1. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering “Revenue Protection Services - A Business” David Bown Product Manager Revenue Services Siemens Metering UK IURPA Conference June 2002

2. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering Revenue Protection - from a department to a business The role of the Revenue Protection Service has had to adapt to survive in the ever-changing UK energy market. Transformed from being a department within a nationalised company to a successful business.

3. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering Background Eastern Electricity Largest Electricity company in England - 3.2 Million customers - Covers North London and East Anglia

4. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering Siemens Metering (Siemens UK) Siemens Metering (division of Siemens UK) Part of Siemens AG 480,000 employees world-wide

5. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering

6. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering Siemens Metering UK - Locations 2000 Employees, enabling a national, independent Energy Management Service Energy Metering & Data Management ~ Midlands Industrial & Commercial Data Management Energy Metering & Data Management ~East Anglia Cash Transaction Processing ~ Newcastle Device Manufacturing Oldham Sales & Marketing, Business Development Telford Siemens Metering World-wide Access to technology & sales channels Siemens U.K. Access to ‘the Siemens Federation’ Backed by :

7. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering Main Clients of Siemens RPS EPN Powergen TXU Energi

8. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering Evolution of Revenue Protection in the UK Late 1970’s - industry became aware of increasing losses due to meter interference -“illegal abstraction of electricity” Meter tampering teams set-up Anti - Meter tampering teams Revenue Protection Units

9. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering UK electricity market - 1993 - 2000 Ownership Changes Scottish Power Scottish Hydro Northern Electric Yorkshire Electric Norweb Manweb Midlands East Midlands Eastern Swalec London Electricity Seeboard Southern Electric SWEB REC footprint NIE Southern Electric (USA) Hanson Scottish Power North West Water (United Utilities) Welsh Water (Hyder) CSW GPU + Cinergy Cal Energy Dominion Resources Entergy AEP + CSW CSW + AEP Eastern Energy P&PL + Southern Electric (USA) PowerGen EDF Scottish and Southern (Merger) TXU Supply Distribution Metering Welsh Water (Hyder) British Energy GPU + Cinergy NPower P&PL + Southern Electric (USA) EDF TXU 24 Seven North West Water TXU S&SE Innogy Siemens Invensys Siemens WPD Innogy

10. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering Supplier Hub Principle Customers Distributor Supplier Meter Operator Data Collector/Aggregator

11. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering How the UK Electricity Market Works Revenue and costs are determined on meter readings Suppliers - Pay energy/use of system costs Industry regulated by OFGEM Energywatch - protects rights of customers Department of Trade and Industry

12. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering The Challenge for Revenue Protection

13. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering Challenge One - Business Separation RPS Needs: - -Information -Local Knowledge -Contacts -Expertise

14. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering Challenge One - Business Separation Effects of business separation on RP: - Data Collectors and meter operators report direct to suppliers Paid to read meters/complete specific jobs No incentive to report meter interference Suppliers avoid confrontation and complaints RP viewed as a cost without a tangible benefit

15. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering Challenge Two - The Settlements System Conflict between Incentive and Responsibility -Supplier has responsibility for revenue protection -Distributor loses most if theft undetected

16. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering l The Supplier pays energy costs to generating companies based on metered consumption on metered consumption l The Supplier pays distribution costs to the host Distributor based on metered consumption host Distributor based on metered consumption Supply costs are relatively fixed per customer Supply costs are relatively fixed per customer The Suppliers margin is what is left over when The Suppliers margin is what is left over when the bill is paid the bill is paid Challenge Two - The Settlements System How The UK Settlement System Works

17. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering Challenge Two - The Settlements System l The ‘customer’ still takes energy l The generator still has to be paid but the Supplier only pays on what the meter says pays on what the meter says l The energy cost shortfall is picked up by other Suppliers l The Distributor is only paid on what the meter says l The Distributor loses Use of System income What happens when a meter is prevented from recording energy consumed?

18. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering ChallengeTwo - The Settlements System The Supplier has to recompense other Suppliers who have The Supplier has to recompense other Suppliers who have picked up the lost energy costs picked up the lost energy costs l The Supplier has to pay the Distributor for the correct UoS charges charges l The Supplier has to meet these commitments regardless of whether they are able to recover their losses from the customer whether they are able to recover their losses from the customer What happens when theft is detected?

19. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering Challenge Three - Commercial Reality Change in culture Commercial Focus Relationships managed by contracts Cost cut - prices lower Consumers can change suppliers every 28 days

20. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering Consequences of change Licence Conditions - No effective auditing or measurement -Suppliers only motivated to do what is necessary to protect their licence Negative reaction by some RP staff -Believe there will only be change once losses get out of control or someone dies as a result of meter interference

21. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering The way forward for Revenue Protection Identify customers Market our service Tailor service to meet customer needs Identified distributor as main customer Helped distributor put in place a mechanism for charging suppliers Helped distributor to implement transactional charges

22. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering Reactions to RP / Distributor Approach Supplier questioned Regulator Regulator supported the principle of Supplier liability Distribution business was pleased

23. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering Contract with Distribution RPS paid for : - -Cases of confirmed meter interference dealt with -Each kWh of unrecorded electricity identified

24. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering Suppliers Problems Liable to pay regardless of whether they are able to recover their loss Loss of expertise RPS Response - Create agency concept -e.g. banking and travel agents

25. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering Case Study - Working for TXU Energi Agreed a contract to fully manage their Revenue Protection process Look after their licence obligations Protect their commercial interests Communicate directly with their customers Wrote and implemented their RP policy This agreement allows an end-to-end solution to still operate

26. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering Business Growth and Development Metering Errors House Keeping failures Pre-payment meter interrogations Vacant premises Untraded sites Revenue Protection Revenue Services Debt Recovery

27. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering Changes in Employment Culture RP Staff are: - -Incentivised -Involved in training and presentations -Connected to company e-mail in their homes -Involved in team build events

28. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering …..But not everything is perfect Not enough offenders are prosecuted There is unease about commercialising RP Our customers do not take enough interest in protecting their own interests Regulator doesn’t help in the way they treat complaints

29. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering …..But not everything is perfect We are vulnerable to: - -Changes in the settlement system -Political influence/decision makers -The UKRPA represents our interest and is listened to and respected by those in power

30. Revenue Protection Services Power Transmission and Distribution Metering 19 June 2002 Copyright by Siemens Metering “Revenue Protection Services - A Business” Questions and Answers