Interview with: Professor Robyn Meeks, Duke University and Professor Ayesha Ali, LUMS, Pakistan
Professor Robyn Meeks, Duke University
Your project is investigating how COVID-19 has affected the efficacy and resilience of metering systems and infrastructure upgrades in reducing utilities’ losses and/or increasing cost recovery.
What kind of issues do utilities operating in developing countries typically face when trying to collect payments from their customers, and what problems are subsequently caused?
There are two major sources of losses that are challenges for utilities in collecting payment for electricity services consumed. First, there is unbilled consumption. This is when a consumer (household, business etc) has used electricity but is not billed for that consumption. This often happens when a household/business has an illegal connection to the electricity distribution system. Second, there are unpaid electricity bills. This occurs when a household/business receives a bill for the services consumed, but they do not pay for that bill. There are many reasons why a household/business does not pay its electricity bill.
These both lead to losses for the utility. They are a problem because it means that the utility has less money to spend on infrastructure maintenance or upkeep, or to invest in upgrades. And without such investments, the system can fall into disrepair, resulting in poor quality electricity services.
Why has payment collection become more challenging during the pandemic?
The pandemic has caused a number of additional problems. Many utilities still rely on meter readers – humans who go house-to-house – to collect data from electricity meters in order to know the quantity to bill. But countries have had lockdowns, restrictions on movement etc, making it difficult to send meter readers around neighbourhoods to do this work.
And, in many settings, people must go in-person to a utility office to pay their electricity bill – but lockdowns, restrictions on movement etc also make in-person payment challenging. A utility might have online payment available, but low-income households are not likely to have access to a computer (or credit or bank card) to carry out an online payment.
Also, if people are out of work due to the pandemic, they will often be cash constrained. This will make it difficult for them to pay their bill.
To what extent does electricity theft affect utilities? Why is the issue likely to be worse during a pandemic?
Electricity theft typically comes from the unbilled consumption and unpaid bills explained above. If people are cash constrained and know they cannot afford to pay for electricity, they may be more likely to steal it.
What impact do you think COVID-19 is having on utilities’ operations and the delivery of electricity services in developing countries?
Beyond the issue of the meter readers described above, utilities may have difficulty sending employees to make repairs when there are electricity quality problems. Also, the pandemic has disrupted global supply chains, so it might be more difficult for utilities to obtain replacement parts etc when equipment breaks down.
What impact do you think modern metering systems can have on cost recovery, both in general and during a pandemic?
Advanced metering infrastructure (aka smart meters), if integrated with billing systems, can negate the need for meter readers, making it easier for bill reading. Advanced metering also can make it more difficult for individuals to connect illegally to the electrical grid, making it harder to steal.
What kind of infrastructure improvements are being investigated? What effect do you think they might have on cost recovery, both in general and during a pandemic?
Beyond the smart meters described above, we are also studying the role of Aerial Bundled Cables (ABCs) in reducing losses and increasing cost recovery. Older wires used in electricity distribution systems are susceptible to illegal connections (e.g., households directly connecting to the wires). ABCs, which have an extra protective layer, are designed to prevent illegal connections directly to the distribution system. They may make it more difficult to steal electricity – during pandemic and non-pandemic times.
Some utilities have also implemented institutional innovations in a bid to improve cost recovery – can you tell us more about them and what they aim to achieve?
Yes, the electricity utility that we are working with in Pakistan has been trying different institutional innovations, in an effort to change the culture of stealing. These efforts focus on outreach to support the community in which the utility operates – in other ways besides electricity. This is about building trust and goodwill with the community. These efforts include medical camps and sports events for children in the communities. Also, safety awareness campaigns in schools are designed to help children understand the dangers of playing with electrical wires, and that stealing electricity through illegal connections can be unsafe.
You are also studying whether the impact of COVID-19 on electricity services and consumers’ bill payments differs across income groups – do you have any initial thoughts on what the differences might be?
The concern is that low-income consumers may have less savings to fall back on. If these consumers are out of work during the pandemic, they might be less able to pay their bills during this time. However, we also wonder, if people are out of work – and potentially under a lockdown restricting movement – then they might be spending more time at home and consuming a larger quantity of electricity services.
Why did you choose to carry out your research in Kyrgyzstan and Pakistan?
Utilities in these countries are testing and trying new infrastructure and metering upgrades, as well as institutional innovations. So these locations allow us to try to better understand the intersection of their efforts and the pandemic.
However, there has been an election and big political changes in Kyrgyzstan in recent months, so we are actually waiting to restart our work there. Our efforts are focusing more on Pakistan right now.
