VIEW: Sustainable Revenue: An introduction to prepayment - Conlog

Sustainable revenue
An introduction to prepayment

Introduction
Welcome to the world of electricity prepayment. This document
provides an overview on the basic principles of prepayment, with
specific focus on the Conlog products and services.
Prepayment is not a new concept, however the popularity of
electricity prepayment has significantly increased as people
become more aware of their electricity usage and the associated
costs. Further, the global demand for prepaid cellular services, has
enabled prepayment to become an easily understood concept.
In simple terms, prepaid electricity is no different to prepaid
cellular airtime, whereby a consumer purchases their
electricity requirements up-front, prior to consumption. When they
have consumed the electricity, they simply top-up with another
purchase. If no new electricity purchase is made, the supply is
suspended.
“
The popularity of electricity prepayment
has significantly increased...
“
2

Overview of a prepayment solution
A prepayment system, or solution, comprises three mandatory components:
> Prepaid meters: the measurement and metering device
> Vending system: a system that consumers visit to purchase electricity
requirements
> Revenue management system: installed at the utility to manage the
prepayment infrastructure
There are then additional aspects, that are optional, yet highly recommended:
> Support services: comprise service level agreements, maintenance
contracts and onsite support as required
> Training: accredited training in all aspects of prepayment, to ensure
transfer to knowledge and skills to utility personnel
> Consulting and project management: effective in providing on-the-ground
expertise and guidance for the deployment of prepayment
This document will focus on providing more information on the three
mandatory components of prepayment.
The first step in the process is to install and commission the vending and
management system. The vending unit(s) should be installed in close
proximity to the customers, while the management and vending server is
installed in the utility offices.
Conlog undertakes the installation of the computer software and systems, to
ensure that all the necessary elements are incorporated, such as the tariff
rates and indexes, any arrears collection or data migration from an existing
system.
Once this is completed, meter installation can begin. Remember, consumers
can only purchase electricity once the vending system has been installed.
Consumers are registered on the management system, by assigning an
account and a meter to the individual. The meter is then installed by a qualified
electrician and a certificate of compliance/or installation is issued.
The consumer information is automatically downloaded into the vending unit,
so that purchases can be made by giving the meter serial number, or account
number.
“
Conlog undertakes the installation of the
computer software and systems...
“
3

Putting the solution together
Management System
Vending
channels
Online
20 digit
STS token
Consumer
Vending server with
security module
Cash
Using prepayment
> The consumer goes to a vending site and gives the vendor
the amount of money they want to purchase for electricity,
along with the meter serial number or meter swipe card.
> The vendor creates the transaction on the vending unit
and returns a token (often a paper receipt), comprising 20
digits, to the consumer.
> The transaction is automatically recorded in the
management system at the utility’s office.
> The consumer takes the token back to their premises, and
enters the 20-digits into the meter via the keypad.
> The consumer now has electricity. As the user consumes
electricity, the meter will deplete the credit. When it nears
the end of the credit, the meter will alert the user. If no
additional credit is purchased, the meter will suspend the
supply. The consumer will have to purchase another token
before power is automatically reconnected
4

Understanding electricity
There are three key steps to the electricity industry:
> Generation: where the electricity is made
> Transmission: transporting the electricity
> Distribution: supplying electricity to the end user
Electricity is generated at the power plant, however to solve the problem
of sending electricity over long distances a transformer is used. This
changes the electricity from low voltage to high voltage, as you can move
electricity more efficiently over long distances if it is high voltage.
The long thick transmission lines carry the high voltage electricity across
the country into substations near businesses, factories and homes. At the
substation the transformer steps-down the high voltage and changes it to
low voltage electricity.
The electricity is then sent to the end user through distribution lines, which
have another transformer on the pole top to further step-down the voltage,
before being connected to the property.
Power plant
generates electricity
Transmission lines carry
electricity long distances
Distribution line carries
electricity to house
Transformer
steps up voltage
for transmission
Substation
transformer steps
down voltage
Transformer on pole steps
down voltage before
entering house
Generation Transmission Distribution
Distributing electricity to households
Power stations supply three-phase electricity, as this is a more consistent
electrical power and can be transported effectively as they can provide three
times more electricity, without having to increase the thickness of the wires.
Three phase electricity is traditionally used for industry, offices and
factories, where they need more power than a home user. These
businesses would receive a full three-phase supply, along with one
neutral wire.
However, homes don’t need as much power and therefore only
one phase of the three-phase supply is used per household. The
three-phase cables come down the street and individual phases
are taken to supply electricity into the house, along with a neutral.
This is a
single phase
230VAC system
This is a
three phase
280VAC 4 wire system
5

