REVENUE PROTECTION IN THE UK

Alan Dick

UK Revenue Protection Association

INDUSTRY ‘DE-REGULATION’

DISTRIBUTIONGENERATION TRANSMISSION CustomerSUPPLY

Old World

New World

Central Electricity Generating Board Area Electricity Boards (14)

Generators( 30+)

NGC(1)

Distributors(7)

Suppliers(22)

In Competitionfor contracts withsuppliers

In Competitioncountrywide

Regulated –whole country

Regulated –Licensed areas

                                                                                                                                                           

                             

                

                                                                                                                                             

             

           

 

               

DISTRIBUTORS

WHAT HAS THIS MEANT? Upside

• Prices Down (until recently)

• Choice

• More customer focus

WHAT HAS THIS MEANT?Downside

• Many Parties– Customers confused– Opportunities for things to go wrong– Opportunities to manipulate

• New incentives– Focus on own interests (‘mind your own

business’)– Need for ‘stick or carrot’

CONTRACTS – ‘Supplier Hub’

Generators NGC

CustomerSupplier

Distributor

RP provider

MeterOperator

DataCollector

DataAggregator

SUPPLIER’S AGENTS

SUPPLY CHAIN

SupplyPortfolio

DUoS

TUoS

SupplyContract

ConnectionAgreement

METERING• ‘Holds together’ competitive supply

– All Generators half-hourly metered– All large suppliers half-hourly metered (90,000)– Domestic/small commercial ‘profiled’ (24 million)

• Competing Meter Services Providers– Supply , install, maintain meters

• Meters themselves– Mostly indoors– New meters electronic (including domestic)– Surface mount

MY METER !

WHAT HAS THIS MEANT FOR REVENUE PROTECTION?

• New thinking

TRADITIONAL RP• Obvious benefit to ‘integrated’ business• Money recovered > cost of operation• Success measured by revenue recovered

(not just identified)• Deterrent value in detecting• May cover not just theft

– Technical meter errors– Fraud

WHO OWNS STOLEN ELECTRICITY?

ENERGY COSTS + DISTRIBUTION COSTS + SUPPLY COSTS + MARGIN

Paid by Supplierto Generators forbulk energy taken

To cover billing,providing meter,customer service,etc

Paid by Supplierto Distributors for using his network to transport it

Supplier’s Profitto keep himin business

WHO WINS - WHO LOSES?(Market impact)

• Whilst theft undetected– Supplier loses ‘margin’

on that supply contract

– Supplier and other Suppliers pay for units stolen according to customer base

– Distributor loses Use of System income

• When theft identified – Supplier faces

‘unexpected’ unit and Use of System costs

– Other Suppliers recompensed for over payment

– Distributor receives ‘unexpected’ Use of System payment

NEW WORLD (UK Style)

• Benefit (or not) depends on party

• Money recovered goes back to repay other parties

• Costs recovered may not meet total costs

• Lessened deterrence value

• Messy to go into areas ‘not your business’

BASIC PRINCIPLES 1998• RP as an agency to all suppliers• Provided by the host PES (= Supplier and

Distributor at that time) as an unregulated franchise in that PES area

• Code of Practice to set services, service standards and information flows

• Funded by Use of System (basics) and transactional charges

• Obligations in Licences

WHAT WENT WRONG?

• Supplier disincentives too strong• Licence Conditions rewrite (on separation of PES

into Supplier and Distributor) did not support 1998 position

• Trading practices inadequate to support Settlement adjustments

• Lack of Regulatory direction

PRESENT POSITION

• Most Distributors still providing RP services

• One does not and the Supplier provides own RPS

• Others might pull out – ‘waiting to see what happens’

• One independent RP Service provider operating for 2 Distributor areas

CURRENT REGULATORY REVIEW 1 – Emerging principles

• Suppliers to be free to choose who carries out their RP obligations– Use Distributor’s RP Service– Use independent RP Service Provider– Make own arrangements ‘in-house’

• Distributors may continue to offer RP Service but no obligation to do so

• Distributors to be responsible for theft of electricity ‘in conveyance’

• RP Code of Practice to continue to set best practices and consistent standards

CURRENT REGULATORY REVIEW 2 – Areas of work

• RP Code

• Incentives

• Defining areas of responsibility– Supplier and Distributor

• Data exchange between Suppliers

• Settlement processes

LESSONS?If De-regulation looms for you

• Be aware– Know what’s going on– Work out implications– Watch out for unexpected changes

• Be proactive– Don’t wait– Offer solutions– Use associations

• Keep being aware– It ain’t over ‘til the fat lady sings