Smart Meters Take Bite Out of Electricity Theft

Electricity theft is not only dangerous, but it weakens power delivery systems around the world. Combating the problem takes technology and determination.

When Pedro Antmann, the World Bank's senior energy specialist, visits developing countries, utility officials almost invariably take him to the slums, where he sees tangles of electrical wires amid shanties.

"They want to show me everybody is stealing the electricity," Antmann said.

It's true that many poor people, unable to pay for electricity, illegally tap the grid. But they are scrambling to power lights, fans, and TVs-not air conditioners, large refrigerators, and other energy-gobbling appliances.

Rather, some of the biggest culprits are large residential, commercial, and industrial consumers who avoid paying their fair share of electricity, often by colluding with meter readers, current or ex-utility employees, or third parties.

"It's impossible (for a utility) to have high losses without having those losses concentrated in that (large consumer) segment," Antmann said.

Electricity theft-revenues lost from illegal connections, unbilled consumption, and non-payment-is difficult to quantify. But in some pockets of South Asia, Sub-Saharan Africa, and the former Soviet Union, losses reach 50 percent. In other words, the utility is collecting half the revenue it should from the power it supplies. Every year in India alone, losses are estimated in the billions of dollars.

(Related: "India Maps Out a Nuclear Future, Amid Opposition")

Not only do energy thieves risk their own lives and the lives of those nearby, they sap local power providers of the revenue needed to provide reliable electricity to communities. Utilities, with help from the World Bank and other institutions, increasingly are combating electricity theft through the use of "smart meters" and sophisticated software that can continuously record consumption and send the data back to the utility. (See World Bank Report: "Reducing Losses from Electricity Theft")

(Related: Dan Kammen on the Great Energy Challenge Blog)

Such automated, two-way equipment can be used to monitor and detect unusual activity, such as meter bypassing, from remote locations. But technology alone is not enough. Combating energy theft takes will.

"What happens in reality in this battle between the utility and the consumer," says Antmann, ". . . is that when the utility says the game is over, the game is over."

Technology vs. Corruption

The beauty of the smart meter strategy is that it eliminates contact between the customer and a utility employee, which is often a factor in collusion. In many cases, and in an approach Antmann advocates, high-use customers are targeted first. Customers using a lot of energy also generally will stop stealing it once they realize the utility has the tools to detect and record the theft, Antmann said.

Bob Gohn, Smart Grid research director for U.S.-based Pike Research, which tracks the industry, concurred that smart metering increasingly is being used to address energy theft in many parts of the world, and he expects it to continue to increase.

"The biggest areas we have seen thus far have been in India and Latin America, most specifically in Brazil," he said by email. Brazil's government last year mandated installation of more than 60 million smart meters by 2020.

"Combating theft is certainly not the only driver for this initiative, but is the primary reason for early smart meter deployments in selected urban areas," Gohn said. Brazil is under additional pressure to improve its power reliability in advance of hosting the World Cup in 2014 and the Olympics in 2016.

Extensive programs or pilot projects also have been implemented in the Dominican Republic, parts of the former Soviet Union, Uganda, South Africa, and many other locations.

There are a number of factors driving reform.

Tapping into live wires is, quite literally, a dangerous crime. Many people get electrocuted or seriously injured each year because of electricity theft. In one incident in Sri Lanka last year, four men were electrocuted while trying to steal electricity cables. And just last month, a Sri Lankan newspaper reported that a young woman had been electrocuted after touching live wires rigged up by her husband who had stolen electricity.

High electric losses cripple a utility's ability to properly invest in its system and provide stable service. Illegal connections not only pose significant safety issues, Gohn noted, but they prevent a utility from having the accurate view necessary to plan and maintain a good network. In many countries, outages become a way of life and power unreliability puts a drag on economic development, Gohn said.

(Related: "The Solvable Problem of Energy Poverty")

"High theft rates (also) raise difficult economic justice issues," Gohn added, "as many stealing electricity cannot afford to pay, yet prices are made artificially higher" because of nonpayment by them and others.

The Cost of the Fix

Gregg Edeson, global energy expert for London-based PA Consulting Group, said smart meters are definitely one of the tools being considered to fight electricity theft in developing countries. But, he cautioned, "At the end of the day it's still an expensive alternative."

"You have to have a solid business case, you don't just jump into this lightly," Edeson said.

(The business case is similar to one used in the developed world, where smart meters historically have been used to improve energy efficiency, and to cut consumption and carbon emissions).

