Prepaid Services is the answer to Utilities’ crippling debt

 In Blog posts

Authors: Philip Belamant, MD of ZAZOO, and David Cooke, Head of Prepaid Business Unit.

With South African municipalities owing utilities providers in excess of R96 billion, it is clear that traditional ways of collecting money due for utilities services such as water, electricity and gas are no longer working. In fact, this level of debt is crippling the utilities, with illegal connections compounding the problem, as seen by recent power cuts due to system overload in Soweto.

It’s time for utilities and municipalities to seek and implement more effective methods of revenue collection, and the model of installing smart meters that compel users to pay in advance for the utilities they use is one of the most compelling.

Government has realized this, and the Department of Cooperative Governance is currently investigating the implications of installing smart water and power meters in 14.5 million homes across the country, to help municipalities resolve their revenue collection challenges. The City of Johannesburg alone has determined to install 150 000 smart meters by the end of 2015, to help reduce the impacts of load shedding.

Smart metering complemented with a pre-paid voucher system offers myriad benefits to users and to the utilities.

Users pay for their utilities in advance of using them. This means that utilities providers and municipalities are no longer burdened with the onerous and expensive task of debt collection. An electronic end-to-end system will also provide much needed transparency for the utilities, ensuring a dramatic reduction in “blind vending”, which can deliver major benefit to both the utility and the customer.

Furthermore, such a system can also reduce the ‘often-not-mentioned’ fraud, which can exist between the customer and the utility. Utilities themselves will thus no longer be expected to produce services with money that they don’t have, and trust between the utilities and municipalities can be rebuilt.

Users are able to control their spend on utility services, budgeting effectively each month by purchasing pre-paid vouchers. The awareness of buying these services in advance is also likely to encourage users to curb their consumption of utilities, possibly leading to reduced demand on the already over-stretched grid.

Pre-paid vouchers can be sold by registered vendors in locations across the country, and with technology available to enable this transaction via mobile phone, users are able to access prepaid vouchers wherever they are. This also creates employment opportunities for entrepreneurs who want to build a new business.

While startling in its simplicity, such a system should comply with all the required financial and technology security standards in the marketplace, including those described by the Standard Transfers Specification (STS) Association. This is the only globally accepted open standard for prepayment systems, and ensures inter-operability between system components of prepayment systems.

It should include fully managed token distribution across multiple channels, management of meter keys with remote key loading, and high level security with identity-based access and password control, as well as role based authorization to ensure system integrity.

Detailed transaction logging and comprehensive data reporting would give utilities and municipalities insights into trends and performance, equipping them to make the best business decisions going forward.

Prepaid and smart meter systems have been installed in many communities worldwide, in countries like Nigeria, the UK, Australia and Latin America. A research paper produced by the Institute for Science, Innovation and Society at the University of Oxford studied the installation of prepaid and smart meter systems in Mozambique. The researcher, Idalina Baptista, found that urban dwellers in Maputo welcomed prepayment, and felt empowered by it, with one interviewee saying that “It’s necessary to make things happen, instead of having things happen to you.”

Watch David Cooke discuss ZAZOO’s new Utility Vending System at African Utility Week:

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