By Steve Eckles and Skip Clark, El Paso Electric Company
With energy prices going up and capital markets tightening, an additional 1 percent or more of revenue from a small investment makes good business sense. By employing traditional methods along with new technology, electric utilities can reduce commercial losses while improving safety for consumers and employees alike.
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Commercial losses, also known as non-technical losses, include metering inaccuracy, non-payment, billing and rate class errors and energy theft. The two dominant components of non-technical losses are non-payment and energy theft. Non-payment refers to customers who are unable or unwilling to pay for their electricity. It can lead to significant revenue loss if the utility fails to handle nonpayment situations quickly. However, electricity theft usually impacts a utility more than non-payment problems.
Energy Theft
A wise person once said “if it has value, someone will attempt to steal it.” This is true with electricity, and the problem is hardly new. As early as 1899, the Association of Edison Illuminating Companies addressed the problem of tampering with screws that adjusted meter damping magnets.
Energy theft involves interfering with an electric revenue meter and/or associated supply equipment to avoid or reduce the true payment due for energy supplied. Energy theft is generally estimated by subtracting energy sold and calculated distribution energy loss from metered energy into the distribution system. Historic estimates from such calculations and field audits reveal energy theft typically ranges from 0.5 to 3 percent of retail revenues in developed countries and much higher in developing countries. This wide range of estimated energy theft reflects the difficult nature of quantifying such a “cloaked” activity. Nevertheless, with electricity sales in the U.S. alone about $300 billion annually, the lowest estimate shows electricity theft still costs consumers and utilities well over $1 billion each year.
Energy theft goes by several names but typically occurs in two ways-diversion and tampering. Meter diversion involves bypassing energy around the meter such as tapping into utility conductors before the revenue meter or jumpering around it as shown in the photo at right. Tampering causes the revenue meter to create false consumption information. Examples include impeding the meter from making an accurate reading, weekend meter swaps, or turning the meter upside-down (inverted) temporarily to make it run backwards as shown below.
Most utilities are conservative by nature; since energy theft is mostly “out-of-sight” it is also “out-of-mind.” Therefore, many utilities don’t have adequately staffed revenue protection/assurance or energy theft departments. Studies suggest that for every $1 invested to combat stolen energy, $4 to $6 can be recovered in savings.
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Another interesting estimate is that 80 percent of energy theft (by revenue) is committed by small-to-medium sized commercial customers while 80 percent of utility energy theft resources (money spent to stop theft) are spent on residential accounts. Whether commercial or residential theft, six steps to minimize energy theft are:
- Training and education,
- Reporting,
- Investigating,
- Prosecuting,
- Restitution, and
- Prevention.
Training and Education
For years, the vanguard in detecting possible meter tampering has been the utility meter reader’s monthly visit. Meter readers need training to quickly review each meter and socket for signs of tampering, removal and other irregularities. Likewise, some utilities spend a few hours educating police and sheriff academy cadets with a few choice videos explaining the problem and importance of reporting suspected violators. Customers can be made aware through bill stuffers, newsletters, websites, and other media advertising that energy theft is not just stealing from the utility, other customers pay for it with higher rates; it has criminal and civil consequences; hazards include fire, shock, and electrocution to themselves, the public, and utility workers; and energy theft indicators such as inverted meters, holes in the glass meter cover, magnets near the meter, jumper wires around the meter, or intercepting electricity upstream of the meter.
Reporting
Along with educating the paying public, utilities should provide a secure web portal and confidential toll-free phone number for customers (especially ex-spouses) to report suspected energy theft. Utilities must warn not to confront suspected energy thieves or take other action but report their findings in detail to the utility which will follow up with trained investigators.
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Technology can help also. Utilities using automatic meter reading or advanced metering infrastructure (AMR/AMI) systems can get unplanned outage reports or “tamper flags” from meters being systematically removed and replaced. Some AMR/AMI systems offer analytical tools and algorithms to detect possible theft from customer load data.
