Revenue Protection Initiatives to Reduce Losses and Improve Municipal Cash Flow

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1 Revenue Protection Initiatives to Reduce Losses and Improve Municipal Cash Flow Presented by: Rens Bindeman Technical Advisor (SARPA) SOUTHERN AFRICAN REVENUE PROTECTION ASSOCIATION

2 GOAL OF PRESENTATION Introduction to the Association - SARPA Focus on Best Practices and Challenges Proposal on Non Technical Loss reduction Call for Assistance from SALGA

3 REVENUE PROTECTION ASSOCIATIONS Ø Ø Ø IURPA - International Revenue Protection Association SARPA - Southern African Revenue Protection Association ARPA - Proposed African Revenue Protection Association SARPA was established in 1997 by Eskom, AMEU and IMFO (SALGA on Exec)

4 SHORTFALLS Smaller Munics do not have dedicated Revenue Protection trained staff Municipalities / Metros do not have Revenue Protection Operational budget Estimated R9.2 billion electricity losses for 2017/18! NOTE: Dedicated RP Sections can recover billions

5 FACTORS THAT IMPACT NON TECHNICAL LOSSES ILLEGAL CONSUMPTION Illegal Connections by Unknown Consumers FRAUDULANT ACTS Meter Tampering Unsafe Leads Data fraud Corruption ERRORS Inaccurate recording of consumption Inaccurate customer account data Metering faults Influence Factors Lack of punitive action - Bylaws Syndicate activities Indigent tariff No revenue protection section / budget Lack of specialization

6 Our Approach Strategic Objective Arrest Upward Losses Trend Reduce Losses Ensure Sustainability Audit Data Meter Installation s Execute Remedial & Recovery Actions 1 2 Focus Areas 5 Implement 3 Best Fit Technology Solutions Deploy Maintain Communicate / Educate / Behaviour Change Communications 4 6

7 IMPORTANT BEST PRACTICES Starting and Training up a RP unit Auditing of meters Remedial Actions Data Analysis Revenue Recovery Processes MD Meter Recertification processes Revenue Loss Forum

8 CHALLENGES No tamperproof meter kiosks Staff are endangered Enemy within - do it right the first time Dealing with 80/20 principle Automatic switch-off solutions needed Cultural and behavioural changes are required Political buy-in with awareness campaigns Lack of expertize to keep abreast of technology and new tamper / theft methods

9 RISKS OF OUTSOURCING SERVICES The question is should we outsource certain aspects of our revenue loss processes or not? We think the time has come to take back the controls of our revenue generation processes and rather teach and enable our own employees to perform such tasks

10 SELF FUNDING INITIATIVE Experience has shown that Utilities who initiate dedicated Revenue Protection Sections soon find that these units become self-funding and within a period of as little as 2 years can clawback significant lost revenue for the Utility. Furthermore, one should not forget that audited and reinstated installation are once again the cash register of the utility.

11 REVENUE PROTECTION UNIT Important issues are as follows:- 1. Size of the unit (1 staff per consumers) 2. Knowledge Levels of individuals (think out of box) 3. Specialized members (RR, Data, Investigations) 4. Integration with other Departments (RLF) 5. Rapid response teams ( resourced and trained) 6. Excellent liaison with Law Enforcement 7. Need for a Champion

12 FOCUS POINTS All actions to reduce losses should be Data Driven Operations Top Level Management support and involvement is also very important, as Revenue Protection Officials need all the support they can get Focus on Large Power Users first Training of staff very important

13 MEMBERSHIP TRAINING Courses was specifically designed to focus on electricity, water finance or law enforcement issues and can be presented also in workshop format v Revenue Protection Basic Course v Revenue Protection Management Course v Revenue Protection Sensitizing Course v Revenue Protection Advance Corse v Infrastructure Theft and Vandalism course SARPA members get 2 days free facilitation

14 REVENUE RECOVERY INITIATIVES Ø The SARPA Revenue Recovery Project has been relaunched to aid ailing Municipalities Ø During several successful interactions with the roleplayers and Pilot Sites it became clear that we would need the full support of the CFO s to make this work Ø During interactions with CIGFARO. Executive members indicated support for such an initiative. Ø Self Assessment Toolkit for the web is under development. and the process will be included into NRS 055 (Revenue Protection Guideline)

15 INFRASTRUCTURE CRIMES Ø National Operational Committee (NOC) chaired by the Hawks are well underway. SARPA to assisting in calling a meeting to get private companies to share intelligence. Ø Provincial Operational Committees (POC) SARPA recently kick started forums in Freestate, KZN and Western Cape. Ø Infrastructure Crime Forum (ICF) (External role players) is required to sign NFMCCC Terms of Reference SARPA included Ø Criminal Matters Amendment Act 18 of 2015 Allocation of a SAPS Crime Code. (3200)

16 NERSA LICENCE AGREEMENT PROPOSAL 6% of operational income to be used to reduce technical losses nothing for non-technical losses Municipalities must provide budget for RP activity to reduce non-technical losses Not a licence requirement and CFO s must provide budget with reduced income and cash flow SARPA recommends that a minimum of 1-2% of operational electricity income be used to fund RP operations until the National standard of 9% electricity losses is achieved

17 REMINDER - NEXT STEPS 1) Management to become knowledgeable about the non technical loss problem and start a RP Unit / Loss Reduction Forum 2) Participation of Municipal staff in SARPA meetings / training / revenue recovery sessions. 3) Take part in Infrastructure Crime Forums between LEA and Industry role players and supply statistics on losses to SAPS 4) Road show by key role players to sensitize Municipalities

18 CONCLUSION In conclusion it must be mentioned how the entire Revenue Protection concept has developed in the past 20 years and has now reached a new level of expertise, which has resulted in the need for those involved in such actions to go to the next level of specialization. This has come about due to the fast tracking of the technology development process of metering worldwide. This has triggered the Service providers to capture the market and offer all kind of packages and wonderful solutions.

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