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Organised by Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie (Development Engineer of Teqnovo Prepayment Water Metering System

Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

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Page 1: Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

Organised by

Prepayment Water Meter as a

Revenue Enhancement Tool

Author & Presenter: Francois Olivier Pr Eng

Assisted by: Dr Eugene Fourie

(Development Engineer of Teqnovo Prepayment

Water Metering System

Page 2: Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

Presentation Content

1. Define the Problem

2. Quantify the Problem

3. The Prepayment Water System

4. Case Study

5. Project Feasibility

Page 3: Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

� In 2003 the country’s annual water demand for urban usewas estimated at approximately 2900 million cubic metres per annum

� This represents approximately 23% of the country’s total water requirement

� It is further estimated that the current water losses is approximately 29% of the above mentioned usage, which equates to approximately 840 million m³/annum

� Multiply by a unit rate of R2.50/kl gives an amount of approximately R2.1 billion/annum currently been wasted

� The yield from the Lesotho Highlands Water Project is approximately 940 million m³/annum

Current Water Losses in South Africa

Page 4: Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

Increase in Non-Revenue Water (NRW)

TREND IN BULK WATER PURCHASES / SALES

14,921,906

16,152,703

18,100,000

20,217,195

22,039,913

24,078,849

13,942,343

16,857,882

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

22,000,000

24,000,000

26,000,000

28,000,000

Year

Bu

lk W

ate

r P

urc

ha

se

s/S

ale

s

(k

l/a

nn

um

)

Total Purchases 18,100,000 20,217,195 22,039,913 24,078,849

Total Sales 13,942,343 14,921,906 16,152,703 16,857,882

2000/2001 2001/2002 2002/2003 2003/2004

30%

23%

7,220,967 kl

4,157,657 klR 9,457,173

R 19,734,263

Page 5: Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

Outstanding Municipal Debt

R 7.3R 9.3

R 11.8R 15.0

R 19.1

R 24.3

R 30.9

R 39.3

R 50.0y = 5.7445e0.2404x

R 0.0

R 10.0

R 20.0

R 30.0

R 40.0

R 50.0

R 60.0

Financial Year (Ending June)

Ac

cu

mu

late

d D

eb

t (R

bn

)

Municipal Dept R 7.3 R 9.3 R 11.8 R 15.0 R 19.1 R 24.3 R 30.9 R 39.3 R 50.0

Increase per annum 0 R 2.0 R 2.5 R 3.2 R 4.1 R 5.2 R 6.6 R 8.4 R 10.7

1997 1998 1999 2000 2001 2002 2003 2004 2005

Page 6: Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

IWA Standard Water Balance

Financial Year: June 2005 - July 2006

System Input Billed Authorised Recoverred

Volume Consumption Revenue(kl) 52.1%

12,634,007 R 80,292,609 R 80,292,609(kl) 52.1%

16,566,253

68.4% Unrecoverred

RevenueR 105,283,121 (kl) R 24,990,512

R 6.3553 3,932,24616.2%

(kl)

24,229,135 NRW Expected Losses100.0% (kl)

3,634,370 R 0R 67,098,114 15.0% 47.9%

R 2.7693 (kl) R 41,925,166

7,662,882 Apparent Losses31.6% (kl)

1,611,405 R 10,240,923R 16,934,654 6.7%

Real Losses(kl)

2,417,107 R 6,693,73210.0%

Prepayment System Objective

Page 7: Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

Pre-payment water system

Meter Master Station (MMS)

Hand Held Vending Unit

(HHVU)

Prepayment Meter

Dallas iButton

Transfer of Credit

Transfer of Information

Page 8: Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

Control CenterModem

BLOCK B

Collector Station

BLOCK A

Collector Station

RF CELL

RF CELL

Two way RF

Communication

between water

meter and

collector station

Two way

Communication

between collector

stations and MMS Meter Master

Station (MMS)ZONE 1 ZONE 2

Pre-payment water system

Page 9: Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

The project consisted of three components:

1. Water Distribution Management (WDM)

2. Customer Demand Management: (CDM)

a) Unmetered connections

b) Illegal connections

c) Faulty water meters

d) Internal plumbing leaks

3. Repair, Operations and Maintenance Programme (ROMP)

Installation of pre-payment

water meters

Leak repair on private properties

Pilot Project

Page 10: Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

Pilot Project Area

116

165

Page 11: Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

Non-payment position in Pilot Area

2005/2006 Financial Year:

SERVICE DEBITS

RAISED

PAYMENTS

RECEIVED

AMOUNT

OUTSTANDING

PERCENTAGE

PAYMENT

IN0001 2,826,758.64R 46,157.12R 2,780,601.52R 1.6%

WA 2,012,618.93R 203,675.41R 1,808,943.52R 10.1%

BR 1,667,285.54R 320,549.45R 1,346,736.09R 19.2%

EL 1,270,681.55R 217,246.58R 1,053,434.97R 17.1%

VA 973,493.16R 275,473.41R 698,019.75R 28.3%

SE 584,041.47R 144,000.24R 440,041.23R 24.7%

BE 471,910.36R 75,311.49R 396,598.87R 16.0%

SURECO 371,455.00R 25,584.50R 345,870.50R 6.9%

BS 192,659.19R 90,103.84R 102,555.35R 46.8%

SUPREP 11,823.74R 9,771.47R 2,052.27R 82.6%

Grand Total 10,384,795.58R 1,792,905.13R 8,591,890.45R 17.3%

Page 12: Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

Pre-Log of the Pilot Site

PILOT ZONE

("Before" Log : 14 January 2005 - 21 January 2005)