Do you have any early results to suggest that modern metering systems and infrastructure upgrades have improved power system resiliency during the pandemic?
We have some very preliminary results that suggest that the ABCs installed might reduce losses and that this reduction persists into the pandemic.
How have COVID-19 travel restrictions/social distancing rules affected data collection? How has the team carried out focus group discussions and household surveys, for example? Have you encountered any issues/do you have any advice to share with other research teams?
We are working with an electricity utility in Karachi and none of our original team members are based there. We have been able to bring new people onboard who live in Karachi and can meet in person with Karachi Electric (KE) staff, when needed. But technology is pretty amazing – we’ve been able to conduct interviews with KE staff, with some team members there in person and others joining via Zoom.
We are planning for household surveys to implemented by telephone, but that is still to come. More on that soon hopefully!
Professor Ayesha Ali, LUMS, Pakistan
What role is Lahore University of Management Sciences (LUMS) playing in this research project?
LUMS has provided incredible support in administering a portion of the grant devoted to carrying out quantitative and qualitative data collection focusing on how our electricity utility partner Karachi Electric (KE) is bringing down losses and their response to the pandemic. LUMS also has a large network of alumni, which really helped us identify and connect with recent graduates who have been instrumental in providing research assistance and project management support. Overall, LUMS provides a fantastic ecosystem for encouraging early career researchers in carrying out policy relevant research.
How did your research partnership come into being – did LUMS and Duke University have a history of working together on energy issues?
Robyn and I were introduced to each other through a colleague in Duke’s Dev Lab. Since our research interests overlap, we decided to apply jointly for grants to study institutional innovations in Pakistan’s electricity sector. While researchers from LUMS and Duke have collaborated in the past, this is the first collaboration on an energy-related project.
In Pakistan, what institutional innovations and technical upgrades have been implemented to reduce losses and increase cost recovery?
We are working with Karachi Electric (KE), which supplies electricity to the largest city in Pakistan covering a customer base of 16.9 million people. Karachi is also the industrial hub of the country.
KE has aggressively focused on bringing down transmission and distribution losses and improving revenue recovery in areas where losses due to both these factors have traditionally been high (upwards of 30%). In these areas, informal settlements and informal usage is high, and people have low propensity to pay (both due to low income and a culture of not paying).
Starting in November 2019, KE implemented an ambitious project in six of the 12 high loss Integrated Business Centres (IBCs). The project focused on setting targets, and decentralising resources to carry out technical upgrades and to tackle the problem of theft in a multi-pronged way. The most important initiatives included replacing conventional cabling with Aerial Bundled Cables (ABCs), removing informal connections, metering informal users, bill payment facilitation by setting up mobile bill payment centres, daily employee bonuses for meeting revenue recovery targets, enforcement drives to catch and penalise theft, as well as customer goodwill initiatives.
What effect do you think they might have, both in general and during a pandemic?
We find that these initiatives do bring down losses and improve recovery in the six IBCs relative to the remaining six which did not receive the project. They work both by making it difficult to use electricity without paying for it and increasing trust and confidence in KE to bill accurately and reward consumers through reliable supply and fewer outages.
Post March 2020, we observe that the IBCs which implemented these initiatives experienced a smaller increase in technical and distribution losses (which went up considerably in the comparison IBCs). However, they were more likely to experience a decline in revenue recovery (relative to the comparison IBCs) in the first three months after the pandemic. We are investigating the reasons for this and whether there is a rebound over a longer time horizon.
Can you tell us more about Pakistan’s three-month COVID-19 bill payment relief package and why you chose to investigate its impact as part of the project?
The government allowed residential consumers with usage less than 300 kWh per month to pay their electricity bills for March, April and May in three equal monthly instalments payable till November 2020. The utility also introduced more flexibility for consumers who were already on instalment plans to help them tide over periods when they found it difficult to pay. We would like to know if these types of measures helped consumers make payments later without defaulting and if it helped the utility minimise technical and financial losses due to the pandemic.
How have COVID-19 travel restrictions/social distancing rules affected the way you carry out research?
Most of our research team has been participating remotely. Some members of the team who are based in Karachi have been working intermittently at the utility’s head office and making some field visits, while following government mandated standard operating procedures, such as wearing masks and observing social distancing.
We also asked Robyn and Ayesha whether they think the pandemic will encourage governments to ‘build back better’, creating more resilient and sustainable energy systems. They said:
We do observe an attitudinal shift as governments and utilities are taking stock and trying to learn how to cushion the impact of such negative shocks. Our partner utility Karachi Electric has been very enthusiastic about this project and we hope that the findings of our work will inform their future business strategy and make the supply of electricity more reliable and resilient.