Combating NonTechnical Losses

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Combating Non-Technical Losses

• 5th National Conference
• ICT for Energy, Utilities and Infrastructure
• May 28, 2008 Sofia, Bulgaria

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Todays Contents
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Non-Technical Losses (NTL)
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What Are Non-Technical Losses?
Any commercial losses that cannot be attributed
to energy being lost through the network or
internal consumption Energy accounted for but
not invoiced and not lost due to technological
reasons already known to and calculated by the
utilities company
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The Non Technical Losses Equation(a.k.a The
Energy Balance)
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The Causes
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Principal Cause Fraud
Illegal Connections Consumers that are not
customers of the entity opening illegal
connections through the entitys distribution
network and consuming energy while not paying for
it Customers of the entity facilitating illegal
connections to neighbours and friends through
their legal connection, paying for the
consumption but not the excise, fees and taxes
associated with subscription dues Meter
Fraud Customers of the entity slowing down or
blocking meters and other measurement apparatus
and paying for less energy than actually consumed
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Principal Enabler Collusion
Illegal Connections Collusion between the
perpetrator and the maintenance personnel
responsible for that area Collusion between the
perpetrator and a legitimate consumer /
customer Collusion between the perpetrator and
the police / gendarmerie / public
prosecutor Meter Fraud Collusion between the
perpetrator and meter reader / technical service
personnel Collusion between the perpetrator and
neighbours / building administrator
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The Solutions
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Underlying Principle
You cannot really identify anything unless you
go out and investigate on the field and inspect
distribution network and customer
installations However, the measures included in
this presentation can guide field teams to go to
the right locations This eliminates swimming in
the dark and makes the whole NTL combat
operation more efficient and with higher yields
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Data Analysis
Data analysis can predominantly identify meter
fraud and collusion It can also identify some
illegal connections opened through the connection
of a legitimate customer It cannot identify
illegal connections opened directly through the
distribution network
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Data Analysis Capabilities

• Commercial solutions (MS Access, ACL, Monarch,
  etc) can be used to analyze massive and complex
  data from the metering and billing, customer care
  and technical service systems
• Data to be analyzed should include
• Consumption indices per customer (going back at
  least 12 months)
• Technical service logs (matching abnormal changes
  in consumer patterns to meter change or
  maintenance works)
• Meter reader IDs (matching abnormal changes in
  consumer patterns to meter reader changes)

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What to Do

• Differences in consumption indices based on
  hypotheses of consumption
• Comparison of consumption of consumers in any
  given location to the entity-wide averages
  involving all other locations of similar
  demographics (village, town, city, plain regions,
  mountain regions, river regions, seaside regions,
  etc)
• Seasonality comparisons (summer vs. winter) with
  locations of similar demographics
• Matching anomalies to meter and meter reader
  changes
• Guiding field teams to perform visits and
  interventions at suspect locations

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NTL Schemes Identified Through Data Analysis -
Example

• Fraud scheme No 1
• sudden increase in energy consumption indication
  followed by an increase of average daily
  consumption
• correlation of an increase with a change of
  employee collecting data from metering devices

• Fraud scheme No 2
• virtual metering device exchange normally used
  when corrective actions needed
• corrective readout lower than previous proper
  readout, indicating that one of the readouts is
  fake
• in some cases metering device is dismantled just
  after collection of data

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NTL Schemes Identified Through Data Analysis -
Example

• Fraud scheme No 3
• swap between more expensive and cheaper tariff
• employee collecting data from metering devices
  enters data in wrong tariff
• billings for customers are diminished by the
  difference in charge between tariffs

• Fraud scheme No 4
• sudden increase in energy consumption
• correlation of an increase with a change of
  collectors ID either ID sharing fraud or
  change of employee collecting the data

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Customer Mapping
Mapping customers to points/stations on the
distribution network allows for the production of
the Energy Balance at each point This can help
guide the field teams to the possible locations
where energy is being lost as a result of illegal
connections made through the distribution
network The pre-requisite, however, is that the
individual points/stations across the
distribution network have meters
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Actual Mapping in the Billing SystemsElectricity
Company Example
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Illustrated Example
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1a
1b
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The Heat Map
Municipal level
City
Sector / Neighbourhood level
A
B
C
D
E
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15
21
Street level
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9
12
18
1
8
16
3
10
19
6
14
11
7
17
20
2
5
Mapping the customers to individual points on the
network and producing / monitoring the energy
balance for each individual point can guide field
teams to the possible locations where there may
be illegal connections
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Field Teams
Field Teams should be guided by data analysis as
well as information received from customer
centres and technical service Teams should be
trained in operational interventions (e.g. meter
reading, replacement, disconnections, etc), as
well as self-defence Teams should include all
legal authorizations necessary to evaluate fraud
and issue the required documentation on the field
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Field Team Responsibilities

