April 21, 2024

Tech firm offers African electricity distribution companies smart solutions for 100% collection efficiency

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Oredola Adeola

SAP, a market leader in enterprise application software solutions, has offered to provide electricity distribution companies in Africa smart solutions to non-payment, consumption-based fraud, illegal connections, and other factors that are costing them billions in lost revenue.

This was released in a statement by Hannes Venter, SAP Africa’s Industry Value Advisor (Utilities), and obtained by EnergyDay on Wednesday.

According to Venter, no company can survive a consistent loss in revenue. He noted that when companies fail to collect the revenue owed for services rendered, it puts pressure on their cash flow which could leave them unable to cover their operational costs, struggle to grow, and even enter into decline.

EnergyDay’s check showed that the Nigerian Electricity Regulatory Commission (NERC) in its 2021/Q4 report, revealed that the quarter had a collection efficiency of 69.34%.

Revenue collected by DisCos in 2020/Q4 rose by N16.64 billion (+8.60%) from N193.53 billion recorded in 2021/Q3 – this indicates a further reduction in collection efficiency in 2021/Q4 relative to 2021/Q3.

Total billing by DisCos to customers in 2021/Q4 increased by N30.12 billion (+11.03%) from N273.00 billion recorded in 2021/Q3.

The NERC report revealed that DisCos are unable to identify who consumes all their energy due to poor customer enumeration and flow metering. The report says that billing efficiency combines technical and commercial efficiencies.

Power utility Eskom recently revealed that more than half of the electricity purchased by South African municipalities is lost to illegal connections and non-payment. This has led to an R51-billion debt by municipalities, adding to Eskom’s significant R400-billion debt burden and hampering the utility’s plans to build additional capacity or its transition to renewable energy.

Kenya Power has investigated cases of fraud in its post-paid billing system, citing billions in lost revenue.

SAP however noted in the statement that poor utility bill collection is prevalent in the utility sector of different countries across Africa.

The company said, “ A 2017 study estimated that electricity theft and non-technical losses cost the global utility sector $ 96 billion per year. This places enormous pressure on utilities and hampers efforts to improve service delivery to customers, adopt new, more sustainable forms of energy, and scale into new markets.”

The end-to-end tech firm also confirmed that revenue assurance mitigates fraud, and reduces losses, adding that several factors contribute to lost revenue, including faulty metering, inaccurate billing, ineffective revenue collection, consumption-based fraud, leaks, and issues with incorrect customer accounts and contracts.

The statement said, “As the sector shifts to meet the utility needs of a growing population – Africa’s population is expected to nearly double to almost 2.5 billion people by 2050 – and pressure grows to move to more sustainable, less carbon-intensive forms of energy, maintaining high levels of revenue collection will be critical.

“A vital component of optimal revenue collection is the practice of revenue assurance. One global study found that it takes an organisation twelve months to detect a typical fraud case, with the average annual loss across industries amounting to $1.8 million. In fact, an estimated 5% of revenue is lost to fraud every year.

 

“In response, organisations need to leverage the power of technology to improve fraud detection, risk mitigation, and fraud prevention capabilities. Revenue assurance is a way of increasing an organisation’s income by identifying areas where revenue is lost, and minimizing such losses by fixing the cause of lost revenue,” the statement said.

SAP has therefore revealed that it is prepared to deploy a revenue assurance tool as a smart solution for electricity distribution companies as a means of detecting anomalies earlier.

This, according to the tech company, would help the utility company reduce financial loss, improve the accuracy of detection at a lower cost, and improve their ability to predict and prevent future occurrences of revenue leakage.

The firms also recommended the use of  SAP Business Integrity Screening in combination with SAP partner solutions to improve revenue assurance and plug any gaps in operations that may lead to revenue loss.

 

SAP Africa’s Industry Value Advisor  on Utilities said, “By leveraging powerful analytics and big data capabilities, revenue assurance tools help utilities identify potential cases of fraud and proactively inform technical teams to investigate.

 

“For example, if a customer’s energy consumption stays exactly the same month after month despite seasonal changes, there is a likelihood that some form of fraud is being committed.
“Energy use usually increases and decreases in different seasons, with most customers using less power in summer when it’s warm compared to winter when heaters are used and electrical hot water heaters work harder to stay warm.

 

“By tracking energy consumption patterns over long periods of time and matching that data to seasonal consumption models, utilities can leverage their revenue assurance tool to ensure they always collect the optimal revenue from every customer.

 

“By using predictive models and integrating the revenue assurance functionality to their enterprise resource planning core, utilities can develop a better understanding of known customer usage patterns. Over time, utilities can apply this knowledge to develop detection methods and strategies that can highlight unknown patterns that may indicate fraud or revenue leakage.

 

“Utility firms’ spendings are at a pivotal moment as booming population growth and rapid economic development push them into building greater capacity while also transitioning to a clean energy future. However, without optimal revenue collection, utilities will lack the financial agility to survive and thrive during this disruptive time,” the Advisor of the tech firm noted.

SAP however cautioned that utility companies can mitigate the risk of fraud with the clever application of technology and ensure they have the financial stability to take a leading role in our continent’s development and just energy transition.

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