Understanding amps, volts and watts
Think of electricity flowing through a wire, just like water flows through
a hosepipe.
The amps are how much electricity (or current) passes through a set
point. For example, how much water (volume) passes through the end of
the hosepipe, or any specific point along the hosepipe.
The voltage (or electromotive force) that causes the electricity to flow
through the wire, is the same as the pressure at the water tap which
causes the water to flow.
You turn on the tap and the high pressure at one end of the hose pushes
out the water to the other end, where the pressure is lower. Voltage is the
same, where electric current travels from one end of a wire to another.
Further, if you increase the pressure at the tap by opening the tap completely,
more water will flow into the hose. In the same way, if we increase
the voltage, more electricity flows in the wire. Turn the tap off, the water
flow stops. Same again with an electrical circuit, where if we remove the
voltage source, no electricity will flow in the wires.
Meanwhile the amount of water you use would be the watts (or power) in
electricity. If you increase the amps or the voltage, it will result in higher
power.
Amps, or current: the ‘flow rate’ of electricity that passes through a point
Voltage, or electromotive force: the ‘pressure’ of electricity between two
points
Amount of water at
set point = amps
Pressure
between the
two points =
voltage
Consumption of
water = watts
6

How is electricity priced?
The price of electricity is traditionally set by the relevant Government authority
or regulator. This price is then implemented by the utility for all consumers.
Conlog has no control over the price of electricity charged by any customer.
Some common terminology used when discussing the price of electricity:
> Tariff: refers to the price of electricity. See Tariff Index for more
information on this.
> Straight tariff: this is when the utility charges a fixed flat rate for
electricity, no matter the volume or time frame that electricity is purchased.
> Inclining tariff: in South Africa this is called the Incline Block Tariffs or
IBT, but all inclining tariffs operate on a similar principle, whereby a
consumer will pay slightly more for their electricity, the greater the volume
they purchase through the month. Through the month there may be a
number of blocks, for example, block one is for 3KWh, block two is 6KWh,
block three is 9KWh and so on, with each block being slightly more
expensive.
In addition, the process to move from one block to another is
automatic and depends only on the amount of electricity purchased,
not whether you purchase electricity over many transactions, or in
one large transaction – the result will be the same. At the end of the
month (or defined period), the cost will drop back down to block one
and the incrementing price will again continue through the month.
> Free basic electricity / poverty tariff: this is a free allocation of
electricity that is given by the Utility, normally each month and to a specific
value.
> Arrears collection: many Utility’s utilise arrears collection as part
of the prepayment tariff, whereby a consumer owes money to the
Utility, for example, for their previous conventional account. When the
consumer purchases an electricity token, a percentage is redeemed
against the debt i.e. a purchase of 100, may have 10% taken (10) to
pay off the debt and the consumer will receive 90 units of electricity.
> Service charges: mandatory service charges, such as refuse or rates,
can also be incorporated into the tariff. For example, a flat service charge
is levied at the first purchase each month. Should a consumer not
purchase, these levies would accumulate and be deducted at the next
purchase.
“
The price of electricity is traditionally set
by the relevant Government...
“
7

