AFRICAN UTILITY WEEK 2007 PAPER PRESENTATION BIZWICK HASSAN LIGOMBA

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1 1. TITLE : CHALLENGES ESCOM MALAWI IS FACING IN THE IMPLEMENTATION OF PREPAYMENT SYSTEM 2. Introduction Electricity Supply Corporation of Malawi Limited (ESCOM Ltd) is so far the sole power utility company in Malawi. It has a total number of just over 170,000 customers. These include domestic, general, commercial and large industrial customers. There are two types of billing systems that ESCOM Ltd uses, and these are post payment and pre payment systems. Post payment system uses a software package called Custima which was introduced in 1999, and is the major billing system in ESCOM having about 75% of its customers in all categories. While pre payment system was introduced in ESCOM in 1997 in the major cities of Blantyre and Lilongwe. Two years later it was introduced in two other urban centers of Zomba and Mzuzu. To date the areas covered with this pre payment billing system remain the same except Army Barrackses of Mangochi, Salima, Dowa and Karonga Districts. It covers 25% of the total number of ESCOM customers, and only those in domestic and commercial single phase and three phase tariffs.

2 3.0 Why pre payment system was introduced The pre payment metering system was introduced with the aim of reducing most of the problems encountered with the post payment system. It uses a software package called suprima which has a capacity of 40,000 customers only. It can be seen here that since the introduction of the pre payment billing system some 10 years ago the areas this has covered remain the same urban centers of Blantyre, Lilongwe, Zomba and Mzuzu plus the Army barrackses of Mangochi, Salima, Dowa and Karonga districts. More over, it is not all area of the urban centers mentioned above that are covered by this pre payment system. Large areas of the urban centers still remain uncovered despite a huge demand of such meters by customers in those areas. The slow rate of expansion in the areas of coverage is due to a number of challenges faced by this pre payment metering system. These challenges can be put into three categories of hardware, software and financial.

3 4.0 Challenges Below is the list of challenges being faced by the pre payment metering system in ESCOM Ltd. 4.1 Hardware and financial challenges The cost of pre payment meters. Pre payment meters cost three times more than post payment meters. Inadequate hardware for vending like PC s, genico gadgets. Unlike cellphone units where one set of numbers representing amount of units can be accepted by any cellphone, pre payment meters accept unique set of numbers for that particular meter only. As such buying of units can be a problem to customers far away from vending stations. On line system is much better than off line system, so, to maintain an on line system depends on reliable telephone network. In most parts of Malawi telephone lines are not reliable and it is difficult to maintain an online system. Shortages of staff During meter installation exercise the corporation

4 relies on hiring contractors to do the installation of prepayment meters in an area. The contractors need strict control and supervision for fear of messing up the exercise. Lack of trained technical staff to repair faulty meters. As expensive as they are, there are still no adequately trained technical staff to carry out repairs on faulty meters. 4.2 Software challenges As a result of the financial challenges plus telephone network problems ESCOM Ltd is unable to acquire enough computers and put them on line for easy account transactions. Instead there are a few computers on line at the headquarters and all regional centers while the rest are off line. Some genico gadgets were also procured and are placed in some service stations in order to sell units to customers in order to ease the problem of customers covering long distances just to buy units. The off line system of selling prepaid meter units has created its own problems for example. Different customer data is created between on line and off line computers since data dumping and merging is not done regularly

5 With genico gadgets end of shift reports can not be printed in order to find out how much a vending station has collected that particular shift The size of the soft ware package, the Suprima is limited to 40,000 customers. Now with about 25 percent of the total number of ESCOM customers being on prepaid system, it can be seen that the package is already saturated and it needs a lot of money to either upgrade it or purchase a new software package. With this package minimum charges for business tariff are absorbed in the tariff but the same is not possible with domestic tariff, as such customers on domestic tariff go without being charged minimum charges. There are meters that were fixed in customer premises without details being entered in the system, with this package customers with such meters are able to buy units with no details to say whether they are on domestic or business tariff and the system assumes a domestic tariff. The suprima package has no facility for funds transfer from one meter to another incase a cashier selling units has made a punching error, they just issue another receipt with correct meter number and indicate on the

6 original receipt as invalid. This is a very big loophole with most cashiers. When selling units using genico gadgets verification of customer data is not possible since the gadgets do not show customer name, therefore, verification of customers during selling is not possible for such vending stations. 5.0 Disadvantages of pre payment metering system It encourages customer cheating in terms of meter tampers and meter by passes since no more meter reader visits to customer premises There is some loss of information like account balances during transition from post paid to pre paid system There are always long recovery periods of post paid debts when huge amounts of arrears are involved. Some staff members connive with customers on postpaid system with huge bills that accumulate over a period of time to change from post paid to pre paid system without updating the same in the new system. Timely funds recovery is sometimes a problem with private vending stations since some vendors remit

