Central Revenue Protection Unit

1
Central Revenue Protection Unit

• David Watson
• 12th October 2009

2
Introduction

• For any Revenue Protection solution to be
  effective it must
• Have access to, and the drivers to use,
  information to operate proactively, not just
  reactively.
• Have the ability to effectively handle theft once
  detected.
• Have proper and effective incentives to improve
  performance and provide cost savings.
• Properly allocate costs and benefits to the
  correct places.
• Central Revenue Protection Unit (RPU) must be
  judged against these parameters.

3
Proactivity

• We can demonstrate that working reactively is
  insufficient.
• Value detected up 500 in two years following
  switch to proactive theft detection in 2007.
• Remove reliance on tip-offs.
• This means using supplier held data to drive
  leads
• Payment data, consumption data, meter read
  cycles, no / refused accesses, customer contact
  notes, meter error reports, non-purchase reports,
  AMR data, AQ data etc.
• For a Central RPU to work a mechanism will need
  to be found to provide them with this data.
• Duplication of existing supplier databases.
• Complexity of managing volume of data across all
  suppliers.
• Data Protection Act concerns?

4
Incentives

• Given the need for maximum inputs there is still
  a need to incentivise the provision of data from
  suppliers to a Central RPU.
• What mechanism will exist to make suppliers
  collate, interpret and flow the right
  information?
• Case study
• Electricity model. Recognition that incentives
  model required in electricity.
• DNOs rely on information provided to them by
  suppliers but have found that without incentives
  to provide data, leads have dried up.
• Therefore not mutually exclusive with SETS or
  other incentive scheme.

5
Governance

• Governance.
• How will they be licensed?
• How will they be regulated?
• How will their performance be managed by the
  industry in order to drive future improvements?
• Suppliers should be able to opt out and provide
  their own solution, enforced with incentives.
• We as a supplier have (a) the customer
  relationship and (b) access to all the data we
  need in order to manage theft.
• Mandating this solution would see a reduction in
  the volume of theft detected on our portfolio.
• If mandating it, would supply licence change be
  required?
• Very sensitive area and many will not want to
  give up control of brand image to third party.

6
Costs

• As a monopoly service provider, costs will be
  higher than other solutions.
• Lose the benefits derived from competition
  between RPU providers.
• Administering cost recovery looks complicated in
  this model.
• Proper allocation is key to ensure costs and
  benefits are properly allocated.
• Market share? Would not allocate costs
  correctly.
• Results based? Would provide a disincentive to
  provide leads.
• Lessons learnt from electricity show a wide
  variance in RPU costs showing that it is possible
  to deliver reductions.
• What incentive does this model have to ensure
  that a national
• provider would deliver efficiencies?

7
Dual Fuel

• The premise that this could provide a complete
  dual fuel solution is flawed.
• How will they disconnect electricity customers?
• Only MOP / DNO activity.
• Will DNOs retain the benefit of losses detected
  on their network or would this be provided to
  suppliers?

8
Change of supplier

• Suggested that this would provide a solution for
  the issue of customers changing supplier.
• Without rights of disconnection and reconnection
  however, this is no better than the status quo.
• Regardless of whether Central RPU or supplier
  pursuing payment, bad debt provision unlikely to
  be different without disconnection / reconnection
  rights spanning change of supply.
• If the Central RPU takes responsibility for
  pursuing payment, suppliers may lose objection
  rights.
• How would they handle found shipperless
  customers when appointed by all suppliers?