“
Meters are available in a variety of
different installation footprints...
“
Understanding the meters
Most meters are available in a variety of different installation footprints, the most
common of which are mentioned here:
> DIN rail: this is a standard type of metal rail that is widely used for mounting
circuit breakers. This is a popular footprint for prepaid meters as many meters
can be installed together in one enclosure. The term DIN derives from the
original specification published by Deutsches Institut fur Normung (DIN) in
Germany, which was then adopted worldwide.
> ANSI base: used in America and the American territories, this glass encased
meter is easily identified by its circular shape
> BS footprint: previously referred to as BS7856, or British Standard, this is
traditionally used for retrofitting an existing conventional meter, and refers to
the wiring of the terminal block as well as the three mounting screws
> Common base: this is a South African standard where the metering device
comprises a two-part housing – a base and the meter. The base is installed
in advance of the meter and when a meter needs to be installed, or removed
for any reason, it is simply clipped into the base.
In addition to the metering footprint, there are two installation types for
prepayment meters:
> Split meter: this is a term to describe where a meter is installed outside the
premises, such as on a pole or in a street meter kiosk, and a keypad is
placed in the consumer’s home. This provides additional security for a utility
as the consumer does not have access to the meter. Communication between
the meter and the keypad can occur via two core cable, or wirelessly through
radio frequency.
> Combo meter: this is a combination device, whereby the meter and keypad
are designed as one unit. The meter would be installed in the consumer’s
premises, normally next to the distribution board.
These meters are then available in single phase and three phase variants.
Split meter
Combo meter
8