7 funds by issuing cheques that can not be honoured by banks when they are in cash problems. Customers on pre paid feel they can just change houses without informing ESCOM. As such, when arrears are not cleared always new tenant comes forward to complain that he is being deducted arrears each time he buys units while arrears are not his, and it is always difficult to trace the previous one who left a bill behind. 6.0 Solutions Despite a number of challenges and disadvantages of the prepayment system, there are solutions to some of the problems encountered with the pre payment metering system. Some of them are: Periodical production of low consumption report of all pre paid meters to check on customers who do not buy units regularly and set inspection teams to visit those meters that appear on the report. Prepayment metering system has a facility of blocking an account that has been dormant for a period of time to stop suspicious customers from further buying of units. The problem with such facility is that the account gets blocked but if no follow up is made and the meter

8 has been by passed such customers continue using free electricity. Encourage installation of split meters in areas with high risk of meter tampers and meter by passes, but there is a problem of availability of water proof covers. Strict control of movement of meters from stores right through to installation Set a precondition of clearing all arrears before a prepayment meter is installed at a customer premises. 7.0 Conclusion There is a success story following the introduction of prepayment system in ESCOM Ltd. The advantages outway the disadvantages of the system. Some of the advantages are: Ease of revenue collection since there is no production of disconnection for non payment slips and send people out to disconnect supply from customer premises. Problems encountered during post payment billing process are overcome.

9 Surtax is worked and paid on the actual revenue collection as opposed to post payment system where surtax is calculated on billed accounts some of which are not paid for while others are billed wrongly. Tremendous reduction of customer credit in terms of debtor days Customers are able to plan and budget for electricity usage unlike the post payment system when they just get a shock of their lives at the end of a billing cycle. From the above points we can conclude that despite the many challenges of the prepayment metering system it is a much better system for Africa utilities to adopt since it has a lot more economic advantages. Further, most of the challenges can be overcome with good strategies. END OF PRESENTATION

10 ESCOM Slide 1 Prepayment system in Escom Ltd Malawi Bizwick Hassan Ligomba Electricity Supply Corporation of Malawi Ltd P.O. Box 57 Zomba Malawi Organised by

11 Slide 2 Introduction Escom Ltd is the sole power utility company in Malawi It has just over 170,000 customers It uses post payment (custima) and prepayment (suprima) systems Custima was introduced in 1999, covers all tariffs Suprima was introduced in 1997, covers 25% of domestic and commercial customers

12 Slide 3 Prepayment system challenges There is a slow expansion rate of the prepayment system due to the following challenges: Hardware Challenges Prepaid meter costs three times more Inadequate hardware for vending e.g PC s, genico gadgets Unreliable telephone network to support on line systems

13 Slide 4 System challenges Cont d Reliance on meter installation contractors Lack of trained technical staff for meter repairs

14 Slide 5 System challenges.cont d Software challenges data dumping and merging delays create customer data differences Genico gadgets do not produce end of shift reports for accountability Suprima capacity saturated, need upgrading

15 Slide 6 System challenges cont d Software challenges Inconsistency in minimum charge application Suprima system porous encourages cheating by cashiers and other technical staff Customer data verification impossible with genico gadgets

16 Slide 7 Prepayment system disadvantages Encourages customer cheating in form of meter tampers and meter by passes Loss of information during transition Long debt recovery period with huge amounts Encourages staff cheating and corruption Timely funds recovery is sometimes a problem when dealing with unfaithful vendors Loss of revenue when dealing with unfaithful customers

17 Slide 8 System successes Ease of revenue collection Post payment billing process problems are overcome Surtax is worked and paid on the actual revenue collection as opposed to post payment system Tremendous reduction of customer credit in terms of debtor days Customers are able to plan and budget for electricity usage unlike the post payment system

18 Slide 9 Solutions to system challenges Regular production of low consumption reports and set up of inspection teams Regular follow ups on accounts that are blocked in the system Encourage installation of split meters in areas with high risk of meter tampers and meter bypasses Restrict meter movement from stores right to installation

19 Slide 10 Solutions systems challenges..cont d Set a condition of clearing arrears before prepayment meter installation From the above points we can conclude that despite the many challenges of the prepayment metering system it is a much better system for Africa utilities to adopt since it has a lot more economic advantages.

20 Slide 11 End of presentation Thank you for your attention (Zikomo kwambiri)