By Ronald Hermans – Product Manager Connexo Insight & Alliances
Prepaid or Pay-as-you-go (PAYG) energy is set to open up a completely new way of doing business for utility companies. Advanced roadmaps are being developed for payments and communications that can anticipate rather than just follow the customers’ expectations.
The notion of prepayment has long been associated with voice and data telecommunications (the mobile market) which, in its emerging years, has helped those with adverse credit or bad-payment histories to access the latest in technologies, whilst avoiding unmanageable bills and finding themselves in debt. More recently there has been a shift in consumer attitude towards prepayment, with many consumers opting for this method of payment as they see it as a convenient option that fits their lifestyle. Prepaid energy is primed for growth in the utility sector and consumers can now decide how to pay for their energy and even become more energy efficient in their consumption. The decision is often based on transparency in relation to spending and energy consumption and attractive tariff models, enabled through smart metering solutions.
Global trends in prepayment
Globally, there are 40 countries offering prepayment solutions across a variety of sectors. In the U.K. for example, more than 4 million households pay for their energy up front using charged top-up cards, and in Southeast Asia, more than 60% use their mobile phones to pre-pay their energy. In South Africa, prepaid energy has been used for more than 20 years, and conventional prepaid meters are expected to change to smart meters as investments in new metering technology unfold.
Prepayment strategies have been readily adopted as they offer clear advantages for both the utility company and consumer. For utilities prepaid energy offers increased revenues and profitability, whilst enhancing the customer experience. Prepaid energy also allows them to steer consumption by offering tariffs that reflect when consumption should peak and when not. For the customer it means greater transparency with the ability to more closely monitor their energy use, set budgets and avoid unexpected, high energy bills.
Assisting with the adoption of prepaid energy is the move from ‘thick to thin’ implementations of energy meters. Thick implementations are conventional or smart meters with local-only functionality; like a coin slot or card reader. Thin implementations refer to a system in which most of the intelligence on rating and charging is located in a central system, with a combination of a meter data management (MDM) and advanced metering infrastructure (AMI) system with smart meters that have a disconnect and load limitation functionality.
What’s the difference? Thick versus thin
- Thick meters require more upfront investment when compared to thin meters. In case of thin meters, customers do not need to access the meter to check their remaining credit. They can simply check the account status wherever they are and whenever they want.
- Notifications help keeping the customer informed and actually avoids disconnects.
- Connected thin meters, together with a corresponding backend IT solution, provide much more flexibility for utilities and customers.
- With thin prepayment customers have several options to top up their energy budget (smart phone application, SMS, point-of-sale, PayPal).
- In case of thin prepayment, the implementation of new tariffs can be centrally managed and does not require any change on the meter or network components.
- A thin meter can be switched from prepaid mode to post-paid mode by configuring the IT system.
- The overall business case for thin meters is more likely to be attractive, as it scales much better.
Opportunities for growth
More and more, analysts are exploring the prepayment trend for utility companies. The growing acceptance of prepaid services around the globe is becoming a major driver for prepaid energy solutions. With the deployment of smart meters and their two-way communication functionality, prepaid energy presents a plethora of new opportunities for utilities. There are major gains to be made from new marketing possibilities – enhanced customer satisfaction, retention, consumption steering, and cash flow optimization.
Prepaid energy allows utilities to protect themselves from customers who refuse to (or cannot) pay on time and helps avoid service disconnections, ensuring revenues do not get lost. There are added layers of complexity for integration, so investment is key to increase market adaption. There is an emerging split between traditional utility operations (especially for those in more liberalized markets) and suppliers who are already operating in more customer- and marketing-oriented environments.
The ideal prepayment solution?
In 2015 Elster, now part of Honeywell, teamed up with Redknee – a global provider of real-time monetization and subscriber management solutions across 90 countries worldwide – to deliver an end-to-end prepayment solution for the utilities sector, i.e. Prepay Energy. This strategic partnership combines Honeywell’s smart grid software solutions with elements of the Redknee Connected Suite for smart utility billing. This modular prepayment solution brings together the best of the Honeywell and Redknee solutions portfolios. The components are integrated on the basis of a slim, agile interface allowing for customization and flexibility to best fit the needs of a utility.
Redknee’s flexible and scalable solution provides customer care, real-time analytics, billing and real-time rating for various smart services. It enables service providers to monetize digital services and deliver bundled offers and promotions across various industry verticals, including utilities, smart homes and transportation. The platform also provides partner billing and settlement to manage the complex Internet of things (IoT) partner ecosystem.
Honeywell’s smart grid software solutions provide utilities with a unified and simple approach for securely collecting, processing, storing and managing smart grid data. The software eliminates challenges that arise for utilities operating separate (multi-vendor) data collection and management systems, and its built-in workflow automation and guided decision-making are designed to enhance operator productivity and reduce the cost and complexity of utility operations. Honeywell covers the entire energy value chain from smart meter platforms to meter data management solutions giving utilities confidence that all the elements of Honeywell’s solutions are interoperable.
The ‘central wallet’ approach from the Redknee and Honeywell alliance offers a smart way of realizing prepaid energy. This approach integrates thin smart meters with remote disconnect and reconnect functionality without the need to access the smart meter, use physical tokens, smart cards or keys to transfer credit to the meter. A set of sophisticated self-care tools is available to customers.
By adopting this methodology, customers can be provided with multiple payment channels, price plans and incentives and this enables utilities to enhance their customer service and reduce the risk of debt close to zero. The central wallet approach is less expensive, more tamper resistant and easier to manage from a central platform. It also allows for changes to be made to the account instantly. This solution comprises three different building blocks: a remote metering infrastructure, a multi-vendor data collection system and multi-vendor meter data management system and a central connected prepay management system.
The prepayment solution is driven and enabled through customer engagement via mobile devices. User interactions via a web GUI provides both customer and operational portals, a vending sales client and vending admin portal. The operational support functions consist of templates for standard utility tariffs, debt management, and standard utility web services (that integrate with third-party applications) plus a batch file processing feature and standard reports for CIS and ERP integration.
At the very core of the offering is a real-time rating and charging module that enables the management of top-up modules and provides the necessary tools to manage tariffs online. With the existing integration options, ‘out-of-the-box’ processes and available protocols and meters, Redknee and Honeywell have a strategic prepayment solution that is ready for utilities to cover end-to-end prepaid energy that can be easily embedded into existing utility operations.
By implementing prepaid energy methods, utilities can offer their customers simple and accessible energy solutions that address their day-to-day needs and fit snugly into their everyday lives. Prepaid energy is the future of the energy ecosystem and will sharpen cash flow management through increased operational efficiencies.
About Ronald Hermans
Ronald Hermans is the Product Manager Connexo Insight & Alliances at Honeywell Smart Energy and has over 15 years of experience in the utility software sector. In his role he ensures the integration of partner applications in Honeywell’s software solutions.