How to Reduce Non-Technical Losses in Utilities (Case Study)

Every year, utilities lose $101.2 billion globally due to non-technical losses such as electricity theft, fraud, and billing errors, according to Northeast Group. 

A study by the World Bank states that utility companies in developing countries often face significant quasi-fiscal deficits. 

These deficits arise from the difference between the expected revenue of an efficient electricity sector, which covers operational and capital costs, and the actual cash collected by the utilities. 

Among those deficits is bill collection losses, an issue that many Indian utilities have tackled after incorporating new meter reading methods. Jump to the case study. 

Understanding Non-technical Losses

Non-technical losses, also known as commercial losses, refer to all the electricity consumed but not billed. 

They commonly result from external factors outside of the power system and primarily involve electricity theft, customer non-payment, and mistakes in accounting and record keeping. 

Basically, they are the opposite of technical losses due to inefficiencies and actions unrelated to the actual distribution of electricity. 

Electricity theft occurs due to non-payment, billing errors, and energy theft. Billing errors can occur either unintentionally or intentionally. 

• Unintentional irregularities (human error): Refers to situations where utility companies generate incorrect bills for consumers due to system failures or human error, for example when recording the wrong numbers in the process of meter reading. 

• Intentional irregularities (fraud): This involves utility company employees deliberately manipulating meter readings or issuing bills that are lower than they should be. Due to these inaccuracies in meter readings, bills are either higher or lower than consumption.

• Non-payment: Occur when electricity consumers choose not to pay their owed amounts, leaving the outstanding debt to be carried by the utility company.

• Bill collection losses: This happens when customers do not pay their utility bills or when there are inefficiencies in the billing and collection process. These losses contribute to non-technical losses (NTLs) and can impact the financial stability of utility companies. Efficient management of bill collection is crucial for reducing these losses and maintaining a steady cash flow.

• Record keeping: Refers to the process of maintaining accurate and complete records related to fraud, meter readings, billing, and other relevant information. 

It encompasses both the absence of records where fraud or losses are not being recorded or documented, as well as potential faults in record-keeping practices such as mistakes in meter reading, data entry errors, or insufficient documentation of inspections and maintenance work. 

Inadequate record-keeping can hinder the detection and prevention of NTLs and make it challenging to identify and address issues effectively.

Why utilities should reduce NTLs

In the utility business, some losses are inevitable. However, it is crucial for utilities to actively minimise these losses to avoid burdening society with increased tariffs or government subsidies, and to maintain revenue for essential grid improvements that benefit shareholders.

Here are four reasons why addressing non-technical losses is important:

1. Financial sustainability: Non-technical losses (NTLs) lead to revenue losses, hindering utilities' ability to cover operational costs, invest in infrastructure upgrades, and provide quality services.

2. Cost control and efficiency: By reducing NTLs, utilities can improve cost control, allocate resources effectively, and operate more efficiently. This includes minimising losses caused by theft, fraud, billing errors, and other inefficiencies, resulting in enhanced financial performance and resource utilisation.

3. Empowering the workforce: Technological solutions for reducing NTLs empower utility workers, enhancing accuracy, efficiency, and job satisfaction for improved service delivery. Empowered employees contribute to more effective service delivery and customer engagement.

4. Improved service quality: NTLs directly impact service quality for paying customers. Reducing NTLs enables utilities to allocate resources towards maintenance, upgrades, and better customer support, improving service reliability and responsiveness.

Addressing non-technical losses (NTLs) is crucial for utilities to ensure financial sustainability, cost control, workforce empowerment, and improved service quality. By minimising NTLs, utilities can maintain revenue, cover operational costs, allocate resources effectively, and operate more efficiently.

This empowers the utility workforce, enhances service delivery, and improves customer satisfaction. 

Case study: How Blicker reduced NTL in India 

Blicker, an AI-powered meter reading software that utilises computer vision technology, embarked on an interesting case study when approached by its first Indian utility client. The client's main concern was combating electricity theft and billing errors, which were causing significant non-technical losses in meter reading for many utility companies in India. They needed a solution that could empower their workforce to reduce mistakes and fraud.

With Blicker, meter readers simply need to locate the meter and capture it through a quick photograph. The AI-powered software swiftly captures the necessary data in seconds. This was especially beneficial in India, where meters are often placed in challenging locations. Blicker's software is designed to read meters in any condition, including when they are positioned upside down.

In India, customers rely on meter readers to obtain their readings, and Blicker's solution empowers these meter readers by simplifying their tasks. They can now capture accurate data with ease. While the solution has significantly reduced fraud, it's important to note that fraud can still occur. Blicker addresses this by implementing verification measures after capturing the meter. 

Some customers may deliberately try to overwrite the captured reading with a different number, while others might input readings from someone else's house. However, Blicker's comprehensive data portal allows for tracking and detection of such fraudulent activities.

Moreover, Blicker's software highlights any mistakes in meter readings, enabling customers to maintain accurate records of their losses. This transparency enhances monitoring and management of non-technical losses. 

While fraud remains a potential challenge, Blicker's data-driven approach and advanced technology empower utility companies to proactively address and track such occurrences, leading to a reduction in non-technical losses and improved operational efficiency!