More and more meter data management (MDM) and other systems and services are also offering mathematical algorithms that analyze energy consumption, meter tamper and tilt flags, historical data and weather conditions to compute an energy theft score. This score is used to prioritize field investigation; hence, better allocating utility resources. More advanced analytics for commercial accounts compares peer group data patterns including water and natural gas usage, employee information, and credit rating.
The drawback of an AMI/AMR system is losing the traditional meter reader’s monthly visual inspections. Even with AMI/AMR and advanced analysis, annual visual meter inspections may be warranted.
Investigating
Besides using AMI/AMR technology, the utilities with the lowest energy theft are usually the most aggressive in quickly investigating all credible reports of suspected theft. Patience and diligence is needed in many cases to catch perpetrators in the act. The presence of utility investigators may deter meter tampering for a time. Metered energy tends to increase after an investigator’s field visit even though theft was not validated. Once theft is detected at one customer’s location, investigate other associated locations such as residential and business accounts, and past customer locations.
Prosecuting and Restitution
Investigators should organize and document evidence properly so criminal charges can be successfully brought against violators. Utilities should lobby municipalities to impose stiff penalties for energy theft. Along with criminal consequences, civil penalties or restitution should be employed such as back-billing and imposing an energy theft charge to recover some of the investigation, reconnection and prevention costs.
Prevention
Energy thieves have a propensity to re-establish their pilfering efforts even after being caught and penalized. Therefore, special meter locks can be installed to prevent meter removal for those previously caught or suspected of energy theft. Transparent socket covers deters tampering also. Establishing payment assistance or “care-share” programs designed for lower-income families can help eliminate the desire for diverting energy while reducing power cut-offs for non-payment. Some electric companies use punitive damage awards and restitution revenue to help fund these energy assistance programs.
Metering Inaccuracy and Billing Errors
Correcting billing class errors and rectifying meter inaccuracy may contribute another half percentage point in additional revenue. In addition to MDM systems checking for probable energy theft, some also scrutinize usage and flag cases where customers may be charged at the incorrect rate. Correcting these errors may also raise revenue while being fair to all customer classes.
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Utility audits show that some electromechnical meters slow down over time. Some meter types made by certain manufacturers in certain eras have consistent slow-down rates-some as much as 0.5 percent reduction per year. Meter accuracy audits have shown worthwhile benefits from finding slow meters.
Accelerating the replacement of old electromechanical meters with solid-state ones will improve meter accuracy. An added benefit is that having no moving parts, solid-state meters are more tamper resistant, and many will register energy usage appropriately even if they are turned upside-down.
As energy prices increase, the financial incentive for people to try to reduce their electric bill by improper methods also increases. Two top goals of electric utilities are providing energy cost effectively and safely, reducing meter tampering and diversion helps to accomplish both.
With the advent of solid-state metering the traditional means of tampering, as employed with mechanical meters, are waning. As the “eyes in the field” are reduced by AMR/AMI systems, utilities can expect to see an increase in diversion by bypassing the meter. Proactively analyzing meter data will help keep the problem in check.
Educating customers to the consequences of energy theft and providing the means for them to report it anonymously through toll-free telephone numbers or secure web portals is called for. Attacking commercial losses by reducing energy theft and establishing more accurate metering and billing will increase revenue and well worth the investment in new technology, public awareness, and human resources.
H. W. “Skip” Clark, has worked in for El Paso Electric Company for 32 years, 10 years as an energy diversion investigator certified by the International Utilities Revenue Protection Association. He is also a certified electricity theft instructor by the New Mexico Department of Public Safety. He holds a BA in Anthropology from Thomas A. Edison State College in Trenton, NJ and a MA in Anthropology/Sociology from University of Texas at El Paso.
Steve Eckles has been a distribution engineer for 15 years at El Paso Electric Company and is a licensed PE in New Mexico and Texas. He obtained a BSEE from San Diego State University and a MSEE from going through New Mexico State University’s Electrical Utility Management Program (EUMP). He has previously authored technical papers in electrochemistry, photovoltaics, electrical utility distribution, reliability and power quality.
