Companies

KPLC switches to pre-paid billing

kplc

A KPLC worker installs a meter box. The power firm seeks to cut costs linked to pursuing defaulters in the new meters plan. Photo/FILE

Electricity distributor KPLC has embarked on the second phase of installing pre-paid meters to improve revenue collection and cut costs incurred when pursuing defaulters.

The power firm plans to install an estimated 300,000 meters at a cost of Sh2.5 billion for customers mainly in urban areas by end of the year according to a statement published on Wednesday.

This follows a successful pilot testing of the system that started in April 2009.

Under a pre-paid system, consumers buy utility units in form of scratch cards. KPLC has been losing billions of shillings in unpaid customer bills and illegal connections.

The company’s balance sheet shows it has about Sh10 billion of electricity receivables, about half of which are in the “impairment” account.

“A large portion relates to rebilling as a result of meter tampering,” said KPLC in an information memorandum for its rights issue last year, which added that fixing of prepaid meters would cut the level of bad debts.

“Following the success of the pilot, procurement of prepaid meters for a country-wide rollout of the project is at an advanced stage,” says the company’s annual statement.

The pilot test, carried out between April 2009 and February last year, cost Sh338 million and was tested on 24,000 customers.

KPLC floated a rights issue in December 2010 that raised Sh9.5 billion, part of which will fund the billing switch.

Johnson Nderi, a research analyst at Suntra Investment Bank said starting in urban areas will hasten the roll out as it focuses on densely populated places.

“It is easier to instal in urban areas because one person can install more units than in far-off places,” said Mr Nderi.

KPLC stands to benefit from the prepaid meters since the gadget will seal revenue leakages and reduce the amount spent on reading meters and pursuing defaulters.

However, analysts say the move will be more useful in revenue collections rather than controlling costs.

Mr Nderi said installing prepaid meters will have a positive effect on the company’s cash flows since it means that KPLC will no longer have to wait for end-month to collect bills.

In its last financial year, KPLC made a net profit of Sh3.716 billion which was a 15 per cent increase from 2009’s Sh3.22 billion profit.

Analysts at CFC Stanbic Financial Services said prepaid meters will be increase the company’s profitability.

But to achieve the benefits of economies of scale, the power would have to cover a wider area.

“This may not be significant but it is still considerable,” said research analysts from CFC Stanbic.

KPLC has an estimated 1.463 million customers and 300,000 switching to pre-paid meters would account for 21 per cent.

Meter reading costs are expected to reduce but “you still need to physically verify if they are working,” said Mr Nderi.

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