• Plan and program field visits based on data
  analysis results and other information
• Perform field visits
• Detect illegal connections and meter fraud
• Replace defrauded meters with functioning ones,
  and store defrauded meters at the headquarters as
  evidence
• Disconnect illegal connections
• Calculate damages on the field and issue invoices
  and other necessary documentation in line with
  the Law
• Gather, catalogue and store evidence
• Record the entire field visit (photo and video
  cameras)
• Perform primary self defence against attacks with
  the aim of repelling the attackers and making a
  clean exit (do NOT stay and fight)
• Perform detailed reports of all visits
• Collaborate with law enforcement agents while
  making visits into danger zones (do NOT go in
  alone if the perceived safety risks are too high)

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Field Team Equipment

• Self defence
• Pepper sprays
• Shields and batons
• Pistols (as permitted by Law)
• Anti canine whistles
• Protective clothing, pads, vests and helmets
• Equipment to restrain attackers (e.g. cuffs)
• Binoculars
• Night and thermal vision equipment
• Advanced first aid kit
• Evidence related
• Photo cameras
• Video cameras
• Sealed evidence bags (as required by Law)

• Commercial
• Computer and printer to issue invoices and other
  legal documentation
• Communications
• Radio (with ability to directly contact law
  enforcement if needed)
• Mobile phones
• Vehicles
• Off-road (for villages and country settings)
• Minivan (for urban and town settings)

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Typical Roadmap for Anti-NTL Program
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1. Set NTL Reduction Targets
Do not expect a magic wand. Even reduction of NTL
by 50 is usually a multiple-year target
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2. Do a Business Case Based on 3-5 Year NPV
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3. Plan the NTL Pilot
Restrict the pilot to a certain zone Set
reduced targets for the pilot, as this is more of
a learning exercise for the company and the
people involved Procure the equipment in time for
the pilot and make sure people are trained on how
to use it Implement data analysis capabilities in
time for the pilot Ensure that the infrastructure
in the pilot zone is suitable for the pilot
purpose
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4. Plan the Roll-Out
Monitor the pilot results continuously and
compare actual NTL reduction to targets Analyze
the pilot results for any changes that need to be
made to the concept Revise the business
case Procure the rest of the equipment, vehicles,
software licenses, etc needed for the
roll-out Perform roll-out of the anti-NTL team to
your other locations (regional teams are strongly
encouraged) Use pilot personnel as trainers /
coaches for the roll-out
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Lessons Learned from Our Experience

• Ensure that data in billing systems are reliable
• Monitor the NTL pilot very carefully Soon after
  the first field visits during the pilot you will
  have a pretty good sense of whether you can rely
  on the data on your billing systems or not
• If there are issues with the data, perform data
  rationalization or cleansing before embarking on
  rolling out the anti-NTL organization
• If you have recently migrated your billing data
  from a legacy system to a modern ERP, go back to
  the drawing board and scrutinize the pre and
  post-migration tests and verifications before you
  decide whether or not you can rely on the data
• Lead a coordinated effort of intelligent
  information analysis and guided field
  interventions
• Do not swim in the dark, coordinate your field
  teams to visit suspected areas and customer
  locations, make best use of your data analysis
  capabilities
• The sources of information can be numerous Your
  own data analysis results, customer hotlines
  (whistleblowers), technical service personnel
  Channel them all to your NTL teams

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Lessons Learned from Our Experience

• Streamline inter-company procedures
• Consequence of unbundling laws distribution,
  sales and customer relationship, and services are
  separate legal entities
• In order to obtain any tangible results your NTL
  combating procedures will need to be at the
  inter-company level
• Design SLAs, together with legal counsel, that
  will enable the streamlining of the process so
  that time is not lost as a result of (potentially
  delayed) operations that depend on the
  involvement of separate legal entities
• Be very careful about property laws and
  trespassing
• Ideally, try to install meters and other devices
  outside of the consumers property
• If not possible, be prepared for the fact that
  field teams may not be granted access to the
  customers property for inspection
• In this case, prepare the most appropriate
  documentation to be issued and steps to be taken
  together with legal counsel and train your field
  teams rigorously
• Always obtain customer consent for access to
  his/her property, and always record what is going
  on

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Lessons Learned from Our Experience

• Deal with instances of fraud the moment you catch
  the fraudster if you lose time you will lose the
  game
• Produce invoices and all other necessary legal
  documentation on the field immediately after
  inspection
• Avoid long stand-offs and committees and
  commissions that will evaluate the actual fraud,
  instead include authorized experts in your field
  teams
• Record everything that goes on in a field visit,
  the more evidence you have the harder it is for
  the consumer to stake any claims afterwards
• The burden of proof is on you, not on the customer

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Thank you for your time !!!
Kemal Özmen, CISA, CFE, CIA Senior Manager, Head
of Business Risk Services and Fraud
Investigations Dispute Services Ernst Young
Romania Premium Plaza Building, 3rd floor 63-69
Dr. Iacob Felix Street, sector 1 011033
Bucharest, Romania kemal.ozmen_at_ro.ey.com