(Related: "The 21st Century Grid")

A smart meter might cost $250 in the United States, but in a developing country the same device could cost $1,500 because of low volumes and necessary rewiring, Edeson said.

Some experts also have raised concerns about the potential for smart meters to be hacked into in efforts to shut them off, steal data or disrupt power supplies. But Edeson says the devices are fairly tamper proof; if meddled with, they send a distress signal that notifies the utility on a nearly real-time basis.

Still, Edeson said he doesn't believe it makes sense to put smart meters on the premises of all industrial and commercial customers. But smart meters can "absolutely be cost-effective if they are placed in a strategic manner," such as on a distribution line feeding commercial and industrial customers.

Such a system helps utilities improve the performance of the network and it "helps keep employees honest, because they know the energy usage overall is being monitored," said Edeson, who worked in Uganda to develop a pilot program using smart meters.

Millers, he said, constituted the biggest portion of electricity theft in that African country. They would transport their electric milling machines on the backs of trucks, and mill alfalfa, barley, and wheat on site, clamping illegally to power lines.

While placing smart meters on some high-use customer premises is an option, other alternatives should be considered as well, Edeson said, such as trying to understand the collusion that's occurring and provide incentives to build a more trustworthy utility inspection team. There also are physical things a utility can do to prevent theft, such as securing meter boxes, installing tamper proof cables and using barbed wire to discourage clamping onto power lines.

But Antmann, of the World Bank, said he disagrees with using smart meters on distribution lines, rather than on the premises of large customers.

"I saw that approach implemented in some Sub-Saharan African countries," Antmann said. "As expected, nothing happened in terms of loss reduction, and in several cases meters are either not working or not being used by the utilities."

Antmann argued that attaching a smart meter to the premises of a large consumer costs no more than $500 and "with that one-time investment you protect on a permanent basis billing and related revenues that can reach $10,000 a month or more."

He cited North Delhi Power Limited, a joint venture formed in 2002 by Tata Power and the government of Delhi, India. The utility serves about 5 million people in north and northwest Delhi. Smart meters were attached on the premises of the largest consumers as part of a comprehensive reform.

Within about five years, total electric losses (some were due to transmission and distribution efficiencies as well as theft) were slashed from 53 percent to 15 percent, largely as the result of automation.

The Will to Fight Theft

But the fight is not over. In January, the utility reported that one of its employees was seriously injured when the owner of a rubber-sheet factory and two of his accomplices attacked a theft-inspection team with an iron rod and bricks.

Because smart meters eliminate such human contact, one can find out quickly whether a utility is eager to root out corruption or maintain the status quo.

After all, collusion is a profitable side business that sometimes involves even the senior officials at a utility. Utility officials, in turn, may enjoy a close relationship with the government. If a utility is reluctant to install a monitoring system, it may mean top management is involved in the collusion and, for change to occur, must be replaced, experts say.

The Dominican Republic is a case in point. In 2008, its electric system was on the brink of financial collapse, plagued by theft, nonpayment, and rolling blackouts. Smart meters were installed but the corruption didn't stop because the utility failed to act on the data, Antmann said. The utility's management was replaced, and the project was restarted, he said.

"This approach of revenue protection with the use of technology is very effective to help the companies (utilities) that actually want to be helped," Antmann said. "Put the tool in the hands of thieves and it doesn't work."

There have been some impressive results since then. Antmann said he was involved in a project in the Dominican Republic where one utility's investment in smart meters paid for itself in recovered revenues in seven months.

If efforts are being targeted to reduce theft among the big users of electricity, what happens to poor people in the meantime?

Kavita Rai, program manager for the London-based Global Village Energy Partnership, which works to help the poor gain access to energy, noted the poor are often the last to be considered because of the high upfront costs to serve them, and the poor rate of return.

(Related: "Fighting Poverty Can Save Energy, Nicaragua Study Shows")

While going after high-use customers that don't pay their fair share may be beneficial, reducing electricity theft alone won't help the poor, she said. What's needed is for utilities to come up with favorable tariffs and innovative approaches to enable the poor to pay the upfront cost of connection, she said.

"It's being done (in parts of the world), but not being done with great vigor," she said.

Antmann agrees the poor need extra help, but says collecting revenue from large customers can serve as an important first step.

"You can't improve the problem countrywide until you solve the problem in the high-value segment," Antmann said. "That's always the first step. Once you do that, you can design and implement an approach for the rest of the market."

(Related Map: "Four Ways To Look at Global Carbon Footprints")

This story is part of a special series that explores energy issues. For more, visit The Great Energy Challenge.

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