Smart grids require smarter, more sophisticated billing systems. Many power utility companies struggle with an antiquated metering estate that makes it hard to introduce new kinds of dynamic pricing and realtime charging. To find out more about these issues, and how a centralised billing system can help to address them, Principal Analyst at Machina Research, Jeremy Green spoke to Wolfgang Kroh (pictured), CEO of Orga Systems, a software vendor bringing its expertise in telecoms convergent billing to the utility domain.
Jeremy Green: What are the main drivers for utility companies to move towards prepayment?
Wolfgang Kroh: The utility industry is on the verge of a technological change with new technologies, new domains and new business models introduced around smart metering and smart grid roll-outs. In addition regulatory, environmental and commercial factors have created a significant shift in focus in a once monopolistic utilities industry.
Utility companies need to transform their current technology-driven organisation into a customer-centric business that is able to meet consumers’ expectations. They need to find new and intelligent ways of managing their energy supply and monetise their assets. Finding the right business cases is key to utility companies and smart metering and prepaid billing as well as new ustomer interaction capabilities are essential.
Offering new services such as prepaid, cost control and budgeting to their customers and bringing a more real-time customer experience into play are opportunities to unlock new streams of revenue for utilities. With the roll-out of smart meters, prepayment should become an ingredient of the back-end system for any utility.
What are the main challenges in implementing prepayment in a utility setting?
WK: Upgrading or replacing existing customer information systems are long-term investments and business-critical projects incorporating technological and financial risks. Industries such as telecommunication have proven successfully that a ‘best of breed’ strategy and stepwise approach will limit the risks of such a transformation.
Implementing an adjunct smart rating and flexible pricing engine, closely integrated with customer communication channels, helps to boost the business agility without renewing the whole billing and CIS landscape. There is no need to decide on hardware technology today that will sit on the customer side for decades. Managing the rating and pricing centrally means keeping one ystem up to date instead of thousands or millions of meters installed onsite and being delivered by various vendors.
One of the major challenges utilities are facing when introducing prepayment is a lack of infrastructure for vending and distribution of electricity. Sometimes service bureaux and offices are available, but they barely fulfill the expectations of customers for opening hours or capabilities for convenient balance reloads.
To ensure a positive customer experience, the reload of the account has to be as simple as possible. Full support of vending via several channels such as online portals, smartphone apps as well as streetseller and kiosk sales models, is a must for closing the loop of billing, engagement and the ability to interact with customers successfully.
How does the introduction of a centralised prepayment billing system benefit the utility in terms of cost reduction?
WK: The utility industry is traditionally a hardware-driven business characterised by long investment cycles for generation sites and network infrastructure. Well-proven technology decisions have to limit the risk that comes with huge investments in these areas. Futureproof architectures and systems are an imperative to this.
In a centralised system design for smart metering using a thin meter infrastructure, the business model is no longer a question of hardware and meters. Launching a prepaid energy offering is simply a new type of payment model the customer can select. No need to send out workforce to change meters, no additional hardware investment – just assigning a new tariff in the billing and the customer migration is done. It becomes question of minutes to introduce new service offerings in a centralised billing infrastructure that is designed around an IT-based pricing and billing. A new level of flexibility and efficiency can be achieved when keeping tariffs, configurations and pricing centralised and close to the IT back office.
Are there other benefits for the utility company, for example in terms of relationships with customers and / or competitive advantage vs. peers?
WK: Customers expect changes to the offered products and services to be usable instantly and maybe with the option to go back after a period of trial. We were told by one of our clients, Meralco, the largest energy supplier in the Philippines, that customers want to manage things similarly across different areas of their digital life. Being able to offer this kind of customer orientation fuels acceptance of new offers and cross-promotions of add-on services!
Select the customer, change his payment settings to prepaid – ‘save and close’ – and a former postpaid customer becomes prepaid without touching the field. Next to the customer experience side of flexible tariffs, this opens up new options for utilities to introduce an enhanced revenue collection and to reduce bad debt.
With a centralised billing system all tariffs available for postpaid customers can be continued in a prepaid service. This is an additional and essential element in changing the market perception of prepaid energy.
Prepaid becomes a true payment option, with budget control for both customer and utility company instead of a penalty for bad debt customers. All this is based on a lean thin meter infrastructure that limits investment and improves the return on invest.
What are the benefits for the customer?
WK: Closing the loop to customers deliver the ground for budget control, more dynamic tariffs, and new services, bundles and promotions. Showing customers actual and timely data is a must to get connected. To create positive energy xperience consumption data and cost transparency must be linked to the customer behaviour. Being instantly informed via mobile devices, a web portal or a home display is what attracts people’s attention.
Customers need relevant and understandable information instantly delivered that gives them the opportunity to react. In order to target customers, instant information enhanced by recommendations and predictions are essential.
It is not only about informing, providing information or notifications. A two-way communication with customers is giving them the possibility to interact. It is about the possibility of opting in, choosing a tariff or refilling a prepaid account anywhere and at any time.
Can you tell us about the relationship between smart grid technology and prepayment, and about the wider social and environmental benefits that these bring?
WK: The introduction of smart metering and smart grid technology is one of the most disruptive changes to the utility industry. Utilities need to think beyond just providing energy to their customers. New technologies and infrastructures create opportunities to offer new products that change the way customers use services and interact with their utility companies. Providing tangible, visible, and direct benefits to consumers is key to exploiting new areas of business and operational efficiencies that are dependent upon customer intimacy.
All clients should have access to their usage information and benefit from the flexibility a prepayment model can provide. For example in developing countries, customers who cannot afford to pay a fixed monthly fee for energy can now have an option to purchase and use energy as no instalments have to be paid. And even if serving your clients with prepayment is restricted by law, like in Germany, utility providers are allowed to install a prepayment meter if a customer is not paying his bills and the meter has been removed more than once.
Smart metering promises to radically transform how utilities serve their customers. With smart meters available that can operate in both credit and prepayment modes, there is no more need for dedicated prepayment meters that are costly for utilities to run. Switching between payment modes can be done easily from the utility back office.
In the end it is all about talking the customers’ language and the question is how utility companies can transform their current technology-driven organisation into a customer-centric business that is able to meet customers’ expectations.