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Vending at the heart of prepayment management

Situated at the southern-most tip of Africa, the City of Cape Town metropolitan council covers an area of 1235 km2. Cape Town is made up of seven smaller municipalities, which were merged to form one Unicity in 2000. The electricity services department provides power to 520 000 residential, commercial and industrial customers, and 73% of the residential customers (380 000) have a prepayment meter installed in their home.

Many customers chose to move to prepayment when they were offered the option, and thE City absorbed the cost of the meter and installation. Today every new domestic customer is required to have a prepayment meter installed, no matter where they live and no matter what their income. This has been well accepted by both residents and political parties, as it clearly demonstrates that the system was not introduced to deal with poor payers.

However, when the then Cape Town municipality first introduced prepayment in 1993, it was mainly in an effort to collect arrears – which at the time totalled 10% of total sales. Tenders for the supply of keypad prepayment meters were advertised, and vending stations were established throughout the area.

"The vending system is at the heart of any prepayment installation, and the City has an overriding obligation to ensure that all customers have convenient access to vending points," says assistant city electrical engineer Neil Ballantyne. "When we introduced the prepayment system we established and ran all the vending stations ourselves, but today we are moving strongly towards outsourcing."

The City is presently calling for tenders for a new vending system, which it will manage. It will replace the present four vending systems servicing 217 vending outlets, as well as several vending service providers with 112 vending outlets. There are also three Internet sales sites and three mobile phone vending sites.

"The vending stations accept only cash or cheques," says Ballantyne. "But since we introduced the Internet site and the mobile phone payment options in November 2001, we have seen steady growth in their use. Today 2.5% of our total sales are transacted remotely."


The City has recently installed SAP software, and in future all the data generated by the prepayment system will be managed through this system. When the meter arrives from the factory the details are downloaded to the system. After installation, the name and address of the customer are also downloaded.

The vending system has a three-way link – to the meter, to the consumer and to the place where the meter is located. When a customer wants to buy electricity, all three components are checked and must match up before the vending machine prints the token that is used to top up the meter. These links allow the vending system to monitor two possible scenarios – a change in the customer data (for example, a new tenant) and a change in meter data (for example, a meter has failed and has been replaced). In both cases new links to the vending system must be created.

The cost of new connections is also managed by the system. The actual cost of the meter, the cable, the readyboard, labour and transport is heavily subsidised by the City for those living in informal or low-cost formal areas, but a nominal charge is still made. The system recovers the amount gradually over time for people living in poor circumstances; more affluent customers are required to pay immediately. In low cost formal housing areas, the cost of moving a meter from a temporary dwelling to the permanent dwelling on the same premises is also recovered over time for those on a lower income.


Arrears recovery is also managed through the software, which handles all accounts. The amount of arrears owed by each customer and the percentage at which the arrears should be recovered is calculated, and sent to the vending system. The system reports the amount of arrears collected on a weekly basis, and the resulting balance is kept in the software database.

"The introduction of the new SAP software has meant that the vending system is much less involved in arrears calculations," says Ballantyne. "This has allowed for simpler specifications, and will therefore, we hope, result in a much lower price for the vending system!"

All domestic consumers are offered two tariffs. The first includes a service charge, and is reserved for those who consume over 500 kWh a month. The other does not include the service charge, but power is charged for at a higher rate. Arrears from the old credit metering system are loaded as a surcharge, on top of the domestic tariff.

"Both prepayment and credit meter customers pay the same tariff," says Neil Croucher, director of electricity services. "And everyone living within the area covered by the City gets 30kWh of free electricity a month – even those who are in arrears. There is thus no reason for anyone not to be connected to the grid."


Once again the vending system plays a key role in identifying those who tamper with meters, or attempt to bypass the meter altogether, by reporting all instances of low purchases or no purchases. The City performs spot checks where the system reports an anomaly, and also conducts sweeps in areas where tamper rates are high. During one of the sweeps City employees go from house to house and check every meter.

"We recover 0.5% of total sales each year as a result of these spot checks and sweeps," says Ballantyne.

When a customer has been discovered tampering with his meter, he is immediately billed for lost revenue. These customers can settle the amount immediately, or ask for it to be recovered over a longer period. At the same time the tamperer’s electricity supply is cut off, and he is required to pay a reconnection fee, plus any repairs to the meter that may be needed, before reconnection. If he is caught a second time, the reconnection fee is increased. A third offence sees the tamperer in a court of law.

"Total revenue recovery is much better now we are able to monitor individuals’ purchase patterns," says Croucher.


Every year the City publishes tenders for prepayment meters. "All STS-compliant keypad meters are considered," says Ballantyne. "Tenders are awarded on the basis of price."

The City uses split prepayment meters, with the meter itself sited on a pole or in a ground mounted kiosk outside the dwelling and the display unit located in a convenient room in the house (usually the kitchen). Prepayment meters do not last as long as their electromechanical equivalent – their normal life is about ten years.

This means that the first meters installed by the City are starting to fail, and meter replacement teams have been appointed to install the new meters, at no cost to consumers. These teams work until midnight seven days a week, replacing meters and transferring credit to the new meter. "Our aim is to keep our response time to under two hours," says Ballantyne. "And we achieve this in most cases. The need to replace meters is on the increase, and we have had to hire more staff to handle the situation."

"The costs of running a prepayment system compared to a credit meter system are similar – they’re just allocated differently," says Croucher. "Prepayment saves on the need for meter readers, and the need to prepare and post out bills. On the other hand, the meters are more expensive and don’t last as long. We also pay commission to vendors – 2% to those that are managed by the municipality, and up to 4% for the ‘super-vendors’ who manage their own group of vendors. But in the end the total amounts spent are about the same."

Once the new software system is fully implemented, users will have one view of the customer and all related data. Everything will be done at source – for example, a change of address can be reported at one of the City’s local offices, and the new details will immediately be updated and available to all users. "It’s a holistic way of managing the customer base," says Ballantyne.