By Eng. Benson Muriithi, Chief Manager, Distribution

Kenya Power & lighting Company Ltd,

March 2011

Challenges and opportunities in changing from

credit to prepaid meters: A case study of KPLC

The Kenya Power & LightingCo. Ltd.

Outline

� Vision, Mission , Strategic Pillars & Our Mandate

� Key Statistics

� Current KPLC Metering Situation & Challenges Posed

� Why Opt for Prepayment

� Pilot Project

� Choice of Prepayment Technology

� Major Challenges & Lessons Learnt

� Prepayment Rollout Plan

Mission : Powering people for better lives

Core values: Customer First; One Team; Passion; Integrity,

Excellence

Vision : to provide world class

power that delights our

customers

Vision, Mission

& Strategic Pillars

Vision, Mission

& Strategic Pillars

3

Note: Reserve margin is based on available plant under normal hydrology currently

no margin available due to poor hydrology and peak load management ongoing

Note: Reserve margin is based on available plant under normal hydrology currently

no margin available due to poor hydrology and peak load management ongoing

Key StatisticsKey Statistics

Our MandateOur Mandate

5

� KPLC owns and operates the electricity transmission and distribution system in Kenya.

� KPLC has more than 1.6 million customer accounts which serve about 8 million people; or a population access rate of over 22%. However, access of the population to electricity infrastructure is over 60%.

� KPLC’s core responsibilities include:

� Procurement of electricity from generators.

� Operation of the transmission system.

� Operation and expansion of the electricity distribution infrastructure.

� Marketing & retailing of electricity in Kenya.

� Generating electricity in some off grid stations.

� KPLC also buys from, and sells electricity to, Tanzania and Uganda.

� KPLC has diversified into fibre optic business.

Compounded Annual Growth Rate (CAGR) computed up to 30 June 2010.

Sustainable growth momentumSustainable growth momentum

Total Number Customer Accounts

Sales GWh

CAGR – 5.3%

6

CAGR – 16%

Type of customer TarrifNo. of customers

Percentage No. of customers

Energy Consumption (Gwh)

%age Energy Consumption

Industrial Customers

CI1, CI2, CI3, CI4, & CI5 2805 0.17% 3,346 50.0%

Small Commercial SC 215,285 13.32% 1,653 24.7%Domestic & Interruptuble supply DC, IT & SL 1,397,667 86.50% 1,693 25.3%

1,615,757 100.00% 6,692 100%TOTAL

Customer Classification

Current Situation and Challenges at

KPLC

Customers metered and billed based on a credit (postpaid)

metering system which poses some challenges.

KPLC Commercial Cycle Process:

DISPATCH BILLS

TAKE &

DOWNLOAD

METER

READINGS

RESOLUTION OF

ANOMALIES

GENERATE BILLS

CONSUME ELECTRICITY

DISCONNECT

DEFAULTERS

FINALISE

ACCOUNT

PDC’S

LAWYERS

YES

NO

PAYMENT BY

CUSTOMER

RECONNECT

CUSTOMER

BILL

PAID?

?

Minimum 28

Days

Min. 109 Days

Min. 49 Days

Challenges Cont . . .

Challenge Annual Cost Implication

1. Accurate reading of all meters every month USD 3.0Million

2. Generation and postage of bills USD 2.3Million

3. Long queues in the banking halls

4. Revenue collection level is only 98% of

previous month’s billing

5. Disconnection & reconnection activities USD 1.1Million

6. Commercial Losses estimated at 3% of the

total generation

USD 10.8Million

• Loss reduction;

• Improvement of customer service;

• Decongestion of Banking Halls;

• Overcome commercial cycle challenges;

• Enhance ease of bill payment.

• Demand side management.

Why Opt to Go the Prepayment Way?

Pilot Project Scope

The pilot phase entailed installation of 24,000 meters within Nairobi

• Customers in the project sites have an average consumption of less than 2,000 units per month.

• Most of the meter bypass cases are within this segment of customers; and the prepayment technology we are implementing is meant to address this vice, hence reduce commercial losses.

