Non-Technical Losses: A Billion Global Opportunity for Electrical Utilities.

Non-technical losses represent a significant burden to global utilities worldwide, resulting in $96 billion lost every year. These losses stem from a variety of factors, such as non-payment by customers, and errors in accounting and record-keeping. But, the biggest contributor is energy theft, with approximately $6 billion of electricity stolen in the U.S. alone every year. In fact, energy theft ranks as the third-most stolen item, after credit card data and automobiles.

Aside from the considerable costs to utilities, energy theft hits customers hard as well. Those being billed for their legal consumption while regularly paying their bills are unknowingly subsidizing the thieves that aren’t paying. What’s more, the increased load on the system can result in power surges or electrical system failures – bad news for both customers and the utilities.

Whether through illegal connections to existing networks, tampering with or bypassing metering equipment, or refusal to pay for service, energy theft is clearly costly and prevalent – particularly in developing countries where many customers are unable to afford the bill. In fact, it is estimated that 50 percent of electricity in developing countries is acquired via energy theft.

For example, the performance of utilities in Sub-Saharan countries present huge inefficiencies, such as in Nigeria where reports showed the utility capturing only 25 percent of the revenues owed. What’s more, studies have shown that hidden costs of distribution losses in Sub-Saharan Africa are more than 0.5 percent of GDP and could be as large as 1.2 percent of GDP in some countries.

So, what are the challenges we face in identifying energy theft, and how can utilities and communities work together to implement solutions that will minimize current and future non-technical loss in utilities?

Challenges to identifying energy theft

Part of the challenge to preventing energy theft is finding ways to combat the broad variety of techniques being used

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With meter tampering, individuals will tilt or remove a meter from the socket, or insert the meter upside-down in the socket. A more dangerous diversion involves a direct connection to the primary voltage grid with a pirate distribution transformer – a tactic oftentimes done in rural locations by an individual with lineman skills. One of the most common methods of energy theft is also one of the hardest for utilities to identify – a complete bypass of the meter from the low-voltage grid. Because the tap is made on the service drop from inside the customer premises, it is impossible to observe from the outside through routine, monthly field investigations.

Couple these and other diversion methods with the fact that typical mechanical meters are read manually only once per month, which makes pinpointing energy theft an even more difficult and delayed process. For example, at the end of a month, a utility sees that they sent 100kilowatt-hours (kWh) to a transformer, but they are only metering for approximately 70 kWh. Where did those 30 hours go, when did they occur, and from where were they stolen?

This presents one of the biggest challenges to identifying and addressing energy theft – with our traditional metering systems, it is a time-consuming, inefficient, and expensive manual process. Many utilities have been forced into relying upon tips received from their customers, or monthly field investigations – both of which are unreliable and ineffective in preventing future thefts.

Traditional solutions to minimize non-technical loss

Completely eliminating all electricity theft is not a realistic goal for utilities, but there are solutions that can be explored to substantially reduce the current levels of theft – and ultimately prevent future thefts from happening in the first place.

One solution is for utilities to treat energy theft in a manner similar to stolen car or credit card data. Working closely with local, state and federal law enforcement agencies can help to support the detection, investigation and prosecution of anyone found tampering with electric or utility-owned equipment, or stealing electricity. For example, BC Hydro in British Columbia went one step further in using a team of ex-law enforcement officials to pursue thieves. Within three years, they had shut down over 1,500 electrical diversions and recovered $5 million in lost revenue.

Another option is to look to implement new laws and government programs to help control energy theft and improve accountability. The state government of Andhra Pradesh in India, for example, initiated a reform program to establish a new legal and regulatory framework in the power sector, including a new law to address electricity theft and the strengthening of enforcement mechanisms. What’s more, the state government implemented more stringent electricity theft laws and penalties, with mandatory imprisonment and penalties for electricity offenders and making collusion by utility staff a criminal offense.

For those impoverished or low-income customers who are stealing because they lack the financial means to pay for their energy usage, other solutions need to be put in place. Identifying energy theft in these areas could allow local governments to enact subsidies to address these needs and provide some sort of relief. For example, in Bogotá, Colombia, where distribution losses were decreased from 22 percent in 1997 to 10 percent in 2000, amidst great political and socioeconomic challenges. Part of the strategic approach to energy theft included the generation of sufficient funds to subsidize low-income and other customers, using means set by the government.

Leveraging new technologies to thwart energy theft

The aforementioned are compelling solutions, but there is more than can be done to address the issue of energy theft in real-time and prevent it from happening in the first place.

The key is to identify and adopt new technologies that can take global utilities beyond simply reading meters; and, with these pioneering technologies, begin to automating, predicting, monitoring and controlling the grid. For example, tapping a Wi-Fi-centric advanced metering infrastructure (AMI) smart grid provides utilities with real-time, actionable data and visibility into their systems. This infrastructure enables them to identify energy theft at the exact point of impact for immediate action.

Once the point of theft is identified, a utility can more easily and effectively take action, whether that is through securing meter boxes, using barbed wire to discourage thieves, installing tamper-proof cables or adopting specific social-engagement strategies. This pre-emptive strategy saves utilities significant time and money that, in the past, have been wasted on manual, random field investigations.

What’s more, once thieves become aware that a utility has tools like this in place to detect and record the theft, they may be deterred from stealing it in the first place.

The road to saving $96 billion

There are undeniable advantages for utilities to mitigate non-technical losses – not only is it critical to prioritize these efforts from a revenue and safety perspective; but, pre-emptive strategies will benefit customers directly and may provide an opportunity for social engagement.

But, it is impossible for utilities to successfully act on energy theft if they lack full visibility into both the extent of the issue and the locations to take specific actions.

In collaborating with local governments and law enforcement, and by implementing new technologies, utilities can affect change, ensuring a future with more efficient, informed local energy management.[Courtesy: Scott Foster, President and CEO of Delta Energy & Communications]