Performance Audit: Smart and RF meters’ contribution to more accurate and timely utilities billing

The Auditor General, Mr Charles Deguara, presented the Performance Audit highlighted in caption to the Honourable Speaker of the House of Representatives Dr Anglu Farrugia. Through an investment of €131 million over a period of 12 years, the electricity smart and water radiofrequency (RF) meters generally yielded positive results. This included the automatic transmission of real-time readings based on actual consumption. Enemalta managed to substantially decrease the amount of unbilled electricity lost through apparent losses and an aggressive revenue collection policy, particularly with respect to cases of electricity theft. Also, Water Services Corporation (WSC) utilised data to detect in real time, third party internal leakages, thus reducing unnecessary financial burden, operational manpower and improved customer experience.

The potential for billing based on actual consumption through smart and RF meter technologies is currently estimated to be around 90 per cent of all electricity and water accounts. In practice, in 2020, these statistics were in the region of 80 and 67 per cent respectively. This variance is due to various technical issues resulting in delays in the transmission of readings. In the case of water RF meters, this variance mainly arises from the different interpretation by WSC and ARMS of what constitutes a ‘stopped’ water meter.

Apparent losses relating to electricity decreased by 76 per cent which translates into savings of over €45 million. On the other hand, non billed consumption relating to water remained stable over the project’s lifetime. In part, this is due to the greater susceptibility to technical faults of the water meter setup. A recent WSC and ARMS study calculated that in 2021, there were 17,928 water meters flagged for inspection, which amounts to over six per cent of total water accounts.

Despite the high level of automation, questions relating to cost efficiency at the billing agency arise. The number of staff employed by ARMS has increased significantly in recent years. It was not always evident as to why most departments within ARMS were augmented with human resources when both the billing and the administrative functions were generally automated. ARMS contends that the increase in staff is reflected both in the increased services being offered by ARMS as well as in the efficiency of internal processes and in the departments within the company.

The utilities’ companies and ARMS have always based billing on a pro rata basis where units in specific tariff bands are apportioned on a monthly or bi-monthly billing basis. This practice has also been endorsed by the Regulator. Billing calculations according to this methodology were generally found to be correct. However, the methodology relating to electricity consumption is the subject of Court litigation. Through other studies, NAO confirmed that a variance materialises between the current billing methodology and an annualised approach where billing considers the respective tariff bands and eco-contribution over a period of twelve months.

In actual fact, NAO’s analysis shows that, in 2020, 46 and 63 per cent of the total analysed electricity and water accounts respectively did not reveal any significant variance, essentially amounting to less than €2 annually whilst the more substantive variances are attributable mostly to the heavy consumer class.

Since the case is sub judice, it is prudent for the NAO to limit its comments to the foregoing. Nonetheless, Government committed to address issues of electricity and water consumption billing methodology in the recent Budget Speech. In this regard, one needs to keep in view the fundamental polluter pays principle enshrined in Article 191 of the Treaty on the functioning of the European Union.