Smart metering and electricity access in India
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 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 in a high-theft environment?
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 will conduct a large-scale neighbourhood level randomised control trial in Bihar, India, working jointly with the two state-owed utilities responsible for all power distribution in the area – the North Bihar Power Distribution Company Limited and South Bihar Power Distribution Company Limited.
The partner companies have requested that the team focus on high-loss areas, the towns of Bettiah (North Bihar) and Ara (South Bihar), and their rural surroundings. The towns have staggering aggregate technical and commercial losses of 50 and 56 per cent respectively (as of January 2018).
The sample comprises 350 urban and 250 rural meter reading units (MRUs), from which 120,000 consumers will be assigned to a treatment condition. MRUs are roughly the size of a neighbourhood or village, where meter readers currently walk around to record consumption values for each billing cycle. The study will apply one main treatment – the mandatory installation of smart meters. It will also apply two sub-treatment arms: consumers will receive smart metering under either post-payment or pre-payment regimes. An additional cross-cutting treatment, which leverages the team’s existing research in Bihar, will provide monetary incentives to the agents responsible for bill collection in order to lower the returns of collusive agreements.
The project will aim 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 advance the theoretical understanding and provide evidence on the effectiveness of technological innovations in high-theft settings, the knowledge generated will be of immediate policy relevance to utilities in all developing countries that experience problems with high losses and theft.
Bihar, India – districts of Bhojpur and West Champaran
Bihar State Power Holding Company Limited (BSPHCL)
North Bihar Power Distribution Company Limited
South Bihar Power Distribution Company Limited
London School of Economics and Political Science