Understanding the vending system
Internet Vending
Utility Office
Retailer Vending
Scratch card
Vending
Vending Server
Security Module
ATM Vending
The vending system comprises of a vending server and
vending units. The vending server is normally housed
in the utility’s IT server room, while the vending units are
installed at various points in the town or region, as this is where
consumers will go to purchase their electricity.
The vending server will have a security module attached to
the computer. The security module is a critical component of
the prepayment solution and must always be kept in a secure
area, with limited access. The vending server controls and
records all transactions from the various vending units.
The vending units can be located in a shop, a utility’s
revenue hall or even a local retailer. The store, or person,
operating the vending system is normally called a ‘vendor’.
The vending system can be one, or many, of the following
devices:
> Computer: a purpose-supplied computer with vending
software
> POS devices: point-of-sale device, similar to a credit card
machine
> Internet: enabling registered consumers to purchase
electricity via the web
> Scratch card: similar to prepaid cellular airtime, the
consumer purchases an electricity scratch card and sends
a text message to redeem the value
> Self service terminal: a free standing device that
consumers can purchase electricity from
> ATM: utilising the automated teller machines of banks,
which offer consumers the ability to purchase electricity as
quickly as drawing cash
> Third party merchants: partners who have their own
network of retailers.
The entire vending system is ‘online’. This means that when
a consumer purchases electricity from a vending unit, the
transaction occurs in real time and is recorded immediately
in the vending server.
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Understanding the
revenue management system
Utility Office
Management Server
Multiple
Management Clients
The revenue management system is the heart of a prepayment solution.
A management server is installed within the utility’s IT server room, whilst
utility employees are able to access the data via management clients – this can
either be software installed on their computers, or through a web interface.
All data regarding the prepayment project, such as the transaction history,
customer information and meter data, is recorded in real time to the
management server, as well as all the security profiles for users.
The revenue management system provides a variety of reports to enable a
utility to quickly analyse their customers, data, income etc. In addition, it is
at the management system that exception reports are generated to reveal
potential problematic customers or trends.
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Understanding the terminology
Within the prepayment industry, there are fundamental terms that are used which are relevant to all
manufacturers and sectors of the industry.
Commissioning
Conlog’s tamper meters have a special function whereby a
meter remains in a “dead” state, so that all the wiring can be
done. Once the installation is complete, the electrician
commissions the meter, by entering a code. The meter is
now active and the electricity is supplied to the premises. If
the meter is not commissioned, the consumer will not
receive any electricity.
Initial Credit
When a meter is installed into the premises, the installation
electrician needs to test and verify the installation. It is
therefore always advisable to load credit at the time of
manufacture, so that the electrician can test and issue a
certificate of compliance/or installation. The normal amount
of initial credit is 5 units, or KWh.
Key Revision Number (KRN)
The Key Revision Number is a number that will change the
entire STS encryption algorithm, which is contained within
the security module. This was designed so that should
anyone be successful in “cracking” a zone, it would simply
require a new Key Revision Number to be issued to each
meter and the breach would be rectified. However, there has
never been a security breach and therefore this has never
had to be used.
Load Limit
Although there must always be an upstream breaker for any
installation, a feature of Conlog meters is the ability to
configure the load limit at the time of manufacture. The
current at which the meter should trip is programmed in
power ratings (KW), not current ratings (Amps).
If the meter must trip at 40 Amps on a supply voltage of
230VAC, it would be programmed to trip at 9.2KW. This is
calculated by Power Rating = Supply Voltage x Trip Current
Meter Serial Number
This is a unique 11 digit number and, as governed by the STS
Association, there is no one single electricity prepayment
meter that has the same serial number. In addition, just as
in the banking industry, there is a luhn check digit contained
in the meter serial number to authenticate the serial number.
The meter serial number appears on the front of the
meter and can also be accessed by entering a short code
(also called hash command) into the meter. The meter
serial number also appears on the meter swipe card that is
shipped with every meter.
Security Module
This device is a mandatory item for any prepayment project.
Further, as it is the device that undertakes the encryption
security and is vital for vending to occur, it should be kept
under extremely secure conditions with highly
restricted access. The industry often refers to the device
as an “automated teller machine” or “money printer” and as
such, should be kept safe.
The security module will have the customer’s SGC(s) loaded
on the device, along with the STS algorithm, in order to
generate tokens from a vending server. The device is
attached to the vending server.
The housing of the module is designed that should
someone attempt to tamper or force open the device, it will
self-terminate.
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STS Association
The world’s first open source, globally accepted
standard for prepayment is STS, also known as the
Standard Transfer Specification, which is governed by the
STS Association. This standard has been adopted by the
International Electrotechnical Commission (IEC) and is
currently being integrated into other smart/AMI standards
globally.
STS is an encryption methodology to enable the secure
transfer of information from the vending system to the meter.
STS also ensures that any credit token (purchase of electricity)
is only valid for that specific meter, thus reducing fraud or theft.
The encryption security is similar to that used in the banking
infrastructure and, in over 20 years, the system has never
encountered a breach.
The benefit of ensuring a STS compliant system is that
because it is open source, a utility is not locked to one
supplier’s proprietary system. This means that the
utility can change suppliers or products, without high
expense. In addition, the industry as a general will
advance more rapidly as competition is encouraged.
Tamper
The term tamper refers to people who are trying to illegally
receive electricity without paying. This takes many forms,
however our meters have enhanced tamper functionality
which assists in addressing this problem.
Token
A token refers to the 20-digit number issued from a vending
point, that is entered into the meter to receive electricity. The
token, or voucher, may take the form of a printed receipt,
a text message on a cellphone, or a number received over
the internet. This token is generated for a specific meter
and cannot be entered into any other meter – should that
occur, the meter will reject the token and the individual will
not receive electricity.
Supply Group Code (SGC)
Often referred to as the SGC, this is a unique number
given to each customer, such as a utility, municipality, or
even a housing complex. The purpose of the SGC is to
create a zone, into which all customers’ meters belong and
the consumer can only purchase electricity from that zone.
The SGC is supplied by the STS Association and forms
part of the security encryption process. A new prepayment
customer must formally request a SGC from the STS
Association, which is then loaded into the security module,
to enable the vending of tokens. If there is no SGC, you
cannot vend tokens.
In addition, in order for any manufacturer to build meters, the
customer must give written approval for the SGC to be given to
the supplier, as the SGC forms part of the production security.
Tariff Index
The tariff rate is a financial calculation that
converts a monetary value to a unit value (KWh). This
function is done at the vending unit, as the meter does
not store the actual tariff rate, but only the tariff index.
However, a customer may have more than one
tariff rate, for example one charge for a three
phase supply and another charge for single phase
supply. These different tariff rates will be assigned a
separate Tariff Index – the three phase supply would be
assigned Tariff Index 1 and single phase the Tariff Index 2.
When the three phase meter is manufactured, it is
programmed to Tariff Index 1. The consumer then
purchases a token from the vending system, which will be on
Tariff Index 1 and enters the 20-digit token into their meter
and it is decrypted to check the Tariff Index. If for any reason
the Tariff Index is different, for example on Tariff Index 2 for
single phase meters, the token will be rejected. This avoids
fraudulent transactions, such as a consumer trying to purchase
a token on a different Tariff Index because the rate
is cheaper.
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P O Box 2332, Durban, 4000, South Africa
Tel +27 (31) 268-1111 Fax +27 (31) 268-1500
www.conlog.co.za
info@conlog.co.za