Mozambique: Advancing the National Utility’s Commercial Transformation

Speeches Shim

Electricidade de Mocambique (EDM) is the state-owned electric utility providing power to over 1.5 million customers throughout Mozambique. The utility’s performance has been suffering given that 24 percent of total power delivered is lost each year due to theft by customers, poor management within the utility, and an underperforming distribution meter system. As a result, the utility loses significant revenue each year and households and businesses are dissatisfied with the quality of the power that they do receive. EDM is currently undertaking a massive transformation to help the company transition to a more commercial orientation, reduce its electricity losses, improve its focus on the customer, and meet a mandate to connect over 400,000 new customers a year. The SRUC Team has been working closely with EDM and other donors in Mozambique to help the company through this process by undertaking a series of activities described below.

Commercial Metering and Loss Reduction Strategy

The Project Manager from EDM for the energy balancing pilot project, Sidónio Mabjaia, installs a compact florescent light bulb in a household as part of the kick-off with the community. This pilot project was identified by EDM as a priority through the Commercial Metering Strategy.
The Project Manager from EDM for the energy balancing pilot project, Sidónio Mabjaia, installs a compact florescent light bulb in a household as part of the kick-off with the community. This pilot project was identified by EDM as a priority through the Commercial Metering Strategy.
Deloitte

Under the USAID SRUC Task Order, a team of U.S., Brazilian, and Mozambican experts and a South African analytics firm worked alongside EDM’s Commercial Department to assess ongoing efforts to reduce commercial losses and improve meter performance. As part of this effort, the team successfully undertook the following: Evaluated available metering and commercial system data;

  1. Assessed information on the operation and interoperability of systems including communications systems, meter data management systems, commercial billing systems, etc.;
  2. Mapped utility processes and organizational structures (including department roles and responsibilities, staffing capabilities, etc.) within EDM specific to metering system management and customer billing systems;
  3. Met with departments responsible for developing and managing the utility approach to calculating system losses including the methodology used, inputs required, and quality of outputs received;
  4. Conducted site visits to learn first-hand about technologies used in the field, processes followed by crews when installing or maintaining meters, and challenges faced by EDM; and
  5. Conducted site visits and exchanges to ESKOM, South Africa’s electric utility, to tour their metering testing laboratories and interview leadership on standard operating protocols to maintain quality.
Alberto Banze, General Manager of EDM's Distribution Directorate, introduced the energy balancing pilot program to the Magoanine block chiefs - a set of community leaders - who will all relay the goals and expectations of the pilot to the community residents.
Alberto Banze, General Manager of EDM's Distribution Directorate, introduced the energy balancing pilot program to the Magoanine block chiefs - a set of community leaders - who will all relay the goals and expectations of the pilot to the community residents.
Deloitte

This work culminated with the preparation of the Commercial Metering & Loss Reduction Strategy (i.e. the Commercial Metering Strategy) which identified initiatives along the meter-to-cash value chain that could reduce commercial losses, improve the operational efficiency of the company’s revenue cycle, and enhance service delivery to its customers. This Commercial Metering Strategy identified key drivers of commercial losses, including: customers bypass, distribution meter failure, errors in the billing and collections process, and fraud, along with tangible approaches to solve those problems. To this end, the Roadmap in the strategy presents ten specific initiatives – along with the technologies needed, investments required, and institutional strengthening necessary – that will help EDM to transform the utility into a more commercially and financial viable entity able to effectively serve its customers and add new customers to the network. A summary presentation of the Commercial Metering Strategy was presented to the international donor Energy Sector Working Group in January 2017 to help EDM facilitate funding for the identified priorities.

Business Prospectuses

USAID and EDM examine the distribution assets in the pilot area of Magoanine
USAID and EDM examine the distribution assets in the pilot area of Magoanine. The pilot will include coaching EDM through a registration of all these assets and their customers in that neighborhood.
Deloitte

After the Commercial Metering & Loss Reduction Strategy was presented in late 2016, the EDM Chief Operating Officer asked the SRUC team to help develop a detailed business case for the highest priority initiatives in the Commercial Metering Strategy to help EDM present a potential list of transformation projects that needed the support of the donor community in Mozambique. These detailed business prospectuses discuss the context for the specific project, trainings impacts on the departments and people within EDM, the detailed deliverables associated with each project, and financial business case. The topics covered in the prospectuses include the following:

EDM presented these final prospectuses to the international donor Energy Sector Working Group in December 2017 and is following up with specific donors to purse the projects that align to their goals and EDM’s transformation needs.

