December 13, 2019

Reducing energy theft is an urgent priority for the energy industry

Words by Michelle Simpson, Head of Services (Governance Services)

It is estimated that energy theft is costing the UK in the region of £500 million per year, which makes its way onto consumer bills at approximately £20 per household.

If an energy supplier identifies that a meter is tampered, they must attempt to gain access to the property and make safe, and then comes all the accounting issues. The supplier has to estimate the amount of stolen energy (not always easy with today’s array of energy consuming products in the household), bill the lost energy units and investigation costs as appropriate and then attempt to recover the amount so as to prevent a bad debt, which otherwise could ultimately inflate the average household bill further. Then the supplier also needs to get the units into the settlement process…and report these thefts through the Theft Risk Assessment Service (TRAS).

A lot to do here but surely the biggest driver for a supplier organisation is to protect the public against harm or death? And that has to be the case irrespective of whether the business case for running the operation doesn’t stack up. We have seen fatalities and injuries due to unsafe meters. Suppliers have a licence obligation to identify and investigate theft, through various means. What would public perception be if there was a fatality despite the fact the supplier had already been made aware of a tip-off through the stayenergysafe mechanism, for example?

I am not certain where energy theft obligations sit in the pecking order of priorities within all energy supply organisations. I know for some it is high priority, as health and safety is the key focus within their organisation, for some it may be that they fulfil their licence obligation and strive to achieve a reasonable cost offset by way of the Theft Detection Incentive Scheme mechanism in order to minimise operating expenses.

What I do find really encouraging is that suppliers work really well together in this area, not only trying to influence change but also to share and resolve complex theft issues. Ofgem has also been keen to listen and encourage improvements to the theft regime.

So, what can service providers to the energy industry do to help energy suppliers in their quest to identify meter tampers and prevent injury and death? I believe there are a number of potential options.

For example, for those well-established suppliers with full revenue protection processes, we can help to facilitate licence and code change improvements through direct supplier discussions, strategic programmes or industry working groups.

Additionally, for suppliers setting up or embedding revenue protection processes, we provide guidance on best practice and provide clarity on some of the more complex aspects such as the TRAS or Incentive Scheme mechanisms. We can influence senior management to invest in theft investigation activities, offering case studies where there has been actual harm and support the overall cost-benefit case.

Where suppliers fail to adhere to their licence and code obligations, we can also implement escalation processes and work with the regulator to influence participation at Board level.

To summarise, I think that although there needs to be a higher priority to tackle theft for safety reasons, there is a supportive energy theft framework to assist suppliers, from new to established, large and small, in fulfilling their energy theft obligations and reducing the risk of harm to all of us.