Revenue Protection in a Deregulated Environment

An Editorial by Woody Woodward (12/21/97)

How does Revenue Protection fit into the picture in the new deregulated environment for electric utilities? It is a VERY important piece of the puzzle, as theft of energy adversely impacts the revenue, and therefore the competitiveness of, the UDC (Utility Distribution Company). Since most all UDCs will also be ESPs (Energy Services Providers) it is imperative that the UDC operate as efficiently as possible, something utilities were not always concerned about before deregulation loomed imminent. The days of summarily passing the costs of energy diversion along to the customer in the rate base are gone.

If the metering on the customers premise is going to be used to determine not only the amount the customer owes the ESP, but also the amount owed by the ESP to the UDC (regardless of the MSP (Metering Services Provider)), any energy consumed that does not register on the meter is a financial loss to the UDC. This loss can also be viewed as a loss of "potential" revenue by the ESP. I say "potential" because if the meter had registered more, the ESP would have collected more. However, since the energy use was not measured, the ESP did not have to reimburse the UDC, so there was no "actual" financial loss to the ESP.

The State of California has already determined that the UDC will be responsible for, with the "cooperation" of the ESP, the investigation, correction, and recovery of revenue from anyone receiving energy that was not properly billed due to theft or meter error. Any UDC that does not currently have a Revenue Protection department or group, must now decide whether to create one, or contract this function out to another company or group. I don't know about you, but if it were my company, I wouldn't want to "farm out" something that can have such a large impact on the financial health of my company. If I did contract it out, I would want to use the most reliable and experienced Revenue Protection Company available, as there is a very real potential for fraud by these companies. Problem is, there currently aren't any such companies (in the US) out there.

As usual, there will be those individuals (and companies?) out there who will attempt to take advantage of the confusion caused by deregulation and find ways to make a profit from it. I imagine "fixers" (those who, for a fee, alter meters or equipment to obtain energy fraudulently) will find many more opportunities as well. Some may even opt to become ESPs or MSPs and offer to cut the customers' bills or consumption by means that, not always with the knowledge of their customer, are less than legal. It will apparently be up to the UDC to locate and pursue these individuals and make sure the legal system addresses their fraudulent activities.

This period of "deregulation" can actually be considered "reregulation", as there will still be regulations, they will just be different, and not necessarily to the advantage of the existing utility company(s). It is conceivable that somewhere down the road in this reregulation process it will be Federally Mandated that Revenue Protection procedures be standardized throughout the nation, so that all of the ESPs (most of whom are, or will be operating in every state), as well as the UDCs, have uniform methods of dealing with the problem.

During these times of change and growth, it is more important than ever that Revenue Protection Professionals maintain their memberships in groups such as the International Utilities Revenue Protection Association and affiliated regional groups. Even though our companies may be in direct competition, it is to the benefit of ALL (except the thieves) that Revenue Protection Professionals, and subsequently their companies, share their experience and knowledge while keeping current with everything pertaining to the detection, prevention, correction, restitution, and when appropriate, prosecution of energy thieves.

Woody Woodward is the Team Leader of the Meter Validity Department of Nevada Power Company in Las Vegas, Nevada. He is currently Director Emeritus of the Western States Energy Theft Association (President, '96/'97) and Internet Web Master of the International Utilities Revenue Protection Association.

Top of Page

Return to Editorial Page

Return to IURPA Page