• There is also wide acceptance of mobile phone technology within this segment, especially the prepaid service. KPLC also intended to ride on this wide acceptance of prepaid services to launch its prepaid electricity service.

Reason for Selecting the Project Sites

Following a lot of research and attending

of conferences such as this one, KPLC

opted for STS Keypad Prepayment

System-technology, and Split Meters.

Choice of Prepayment Technology

Keypad

• KPLC’S employs use of online vending.

Challenges on ICT coverage across the country

.

• Initial project team position was to locate

vending in our existing pay points for the

learning purposes; and later to engage 3rd

party vendors at the time of doing the rollout

of the prepayment project.

Vending

CURRENT VENDING CHANNELS

• On line PC (POS) – In KPLC Offices and Uchumi Supermarkets

• Mobile phone money transfer -MPESA / ZAP (SEMI-AUTOMATIC)

VENDING CHANNELS EXPECTED TO BE INTRODUCED SOON

• Cell Phone Merchant (and full automation of MPESA/ZAP).

• SMS or Voucher/ Scratch Card

• Web/ internet Based

• Terminals

• Third parties

Vending Channels

• June 2009

Commencement of Prepaid installation by KPLC

staff

• December 2009

Bringing on board of Contractors to assist in

the installation effort

• January 2010

Completion of the installation process (25,000)

Milestones

Major Challenges & Lessons Learned

Challenge Mitigation1 Lack of capacity to change all the

credit meters to prepayment in the given project time.

Engagement of registered electrical contractors

2 Lack of sufficient convenient vending points

To be solved through engagement of 3rd

party vendors3 Prepaid customers find it difficult to

understand domestic tariff DC as applied to Prepaid. Many levies and monthly variable pass through costs

Request ERC to simplify the tariff by making it flat rate based. Also lobby Finance Ministry to exempt charging of VAT for first 200 units for all customers

4 Unreliable communication link to two Uchumi Super Market Vending Points.

Procurement of terrestrial communication links for the two vending points.

5 Slow pace of installation of pole prepaid meters due to rotten poles. Risk to installation staff.

Teamed with O&M department for prompt change of rotten poles; and also inclusion of pole change rate for the contractors to undertake this work for expediency.

Major Challenges & Lessons Learned

Challenge Mitigation

6 Emergency teams not familiar with prepaid metering technology.

Carryout a sensitization campaign for O&M emergency teams.

7 Delays in MPESA & ZAP Vending at the 24hrs Call Centre Vending Point due to the manual vending process

Automation of the MPESA vending is being pursued.

8 Delay in validation of prepaid meters upon installation due to the manual paper process.

Implementation of paperless system using works order management system and handheld sets.

9 O&M staff opening welded and

sealed prepaid meter boards and

leaving them open after carrying out

work.

To sensitize O&M staff on the

importance of reporting breached

meter board cases to RPU for purposes

of securing the same

1

0

Prepayment meters going on and off

in cases of under voltage that are

outside meters operation limits

Changed our meter specifications for

rollout phase to widen the voltage

operation level (min 120 volts)

• KPLC TENDER I – 180,200

• ESRP TENDER - 120,000

• KPLC TENDER II – 200,000

• Total 500,200

• Procurement of additional meters will be

done on a continuous basis until conversion is

complete.

Meters for Planned Rollout

• To install 100,000 meters by June 2011

• To install a total of 500,200 by December

2011

• All new customers to be attached through

prepaid meters.

• Adopt to new technology i.e. smart meters

Prepaid Installation Targets

Service level innovationsService level innovations

22

Easy Pay Products e.g. Payment of electricity bills at Commercial

Banks, ATMs, Supermarkets and Post Offices country wide

E-bill products i.e., Checking Bills via email and SMS

SMS alerts to customers for disconnections and scheduled

outages

Automatic Meter Reading for 4,200 large power meters

Prepayment Pilot project for 25,000 small to medium customers

Mobil phone money transfer: MPESA (Safaricom) & Zap (Zain)

Flat Rate Connection for Slum Areas

THANK YOU!