More revenue by fighting non-technical losses

Smart grid electric power technology has won over utilities around the world for its features that enable power companies to automatically maintain network stability, isolate and compensate for outages as well as merge low voltage renewable sources such as solar and wind energy seamlessly into the power supply.

Eletrobras, Brazil’s largest electric power utility, is turning to Siemens and its smart grid technology to solve a different but no less serious challenge: electricity theft. The company loses up to 22 percent of all the power it generates to businesses and residents who take energy without paying for it, either by diverting power clandestinely from power lines with illegal hook-ups or by manipulating their meters to show less than actual consumption.

Eletrobras, the largest utility in Latin America in terms of generation capacity, took a major step forward in April 2016 to combat theft when it created its Advanced Metering Infrastructure (AMI) and opened its new Metering Intelligence Center (MIC) in the national capital, Brasilia. The company is counting on the MIC, which incorporates the Siemens Meter Data Management application running on the leading Smart Grid application platform EnergyIP, to root out electricity thieves, big and small, and recover some of the US$150 million in billings that the company estimates it is losing each year to electricity scofflaws.

A new metering intelligence center
The MIC is the centerpiece of a US$700 million project to combat non-technical losses, called Energia+ that partners Eletrobras with the World Bank. Known as a champion of projects that seek to speed social progress, the bank is financing the bulk of the project’s costs in the belief that reducing electricity thefts by half over the life of the project will lead to a faster and more equitable economic growth and benefit Brazilian society overall.

Paulo Lucena, the Eletrobras executive who heads the Energia+ program, said Brasilia was chosen for the Metering Intelligence Center’s location because it allows for the best logistical integration of the regions where the six Eletrobras distribution companies are located.

Big data, smart meters
Important elements of the anti-theft system are the 120,000 so-called “smart meters” that include Siemens technology and that send data via digital communications directly to the center for analysis. In addition to detecting anomalies in electricity use that could indicate electricity theft, the Siemens MDM solution (EnergyIP + EIP NTL) platform is fully integrated with Eletrobras’ billing and management systems to ensure reliable energy billing to their consumers.

Scale of thefts
Electricity theft is a general problem in Brazil, but Eletrobras loses twice as much power to user “irregularities” than the country’s other power companies. Brazil is not all that different from other Latin American countries: utilities in Colombia, Argentina and Mexico, for example, also suffer comparably high percentages of electricity theft.

Theft is especially rampant in Amazonas state capital Manaus, a booming industrial city on the Amazon River. There, one third of all Eletrobras electricity is being stolen. The high incidence of energy crimes there has made the city a special focus of Energia+ and the utility is installing nearly 150 smart meters there every week.

Why are Eletrobras’ non-technical losses so high? Officials point to several factors. Eletrobras’ six distribution areas are located in the North, Northeast and Amazon regions that generally are more economically disadvantaged than the rest of the country and where law enforcement is weakest.

Moreover, Eletrobras’ is caught in something of a vicious circle: the company suffers so much revenue loss as a result of electricity theft that it is short of the investment capital it needs to modernize, expand its coverage area and better monitor its system.

Lucena said it’s important to point out that while “socio-economic” issues do play a role in energy theft, most energy fraud happens in “affluent sectors” and is perpetrated by business customers such as hotels, gas stations, bakeries and shopping centers that can afford to pay.
 
Ratepayer burden
The high percentage of Eletrobras losses to electricity theft has a number of negative consequences. First, honest rate payers end up paying for the thieves since about 40 percent of the revenue losses caused by thefts are simply charged back to the rate base.

Another negative impact is that the improvised illegal connections are often health hazards and cause fires. And since the thieves make no effort to conserve electricity, they needlessly increase the system’s need for more generation capacity. As a result, electricity thefts work against social goals of preserving the environment and reducing carbon emissions.

An additional social consequence is that by artificially raising the price of energy by shifting an undue payment burden on honest customers, energy theft indirectly discourages business expansion or relocation. That means fewer jobs are created in the local economy, said Cristophe de Gouvello, the director of the World Bank’s energy and climate change programs in Brazil.

Regulatory pressure
Eletrobras long ago reached the limits of its tolerance for energy thieves and has known for years it had to act on the problem. Eletrobras also felt increasing pressure from regulators who in recent years have shifted aa growing share of revenue losses stemming from theft to shareholders in a bid to limit the pain for ratepayers.

But because of the above-mentioned vicious circle, Eletrobras couldn’t provide the necessary investment capital on its own to pay for a smart grid addition like Siemens’ MDM solution (EnergyIP + EIP NTL). In stepped the World Bank, which – after recognizing the social benefits to be had with the Energia+ program – agreed to finance US$500 million of the US$700 million cost of the technology provided in part by Siemens.

Meters talk
Over the six-year duration of the project, the money will finance installation of at least 120,000 smart meters, a new generation of virtually tamper-proof measuring devices that “talk” or send data directly to the Measuring Intelligence Center in Brasilia.
Meanwhile, the Brazilian government has recognized the gravity of the electricity theft problem. Last year, the congress passed legislation that made electricity theft a crime and eased the way for utilities and local law enforcement to intervene in irregularities with arrest powers.

Fighting on the front lines of the struggle against energy theft in Manaus, where the problem is most acute for Eletrobras, is Kellianne Vieira, a 20-year employee who last year took on the leadership of the Division of Energy Measurement and Loss Control in the company’s Amazonas region.

Quick response
The combination of Energia+ monitoring and stronger Brazilian laws to hold thieves accountable is already having a positive effect in her district. Reaction time to irregularities is down because Siemens software quickly and efficiently analyzes user data at the MIC and sends its reports to Vieira and her team, to help them make their cases.

Bolstered by those reports, Vieira and her team conduct a number of field trips each week to confront customers suspected of avoiding payment altogether or manipulating meters to reduce their bills. She says it is dangerous work, and that at times she has been met by “armed persons who want to deny us access.” Local police often accompany her on field trips to convey how seriously the Amazonas government regards the problem.

“Most people never admit they are stealing, they give excuses, or blame it on the previous owner. But we tell them that if they are using it they have to pay for it,” Vieira said. “They pay what they call a fine, but which really is no more than what they owe us plus interest.” “We don’t call it punishment,” Vieira said. “We call it energy recovery.”