Prepayment – pioneers in the Caribbean
We interviewed Ben Statia, Director, Distribution of Integrated Utility Holdings, Curaçao’s electricity and water utility, to gain some insight into present activities and plans for the future.
MI: Kodela seems to be a highly innovative utility in the Caribbean. Could you give us some background to the utility, describing how this has come about?
BS: In September 1897 the first light was lit on the island of Curaçao. Some years later a company known as S.E.L. Maduro and Sons bought the electric company for Naf. 30 000 (US$17 000). In 1927 it was sold to Nederlands Indische Gas Maatschappij (NIGM, which after a while changed to OGEM). At that stage the company had 7000 consumers. NIGM was granted the sole concession to run the company for 50 years.
In 1975 and 1976 the government became the 100% shareholder of both KAE (the production company) and KODELA (the distribution company). In 1983 we started researching alternative energy, and in 1986 we installed our first windmill. In 1994 we started using our first windmill park of 12 windmills with a capacity of 3.3 MW.
In 1988 our government decided to integrate the distribution of water with electricity, and from then on KODELA was responsible for the distribution of both these resources.
That same year saw the management of KODELA and KAE integrated in an organisation called Integrated Utility Holding (IUH). The IUH is the sole shareholder of KODELA and KAE, and the island of Curaçao has a 100% shareholding in IUH. Management wants to increase the reliability and quality of water and electricity, achieve acceptable tariff rates and increase productivity, and plans to achieve this through a restructuring programme. The companies now have a total of Naf. 335 million (US$189.3 million) worth of assets and about 60 000 consumers.
We are aware that our external environment is changing rapidly. Although we are a monopolistic company, our clients are becoming more critical and competition is increasing worldwide. We believe as a company that we have to be a step ahead, and that implementing innovative technology is the way to go.
On the domestic side the Pagatinu project, which encompasses prepayment meters for electricity and water usage, seems to be the most important. Why was prepayment chosen? What are the benefits expected to be? And how has prepayment been accepted by users?
For years our company has been coping with the problem of recovering bad debts, but we believed that we had to look further than simply choosing an easy way to solve this problem. It was quite difficult to get information about the options available, and we ended up in Wales studying a water prepayment system. We were very impressed with what we saw, and afterwards almost bought the system they were using.
At that stage we were still focusing on the bad debtors group. It was a coincidence that we subscribed to Metering International, and the first copy of the magazine contained a lot of information on prepayment systems being implemented in South Africa. We immediately decided to attend a workshop about prepayment that was being held in September 1997. We think that much of our success with prepayment has to do with the information we received at the workshop about prepayment systems in general. After this, as a matter of fact, we also changed our focus to a much larger group – all the household consumers.
We expect prepayment to achieve a win-win situation for both the customer and the company. In the end the pilot project will have to show a financial benefit, particularly regarding the reduction of outstanding balances, and it has to be financially feasible.
The successful introduction of the prepayment concept also has a social humanitarian motive. We believe that with this system the customer will have a tool to enable him to control his usage more effectively.
And finally we want this concept to contribute to the improvement of our image.
We think our customers have successfully accepted prepayment. A survey last July showed a very positive reaction to prepayment, and 99% of our customers did not want to go back to a conventional system. Now we are in January 2000 with almost 1400 prepayment electric meters installed, and we still have 99% of the initial customers.
You anticipate some innovations being adopted shortly, such as RF communications for water meters. What innovations do you envisage, and why have you chosen these particular ones?
There were two main reasons for us to look into the option of radio frequency for prepayment. First of all we distribute water and electricity, and we inherited a historical problem when we took on the distribution of water in 1988. The connection points for the water and electricity meters were in most cases quite far apart, and the double trenchwork which would have been required made it financially less feasible to install these systems using cable.
A second problem is that customers would not necessarily want us to do double trenchwork in their gardens. The RF solution for water was chosen so extra trenching would be avoided. Before the introduction of RF meters, the equipment made use of a wired link between the meter and the remote unit in the house. The latest meters will use an RF link between the meter and the user interface. We will start with the implementation of RF prepaid water meters by July this year.
You have chosen an AMR solution for your industrial customers. Why did you choose this particular solution? What have been your experience to date?
We think that an AMR solution will contribute immensely to our commercial objectives, because it will allow us to gather valuable information promptly. Our meter accuracy has to be improved, and we have to be able to get accurate infor-mation much more frequently. We believe that by automating our metering systems further we will achieve the projected efficiency and ultimately customer satisfaction and cost savings.
In particular our industrial clients which are export oriented (which include the hotels) have been facing tremendous competition in the Caribbean. Certainly they are constantly looking at cost savings for water and electricity. As a company we are aware of this difficult situation, and we will start with the implementation of AMR solutions this year so we can offer them many more value-added services.
Kodela is busy updating its billing system. What can you tell us about this? What lessons have you learned?
This has been a tremendous experience, because the system is custom-made for our company.
The positive side of making a system by yourself is that the expert can build according to your needs. The negative side is that we are using too many resources in the building of software. It has been an interesting learning experience, but we believe that in the future we will look for standard packages.
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