Meter Laboratory Testing Roadmap

The Commercial Metering Strategy also included a roadmap  for a establishing a meter laboratory for EDM. EDM has consistently experienced issues with the quality of their meters and meter installation – exacerbating commercial losses and making it difficult to collect data that allows them to properly analyze the source of the problem.  The company’s current process to test the meters is very limited. EDM only performs the factory acceptance testing (FAT) at the manufacturer. The FAT is often done on batch samples (approximately 5 percent). No calibration tests are conducted after the meters are shipped and arrive in Mozambique, resulting in incorrect meter readings, billing, and customer dissatisfaction.

EDM loses between 35,000 to 40,000 distribution meters annually due to malfunctions. The company’s lack of capabilitiy to test meters hinders EDM’s ability to claim reimbursement for faulty meters from the vendor. This has a significant cost, and EDM is often unable to determine whether they can claim this back from the vendor or not. Furthermore, EDM is often unable to validate or calibrate meters prior to installing them in the field; this resulted in customer dissatisfaction and errors in billing. 

The SRUC Team advised EDM to consider the implementation of a Type Test lab for an improved acceptance testing and meter calibration. SRUC also provided guidance on how to align their meter testing procedures with international best practice to mitigate its impact on performance. This work included evaluating options on how EDM can best address the large number of meter failures and recommendations for a large-scale meter replacement program (for existing customers) and network expansion program (to connect new customers). In a Metering Laboratory Roadmap report, the SRUC team analyzed the various options for laboratory buildouts and laid out benefits and costs for each scenario. The Roadmap included a cost estimation as well as the technical specification for a Type Test lab tailored for EDM needs. Furthermore, it analyzed the alternatives EDM has for calibrating its meters and performing tests to evaluate their reliability prior to acquisition and installed in the field. 

A boy waits for an after-school snack at a grocery kiosk within the Magoanine pilot area. A little less than 10 percent of the clients in the pilot area are commercial clients operating small businesses.
A boy waits for an after-school snack at a grocery kiosk within the Magoanine pilot area. A little less than 10 percent of the clients in the pilot area are commercial clients operating small businesses.
Deloitte

EDM used the study to understand the relevant meter testing technical specifications as well as to benchmark EDM against the approaches used in other countries and the costs involved to create a lab. 

As result of this, EDM launched a tender to select a laboratory solution, guided by the terms of the specifications set out in the study. They have also used the requirements set out in the study to build their internal capability to manage these assets themselves in the future.

Network Customer Information System (NCIS) Pilot

One of the areas identified in the Commercial Metering Strategy was an improved Network Customer System (NCIS). This initiative would allow EDM to better locate its network assets and customers and better understand where there are areas of high losses or overloading on the system. The Team is currently engaged in a yearlong pilot with EDM to build out the supporting businesses processes, technology and databases, software systems, field force procedures, and internal training requirements.

The pilot will integrate the existing company’s network and customer information systems, comprehensively update the distribution asset and customer location information for the pilot area, and eventually allow the company to undertake an “energy balancing” exercise that yields geographic information on commercial losses in the system.  Once EDM rolls out the pilot nationally, EDM will be able to accurately identify commercial losses by area (region, city, feeder, and/or transformer-level) and/or by consumer type (residential, industrial, and commercial) for the first time.

As the utility improves its ability to detect losses, the Team is working with Distribution Department on how best to engage the community and its customers once they have discovered abnormal usage patterns or losses in the system. The Team will help EDM distribute energy efficient lamps throughout the pilot area, engage in community meetings with leaders to explain the responsibilities and roles of the utility, and connect directly to their customers as partners. 

The NCIS Pilot is currently underway in the neighborhood of Magoanine in Maputo. This area was selected because the range of commercial loss issues faced in the neighborhood is considered representative of those in a typical Maputo neighborhood including power theft, tampered meters, and infrastructure issues. The region includes both split and integrated pre-payment meters.

Last updated: January 26, 2018

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