The effect of smart metering on revenue collection, electricity access and supply

Background, challenges and context

Utilities in many developing countries are trapped in a cycle of low payment leading to restricted and low-quality supply. Utilities’ lost revenue causes them to under invest in distribution networks, leading to fewer new connections and rationing, voltage fluctuations, and unreliable service for existing customers. Poor service, in turn, causes consumers to feel justified in making incomplete payments.

Advanced metering infrastructure (AMI) smart meters, which enable two-way communications between the meter and a central server, may be able to improve cost recovery and reliability.

AMI smart meters provide information about where and when outages occur, enabling distribution companies to fix problems quickly. As the meter is connected to the mobile phone network, the utility can directly observe consumption in close to real time.

Smart meters can also aid in the detection of theft by triangulating the location where losses are occurring at a much more detailed geographic level than is otherwise possible. Large, volatile, or informal loads can be identified and either cut off or formalised.

Because AMI smart meters offer two-way communication, it is possible to remotely disconnect non-paying consumers or transfer them to pre-payment without the intervention of revenue collection agents – some of whom have been observed to collude with utility customers at the expense of power suppliers.

Smart metering also encourages accurate metering and billing, improving utility accounting and enabling consumers that are being metered to watch their own consumption more carefully.

However, smart meters have a capital cost, and it is not yet clear whether they earn a return in terms of energy cost recovery or greater household connections. In addition, there are no credible evaluations on the crucial point – can this technological intervention change norms, incentives, and payment, and thereby improve reliability and access?

Research overview and objectives

This project will evaluate the ability of smart metering with prepayment to break the cycle of low payment leading to restricted and low-quality supply. It aims to answer whether smart metering can improve cost recovery, and thereby energy reliability and access.

The team plans to conduct a large-scale neighbourhood-level randomised control trial in Haryana, India, where a smart meter rollout is already being implemented. Over 60,000 smart meters have been installed in the towns of Karnal and Gurgaon. This provides the perfect setting to conduct the study, as it removes the highly time-consuming process involved in physical installation.

Currently, the meters are functioning as traditional electromagnetic meters with ‘smart’ features such as remote disconnection and real-time data transfer. Pre-paid billing is not yet operational. Activating the smart features is a software and policy decision. The government of Haryana is keen on an evaluation of smart meters, and the project team is working with them to define a project plan using the existing hardware.

The team aims to randomise the initiation of smart features within the existing sample of installed hardware in order to answer three research questions:

• Does smart metering with pre-paid meters improve revenue collection and reduce losses?

• What is the effect of change in consumer payment patterns and power theft on reliability?

• Does the technological change, specifically in rural areas, have an impact on grid connectivity?

The study will measure outcomes related to revenue collection; energy injection and consumption; new connections; usage of power and service quality; energy access; and theft.

Helping to provide evidence on the effectiveness of technological innovations, the knowledge generated will be of immediate policy relevance to utilities in all developing countries that experience problems with high losses and theft.

Location

Haryana, India

Partners

• Department of Energy, Government of Haryana, India

• University of Chicago

• London School of Economics and Political Science

• Yale University