Aqualectra, formerly known as Kodela, is Curaçao’s utility responsible for the generation, transmission and distribution of water and electricity. Aqualectra has about 60,000 customers. Each year some 16,000 household and business customers are disconnected at least once, but often on numerous occasions, because of late payment of bills.
The result was that Aqualectra was faced with rising costs of collection, along with an ever-growing credit line. Disconnections also resulted in a deterioration of the relationship with a significant portion of Aqualectra’s customer base.
In 1997 the utility embarked on a strategy to provide enhanced service to their customers, while at the same time enforcing stricter credit control. Prepayment was especially attractive for water, as Aqualectra was not disconnecting delinquent customers. A delegation visited the UK and South Africa to investigate prepayment and concluded that the South African models were best suited to the Curaçao environment.
THE AQUALECTRA APPROACH
Aqualectra adopted a multi-faceted approach to pursue the prepayment concept.
- Engage Outside Experts
Various experts in the field of prepayment were approached to provide input to Aqualectra’s Prepayment Think Tank. The team produced a feasibility study that considered issues such as customer demographics, tariffs, technology, operational implications, financial and economic feasibility, marketing and PR to all stakeholders. The feasibility study was completed in 1998, and a pilot project was recommended.
- Ring-Fence the Pilot Project
Two neighbourhoods, Santa Rosa and Santa Barbara, were chosen for the pilot. These areas are densely populated, with easy-to-access Aqualectra branch offices. In addition the customer base was diverse, enabling the pilot to reach all customer categories. A prepayment team was set up to run the pilot as a separate stand-alone project from an administrative, operational and financial point of view, to facilitate supervision and measurement.
Aqualectra realised that the success of the project depended on many parties, and was determined to communicate to all stakeholders. The communication plan included an internal PR campaign, a plan to keep government and unions involved, and a PR campaign to inform and recruit prospective customers in the pilot area.
- Phased Introduction
The project was phased to limit risk. 1000 customers from each site were targeted for the pilot. A total of 2000 was small enough to manage and measure performance, and large enough to obtain insight into and experience of managing a prepayment project.
In addition to measuring the obvious aspects such as consumption, losses, operational costs and cash flow, Aqualectra also measured and analysed customer reaction to the prepayment concept and perceptions regarding the services the utility provides. The systems and data required to perform the measurement and analysis were put into place before the pilot project was implemented. Much of the data was required to populate the financial model and to check the accuracy of the assumptions made during the feasibility study.
The feasibility study resulted in the development of a number of strategic decisions that would guide the project.
- Aqualectra would need to have the expertise to operate and maintain the system on a day-to-day basis.
- Customers would have a choice to switch to prepayment, but would have to commit to prepayment for both water and electricity.
- The prepaid system should manage water and electricity from the same management system using the same database.
- STS-based keypad technology would be used for electricity meters. This meant that the Aqualectra stepped tariff must be implemented in the vending system, and credit would be transferred as kWh.
- Water meters would be two-way tokens, preferably with an STS keypad token in addition to the smart token. Transfer of credit would be in Antillean guilders.
- A small one-off incentive would be provided in the form of a free token to each customer.
- Aqualectra would operate two vending sites and outsource all other vending sites as required. A 24-hour service at some of
the outsourced vending sites was imperative.
- A customer helpdesk was to be operational for the duration of the pilot.
- Split meters were required. The metering element was to be installed on the boundary of the property, with the customer display at a convenient place within the customer’s premises.
In July 1998 a press conference was held to launch the project, which was called the Pagatinu Project. The key message was improved customer service, savings for Aqualectra and customers alike and the fact that Pagatinu used leading edge technology. Press releases became a regular part of the project communication, and all customers in the pilot area received information leaflets with their bills. A promotional video was screened in each of Aqualectra’s offices. Aqualectra also arranged a number of stakeholder meetings, and feedback from them influenced future communication strategies.
The PR and recruitment drive proved so successful that the installation teams could not keep up with the number of applications. Once the communities saw the benefits of the system first-hand, the rate of applications increased to such an extent that the recruitment drive had to be aborted and the PR campaign was given a much lower profile. The best PR was the word of mouth promotion of the system by existing Pagatinu customers.
The strategy was to establish the prepaid electricity pilot first and then to follow with prepaid water, because the prepaid water industry lags the prepaid electricity industry by a number of years in reliability and maturity.
Aqualectra would have preferred split meters with a remote interface between the metering element and the customer interface (radio, plc etc.) but the technology was not yet available. Split meters with a two-wire interface were chosen for electricity.
Aqualectra developed a specification for the water meters that included a two-way currency transfer mechanism together with the option of transferring credit via keypad. A remote communications link between the meter and customer interface was also specified. After two unsuccessful small-scale technology pilots, Aqualectra has settled on integrated meters without keypad functionality.
The vending infrastructure consisted of off-line vending stations with batched data transfer via dial-up modem.
The prime measurement tool used by Aqualectra is the customer survey, conducted face to face, over the telephone or by filling in a survey form. The helpdesk co-ordinates all PR and marketing activities, including the customer surveys. These results do not include water, which is still in a pilot stage.
- 84% of respondents rated the Pagatinu system as satisfactory to excellent.
- 95% of respondents experience no product failures.
- 94% believe they have become more energy conscious.
- 79% believe they are consuming less power, 18 % believe that consumption levels have not changed.
- 94% want to keep their prepaid meters, while 4% are undecided.
1% want to change back to conventional metering.
Aqualectra has compared consumption before and after the switch to prepayment for a large sample of the pilot, and has found that although customers believe they are using less energy, consumption levels have remained the same.
Prepaid processes for electricity have been incorporated into Aqualectra’s normal operations. Aqualectra is in the initial stages of piloting prepaid water metering products.
At the end of 2003 there were 10,000 prepaid electricity connections and seven points of sale. Four of the seven vending units are open 7 days, 24 hours a day. Currently 40 of the 50 pilot water meters have been installed.
The pilot project has not been without its problems, and Aqualectra has experienced a number of difficulties and learnt many lessons. The most pertinent of these are:
- Initial product problems are inevitable. Be prepared to manage them.
- A comprehensive marketing and PR campaign pays dividends.
- Installation costs were much higher than expected. This is mainly due to the installation of the two-wire communications cable that had to be dug into the ground.
- Initial meters, installed outside, could not withstand the harsh UV environment despite being partially protected from the
- Communication to points-of-sale via modem is not always reliable. Strict data back-up procedures must be in place.
- A significant percentage of prepaid electricity customers who have conventional water meters have neglected to pay their water bills.
- The prepaid water industry still lags the prepaid electricity industry technologically.
In the immediate future Aqualectra intends to extend the water pilot.
The financial models are currently being reworked to cater for various scenarios to establish the feasibility of extending the project further. Critical issues are the capital cost of the meters and the high installation costs. Current indications are that the project is feasible for 15,000 water and electricity customers on the island.
Remote communications for split water and electricity metering is important to Aqualectra and would make prepayment viable for a large percentage of Aqualectra’s customer base. In the long term split water and electricity meters communicating to a single customer interface would be ideal.
The full integration of water and electricity vending systems is a high priority and will enjoy attention in 2004/2005. Aqualectra is investigating the use of online vending systems to improve reliability and to provide Internet vending and non-attended vending via stand-alone terminals or bank ATMs. This fundamental change in vending would allow for conventional bill payment and receipting functionality combined with vending functionality, and the integration of the prepayment software applications with other Aqualectra software.