Revenue losses are a common
problem among utilities across the
globe and are typically segmented
into three categories:

• Technical – energy/commodity lost during distribution;
• Administrative – internal operational issues related to
  under-billing; and
• Commercial – theft and fraud.

Across all three loss types, UtiliPoint (a
leader in providing research to the utilities
industry) estimates revenue lost at
between 3 and 7 percent (see Figure 1).
The following review will focus on
administrative and commercial losses,
which make up 2 to4 percent of total
revenue.

For a typical large North American
utility, commercial and administrative
revenue losses can amount to over $150
million per year.

Most utilities employ small internal revenue
assurance teams that largely focus
on theft and rely on field personnel to
identify and resolve issues. Also, current
revenue assurance processes within utilities
are highly manual and not data-intensive. Employing such an approach leaves
significant money on the table.

Recently, computer applications have
emerged for utilities to purchase that
automate the process of looking for
either unpaid bills or energy theft. This
approach, however, also fails to optimize
the revenue recovery, due to inexperience
with these analytical tools, insufficient
staffing and a utility’s hesitation to
invest in prevention programs.

IBM had developed a Revenue Assurance
Management Program (RAMP) to
address revenue losses in the utilities
industry. The program is comprised of a
proprietary methodology and set of tools
to identify and recover lost revenue for
gas, electric and water utilities. RAMP has
as its foundation a gain-sharing and governance
model that meets the needs of utilities,
with various implementation options.

A unique characteristic of RAMP is that
as opposed to being just an application
that the utility can purchase, the offering
is available as a service to the utility.
RAMP materially improves the identification,
collection and prevention of administrative
and commercial losses across
20 different loss types. The program
includes:

Statistical Analysis of Loss Types

IBM applies sophisticated filters to a
utility’s billing, metering and other transactional
data in order to identify different
loss types including, but not limited to,
theft losses, miscalculated bill due to company error, incorrectly sized meter/regulator
for consumption, and under-registering
meters.

Analytical tools are available through
Itron, an IBM partner, as well as tools
developed by IBM Research (see Figure
2). The tools capture and analyze more
than 125 fields of data, helping to materially
improve the identification of losses.

The analysis tools are complemented
by the experienced IBM-Itron team,
combining decades of industry expertise
with critical analytic skills. The following
capabilities and services are available
with RAMP:

Flexible Identification, Investigation and Recovery Approach
The RAMP approach enables a utility to
collaboratively determine which tasks in
the revenue assurance recovery process
should be completed by which partner.
IBM is flexible in assigning roles and is
prepared to undertake all RAMP tasks.

Enhanced Back-Billing System
Once a revenue assurance lead is confirmed
to be a loss, there is a need to
back-bill the account (subject to any PUC
or utility company guidelines that restrict
the length of back-billing).

Many utilities have a less-than-optimal
method of reconstructing the back-bill,
effectively losing a portion of the potential
revenue recovery. To effectively
back-bill the account, it is necessary to
understand the causative reasons for
the meter under-registration, and then
to use a back-billing approach that recognizes
and responds to those causative
factors.

Typically the causative factors leading
to under-registration fall into one of two
categories: “fixed percentage” of loss and
“variable patterns” of loss. Fixed percentage
losses occur frequently, particularly
for meters that are inaccurate and also
for several theft types. These loss types
exhibit a rather constant, fixed percentage
of loss once the loss starts. As an
example, if tampering disables one phase
of a two-phase meter, and that phase
carries 45 percent of the load (based on
an analysis of the customer site at time
of theft detection), then the re-billing
would need to make up for that missing
45 percent.

A “variable pattern” loss would be
caused by a different kind of theft, e.g.,
a customer who tampers with the meter
one week, but not the next. The key here
is to measure the total load and also look
at periods when no tampering occurred
to determine the appropriate base level
of usage/demand. A seasonally adjusted,
customer-specific base graph is then created
and compared with the tampered
readings to highlight the amount of
under-registration.

Once the theft type (fixed versus
variable) is known, then a re-billing tool
can recalculate the missing amounts.
This, however, is only one aspect of the
re-billing engine. The re-billing tool must
also recognize other factors, like days
in the month for variable loss types and
whether there was an estimated reading
(estimated readings can distort re-billing,
since an under-billing in the estimated
month can artificially inflate the usage
in the month where the actual reading is
recorded).

The end result is a professional presentation
that helps the utility to improve
the back-billing accuracy (start date and
amount of recovery), facilitating customer
discussions and supporting back-billing
challenges with the PUC or other public
organizations, e.g., for prosecuting theft
(see Figure 3).

Investments to Enhance Utility Loss Prevention
The RAMP review will identify the root
causes of several loss types and help
quantify the loss impact on the utility.
IBM, after utility review, is prepared to
undertake loss prevention projects which
require IBM’s investment when there is
an appropriate anticipated return on
investment.

In the end, RAMP not only identifies
leads for the utility, but it maximizes revenue
recovery via improved billing and
loss prevention.

RAMP is supported by a proprietary
database to enable detailed loss recovery
analysis, combined with a work flow management
system that plans, controls
and supports daily revenue assurance
investigations.

Gain Sharing Provides Unique Advantages to Utilities

An additional, key aspect of the RAMP
solution is the opportunity to provide utilities
with revenue upside through a gainshare
arrangement (see Figure 4). This
arrangement is unique to the industry
and provides potential utilities in a capital-
intensive industry with the opportunity
to recover losses with minimal to no
investment, with reduced risk. The percentage
of gain sharing that goes to the
utility is specific to each contract. However,
the gain-sharing formula is based
on a “due diligence” review of potential
benefits and costs, and it is developed so
that the arrangement provides the utility
with significant revenue recovery over a
potential multi-year contract.