's entire billing process, reducing bad debts and saving collection costs;
• Consumer Awareness. Prepaid metering turns the utility/ customer relationship on its head, offering choice and control to consumers;
• Legal Roadblocks. Laws or regulations may block some prepaid metering strategies in certain states; and
• System Integration. The next step means integrating pay-as-you-go metering with other technology applications, such as customer information systems (mainframe or client-server) or automated meter reading (AMR) equipment.
Carl J. Powell, sales manager, Siemens Measurements Ltd., speaking from his office in Oldham in the United Kingdom, sees "very few technical problems" in setting up a smart card system. "The technology is proven," says Powell. "The only problems I could see would be ones of customization of the metering product and the linking of the vending system to the main frame billing system of the utility."
Jon Thomas echoes that view. As president of CIC Systems, Inc. (Nashville), which designs and supplies PowerStat,Ô a pay-as-you-go metering system, and which claims to be the only U.S. vendor of electric utility prepayment systems, Thomas sees the problem as one of overcoming outdated laws and business cultures.
"The first hurdle to cross is to convince regulators that this is not just some onerous process imposed on poor people.
"And it's not just that people like to pay in advance. They like having the information, It allows them to budget. When you give choices and information to customers, they like it. But you'd be surprised about the number of utilities that have an impossible time believing that."
Janet Penz adds her experience at Schlumberger: "Some states prevent nonpaying customers from being turned off in the winter, reducing one of the benefits offered through prepayment meters (em minimizing bad debt.
"Gas utilities that are able to mold corporate culture, like Peoples Gas, have overcome the hurdle of relighting pilots when the valve closes. [We] look forward to implementing a large-sale prepayment system with Peoples Gas as soon as the legislative issues have been overcome."
The UK natural gas industry has been using smartcards "for a number of years now," says Powell, "with an installed base approaching one million." Smartcards are "fairly new" in the electricity sector, however. Powell cites "a supplied base of approximately 150,000."
Powell says Siemens has supplied in excess of one million units worldwide. Penz describes Schlumberger as the "world leader" in prepayment systems, with over 1.5 million prepayment meters installed in the UK alone.
Penz notes that point-of-sale terminal cards and smart cards were introduced to the U.S. public last summer with great success at the Atlanta Olympics. Powell adds that
similar, but more sophisticated "Key Pad" technology is widely used in South Africa.
"Our system [at Schlumberger] is unique," says Penz. It enables customers to buy natural gas at any outlet while providing two-way communications, such as debt recovery, standing charges, stepped tariffs, and many other features."
Powell adds: "We [Siemens] were involved with Peoples Gas initially and still keep contact. We are also working with two major gas companies in the U.S., with our Electronic Adpative 2000 domestic gas meter."
Credit or Debit?
When asked to explain what a "smart card" is, and the difference between it and a "debit card," such as a bank card that depositors use in automatic teller machines, Thomas emphasized interactivity. "A debit card will directly adjust a customer account, such as a checking account. It needs a direct and secure telecommunications link with some transaction clearing house in some other location. A smartcard is simply a card with a microprocessor chip and some memory, usually between 512 and 16,000 bytes.
"But you can do a lot with that data," says Thomas. Typically, he notes, a customer will take a smartcard to a vending site and add value to it. The customer then goes home to insert the card into the utility meter and debit value from the card itself (em not from the underlying account. To work like a true debit card, says Thomas, customers using prepay cards would need their own, high-tech, dedicated, secure telecommunications links to financial institutions (em something that is still easier to do from a remote vending site, such as a grocery store, than from the home.
Back in the UK, Powell notes that prices for cards and meters vary, depending upon quantities: "Generally in the UK the card would vary between £4-6 [$6.75 to about $10], and the meters would cost approximately three times that of a traditional credit meter. Vending (point-of-sale) units also vary in cost and to my knowledge would range between £600-1200 each [$1000 to $2000]."
Integration with AMR
Smartcards warrant attention in the way they change utility billing operations and the relationship between company and customer. CIC's Jon Thomas offers his take on the subject:
"What a pay-as-you-go system does is to change your internal systems. In fact, you eliminate the billing step entirely."
Of course, the real economies of scale come with system integration (em by linking the pay-as-you-go smartcard system with the utility's computerized customer information system, and perhaps with automated meter reading (AMR). That point raises questions: How does prepayment billing mesh with AMR? Which technology is better in cutting costs, and gathering information on customer usage profiles?
Schlumberger's Penz explains the relationship between smartcards and AMR:
"The traditional billing system requires meters to be read and a bill generated and mailed to the customer for payment. Numerous inroads have been made in AMR to make this process more efficient. The beauty of prepayment metering is that it eliminates the need for AMR for many customers, since gas consumers pay in advance. Meter reads are updated every time a customer buys the product.
At Siemens, Powell sees room for both technologies.
"My experience seems to point me to the following conclusion: Both systems should run side by side. [Some] customers prefer to pay as you go. [They] are best suited to smartcard metering. however, customers who pay by direct debit are best suited to AMR. Both systems allow the utility to understand their network usage in more detail (em to become more operationally efficient." t
Bruce Radford is editor of PUBLIC UTILITIES FORTNIGHTLY.
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