Revenue Protection - from a department to a business

1. “Revenue Protection Services - A Business”David BownProduct ManagerRevenue ServicesSiemens Metering UKIURPA Conference June 2002

2. Revenue Protection - from a department to a business • The role of the Revenue Protection Service has had to adapt to survive in the ever-changing UK energy market. • Transformed from being a department within a nationalised company to a successful business.

3. Background • Eastern Electricity • Largest Electricity company in England • - 3.2 Million customers • - Covers North London and East Anglia

4. Siemens Metering (Siemens UK) • Siemens Metering (division of Siemens UK) • Part of Siemens AG • 480,000 employees world-wide

6. Energy Metering & Data Management ~ Midlands Backed by : Cash Transaction Processing ~ Newcastle Siemens U.K. Access to ‘the Siemens Federation’ Siemens Metering World-wide Access to technology & sales channels Device Manufacturing Oldham Industrial & Commercial Data Management Sales & Marketing, Business Development Telford Energy Metering & Data Management ~East Anglia Siemens Metering UK - Locations 2000 Employees, enabling a national, independent Energy Management Service

7. Main Clients of Siemens RPS • EPN • Powergen • TXU Energi

8. Evolution of Revenue Protection in the UK • Late 1970’s - industry became aware of • increasing losses due to meter interference • - “illegal abstraction of electricity” • Meter tampering teams set-up • Anti - Meter tampering teams • Revenue Protection Units

9. Scottish and Southern (Merger) TXU TXU EDF EDF Scottish and Southern (Merger) UK electricity market - 1993 - 2000Ownership Changes Metering Distribution Supply REC footprint Scottish Hydro Scottish Power Norweb North West Water (United Utilities) North West Water TXU Cal Energy Northern Electric Innogy AEP + CSW Yorkshire Electric Manweb Scottish Power Midlands Innogy GPU + Cinergy NPower GPU + Cinergy East Midlands Siemens Dominion Resources PowerGen Eastern 24 Seven Eastern Energy TXU Siemens Hanson London Electricity Entergy EDF Swalec Welsh Water (Hyder) Welsh Water (Hyder) WPD S&SE British Energy Southern Electric Seeboard CSW CSW + AEP Invensys SWEB Southern Electric (USA) P&PL + Southern Electric (USA) EDF P&PL + Southern Electric (USA) NIE

10. Supplier Hub Principle • Customers • Distributor Supplier Meter Operator • Data Collector/Aggregator

11. How the UK Electricity Market Works • Revenue and costs are determined on meter • readings • Suppliers - Pay energy/use of system costs • Industry regulated by OFGEM • Energywatch - protects rights of customers • Department of Trade and Industry

12. The Challenge for Revenue Protection

13. Challenge One - Business Separation • RPS Needs: - • - Information • - Local Knowledge • - Contacts • - Expertise

14. Challenge One - Business Separation • Effects of business separation on RP: - • Data Collectors and meter operators report • direct to suppliers • Paid to read meters/complete specific jobs • No incentive to report meter interference • Suppliers avoid confrontation and complaints • RP viewed as a cost without a tangible benefit

15. Challenge Two - The Settlements System • Conflict between Incentive and Responsibility • - Supplier has responsibility for revenue protection • - Distributor loses most if theft undetected

16. Challenge Two - The Settlements System • The Supplier pays energy costs to generating companies based on metered consumption • The Supplier pays distribution costs to the host Distributor based on metered consumption • Supply costs are relatively fixed per customer The Suppliers margin is what is left over when the bill is paid How The UK Settlement System Works

17. Challenge Two - The Settlements System • The ‘customer’ still takes energy • The generator still has to be paid but the Supplier only pays on what the meter says • The energy cost shortfall is picked up by other Suppliers • The Distributor is only paid on what the meter says • The Distributor loses Use of System income What happens when a meter is prevented from recording energy consumed?

18. ChallengeTwo - The Settlements System • The Supplier has to recompense other Suppliers who have picked up the lost energy costs • The Supplier has to pay the Distributor for the correct UoS charges • The Supplier has to meet these commitments regardless of whether they are able to recover their losses from the customer What happens when theft is detected?

19. Challenge Three - Commercial Reality • Change in culture • Commercial Focus • Relationships managed by contracts • Cost cut - prices lower • Consumers can change suppliers every 28 • days

20. Consequences of change • Licence Conditions • - No effective auditing or measurement • - Suppliers only motivated to do what is • necessary to protect their licence • Negative reaction by some RP staff • - Believe there will only be change once losses get • out of control or someone dies as a result of meter • interference

21. The way forward for Revenue Protection • Identify customers • Market our service • Tailor service to meet customer needs • Identified distributor as main customer • Helped distributor put in place a mechanism • for charging suppliers • Helped distributor to implement transactional • charges

22. Reactions to RP / Distributor Approach • Supplier questioned Regulator • Regulator supported the principle of Supplier • liability • Distribution business was pleased

23. Contract with Distribution • RPS paid for : - • - Cases of confirmed meter interference dealt • with • - Each kWh of unrecorded electricity identified

24. Suppliers Problems • Liable to pay regardless of whether they are • able to recover their loss • Loss of expertise • RPS Response - • Create agency concept • - e.g. banking and travel agents

25. Case Study - Working for TXU Energi • Agreed a contract to fully manage their Revenue • Protection process • Look after their licence obligations • Protect their commercial interests • Communicate directly with their customers • Wrote and implemented their RP policy • This agreement allows an end-to-end solution to still • operate

26. Business Growth and Development • Metering Errors • House Keeping failures • Pre-payment meter interrogations • Vacant premises • Untraded sites • Revenue Protection • Revenue Services • Debt Recovery

27. Changes in Employment Culture • RP Staff are: - • - Incentivised • - Involved in training and presentations • - Connected to company e-mail in their homes • - Involved in team build events

28. …..But not everything is perfect • Not enough offenders are prosecuted • There is unease about commercialising RP • Our customers do not take enough interest in • protecting their own interests • Regulator doesn’t help in the way they treat • complaints

29. …..But not everything is perfect • We are vulnerable to: - • - Changes in the settlement system • - Political influence/decision makers • - The UKRPA represents our interest and is listened to and respected by those in power

30. “Revenue Protection Services - A Business”Questions and Answers