0

5

10

15

20

25

30

35

40

45

50

15/1

12:

00 A

M

16/1

12:

00 A

M

17/1

12:

00 A

M

19/1

12:

00 A

M

20/1

12:

00 A

M

21/1

12:

00 A

M

Date

Flo

w R

ate

(m

³/h

)

Max=1060

kl/day

Avg=665

kl/day

Min=401

kl/day

Demand = 264 kl/day

Excess MNF = 322 kl/day

Exp MNF = 78 kl/day

Page 13: Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

Pre-Payment Financial Model

Units BeforeExpected

MNFExcess MNF

Prepayment

Water Sales

kl/day 665 78 322 264

677

l/hh/day 982 116 476 390

kl/hh/month 29.9 3.5 14.5 11.9

kl/hh/month 0.0 6.0

kl/hh/month 14.5 5.9

R/kl R 2.7181 R 5.72

R/hh/month R 39.34 R 33.50

R/month R 26,632 R 22,682

R/annum R 319,581 R 272,187

TOTAL R 591,768

Average Payment (Saving) /

household / monthAverage Payment (Saving) /

monthAverage Payment (Saving) /

annum

Demand per household / month

Free Basic Water

Quantity water paid for

Unit Rate

PILOT ZONE

Average Demand

No of Households

Demand per household / day

Project Cost:

677 meters @

R1500 =

R1,015,500Payback periodPayback period

= 21 months= 21 months

Page 14: Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

PILOT ZONE

("After" Log : 25 October 2006 - 31 October 2006)

0

5

10

15

20

25

30

35

40

45

50

25/1

0 12:

00 A

M

26/1

0 12:

00 A

M

27/1

0 12

:00

AM

28/1

0 12

:00

AM

29/1

0 12

:00

AM

30/1

0 12:

00 A

M

31/1

0 12

:00

AM

Date

Flo

w R

ate

(m

³/h

)

Max=868

kl/day

Avg=349

kl/day

Min=112

kl/day

After-Log of the Pilot Site

Demand = 237 kl/day

Min = 112 kl/day

Page 15: Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

After Installation

Units Before Current "Savings" Water Sales

kl/day 665 349 316 250

677

l/hh/day 982 516 466 369

kl/hh/month 29.9 15.7 14.2 11.2

kl/hh/month 0.0 6.0

kl/hh/month 14.2 5.2

R/kl R 2.7181 R 5.70

R/hh/month R 38.54 R 33.96

R/month R 26,089 R 22,993

R/annum R 313,065 R 275,914

TOTAL R 588,979

Average Payment (Saving) / monthAverage Payment (Saving) / annum

Free Basic Water

Quantity water paid for

Unit Rate (Excl VAT)

Average Payment (Saving) / household / month

Average Demand

No of Households

Demand per household / day

Demand per household / month

PILOT ZONE

Page 16: Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

Pilot Project Area

Page 17: Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

1. The Municipality will repay the funds plus finance cost (prime interest plus 1% at starting date of each sub-project) supplied by Rand Water through a percentage of the value of savings effected by the project

� Year 1 80%

� Year 2 70%

� Year 3 60%

� Year 4 and beyond 50%

Agreement with Rand Water

Page 18: Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

2. Payment will be in terms of a levy by Rand Water on bulk water sales

3. The value of savings is to be determined by means of ring fencing the projects and comparing the effect of the project on water usage

4. Contribution of the Parties to the repayment of capital and financing costs is to be agreed on at the time of approval and be captured in an Annual Implementation Programme

Agreement with Rand Water

Page 19: Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

WATER SUPPLY SUB-

ZONE

SAVING ON

EXCESS MNF

PREPAYMENT

WATER

SALES

TOTAL

("Value of

Saving")

SUBZONE Z35/1 327,046R 201,595R 528,641R

SUBZONE Z35/2 335,527R 241,557R 577,084R

SUBZONE Z35/3 103,122R 577,084R 680,206R

SUBZONE Z35/4 313,065R 275,914R 588,979R

SUBTOTAL 1,078,760R 1,296,151R 2,374,911R

NON-PAYMENT 1,808,944R

GRANT TOTAL 4,183,855R

“Value of Saving”

Page 20: Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

“Payback Schedule”

2006/2007 2007/2008 2008/2009 TOTAL

4,183,855R 4,183,855R 4,183,855R 12,551,564R

80% 70% 60%

3,347,084R 2,928,698R 2,510,313R 8,786,095R

14.5% 423,866R 370,883R 317,900R 1,112,650R

2,923,217R 2,557,815R 2,192,413R 7,673,445R

LESS: Interest charges

Project funding available

PAYBACK SCHEDULE

Non-payment amount per

annum

Payback Percentages

"Value of Savings" to be

repaid

PROJECT COST

Number

of

Connections

Estimated

Project Cost

Repayment

Period

(months)

2666 3,999,000R 17

Page 21: Prepayment as Revenue Enhancement Tool - ESI-Africa.com...Prepayment Water Meter as a Revenue Enhancement Tool Author & Presenter: Francois Olivier Pr Eng Assisted by: Dr Eugene Fourie

Key Success Factors for Prepayment Water Meters

� The process must be a Holistic Process

� Financial

� Technical

� Institutional

� Socio-Economic

� Communication/Community Liaison

� You cannot use a Technical Instrument to solve a Social Problem

� If the Management Component is lacking the process is doomed to fail