REVENUE PROTECTION IN THE UK Alan Dick UK Revenue Protection Association

INDUSTRY ‘DE-REGULATION’ DISTRIBUTIONGENERATIONTRANSMISSIONCustomerSUPPLY Old World New World Central Electricity Generating BoardArea Electricity Boards (14) Generators ( 30+) NGC (1) Distributors (7) Suppliers (22) In Competition for contracts with suppliers In Competition countrywide 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’ GeneratorsNGC CustomerSupplier Distributor RP provider Meter Operator Data Collector Data Aggregator SUPPLIER’S AGENTS SUPPLY CHAIN Supply Portfolio DUoS TUoS Supply Contract Connection Agreement

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 Supplier to Generators for bulk energy taken To cover billing, providing meter, customer service, etc Paid by Supplier to Distributors for using his network to transport it Supplier’s Profit to keep him in 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