STUDY ON AUTOMATIC METERING INFRASTRUCTURE (AMI)

By Engr. Norman A, Pollentes

Chapter I: Introduction

I.1 Background of the Study

Way back in the year 1990’s, the Philippine Government reported that its power industry had
succumbed to different kinds of problems that resulted to increase in cost of electricity:
a. NAPOCOR inefficiency,
b. Ballooning foreign loans,
c. High cost of Government subsidy to consumers,
d. Purchase Power Adjustment (PPA)

It was through the persuasion of then Pres. Arroyo, an economist, that the EPIRA was passed by
the Congress and the Senate and was eventually promulgated last June 2001. EPIRA was
conceived address inefficiency and consequently to result to the decrease of cost of electricity.
[Unfortunately, the outcome was ironic because Philippines is now one of the highest priced
electricity in Asia]

As EPIRA started actual implementation, the cost of electricity was unbundled into layers of
Generation, Transmission, Sub-Transmission, Distribution (Distribution+Supply+Metering) and
Supply (Retail electricity Supply.). In the case of Ceneco, its franchise business covers the layers
of:
a. Sub-Transmission,
b. Distribution, and
c. Supply
Under EPIRA, ERC was created as the regulator side by side with NEA to ensure that ECs are
operating efficiently and output results to reduction of price of electricity.
Thus, there is an ever-growing need to be efficient, accurate and competitive in order sustain the
viability of ECs. It is because ECs that can provide the least cost will definitely be the ones who
will be able to survive especially in the years starting 2021;
The Systems Loss CAP

Systems Loss (SL) are losses that is computed as the variance between Purchased kWh and Sold
kWh. Ceneco, just like Meralco or any other Distribution Utilities, is allowed to pass on the cost
of SL to their consumers by way of SL charge. However, the said SL that is under regulation by
ERC has a maximum value called the SL cap which is the limit of how much SL can an EC pass
on to its consumers. The losses above the cap cannot be passed on the consumers and will be
absorbed by Ceneco and is called subsidized Systems Loss. At present, the said cap is set to 11%.

One of the increasingly tight regulation by the Energy Regulatory Commission (ERC) and NEA
are as follows: a) ERC Resolution No. 20, Series of 2017, and b) NEA 2018 KPS (Systems Loss)

Such regulation prescribes that in the year 2021, the systems loss cap of Ceneco will be
progressively reduced from 12% in the year 2018 to 8.25% in the year 2021. So, with the
current Systems Loss performance of Ceneco of 12%, 8.25% is posing a difficult and
challenging task that requires early preparation.

Systems Loss is further divided into two (2) categories based on its nature:
a. Technical losses (currently 5% in the case of Ceneco), and
b. Pilferage (currently 7%). [ Data taken from Ceneco Corporate Planning Division]

Year Technical Loss Pilferage

2018 6% 6.0%
2019 6% 4.0%
2020 5% 3.5%
2021 5% 3.25%
Table 1: Annual Systems Loss Cap Reduction
Any Systems Loss in excess of the systems loss cap will be subsidized/absorbed by Ceneco
wherein the cost roughly amounts to P50M/1%SL/year. Thus, if by 2021, Ceneco's Systems
loss will still be 12%, Ceneco will be compelled to subsidize (12% - 8.25% = 3.75%) 3.75%SL
or roughly (3.75x50M) P187M/year. This amount is large enough to cripple Ceneco’s
Operation and result to eventual business closure.

Radical Solution for a Radical Result

The most radical action plan that Ceneco or any other Distribution Utility can make for now
without indulging costly approach and yet achieve effective result is to REDUCE pilferage to a
target 3.25% from existing 6% or a reduction of 3.25% (as stated above) in order to ensure that
their 2021 Systems Loss be kept within the cap of 8.25%.

The Prospect

Automatic Meter Reading is currently one of the emerging metering solutions that once it is
properly introduced and explained to EC customers, everyone gets excited.

Its major selling point is its capability of gathering reading/energy consumption on an hourly and
real time basis that can be used as a tool for monitoring consumer consumption in a real time
hourly scale. Such information can be used to detect the suspected meters having outage or
committing pilferage. Areas can easily be identified where pilferage or outages occur with
accuracy and high probability. Such feature can immensely contribute to help Ceneco achieve
higher Key Performance Standard (KPS) compliance especially in achieving Systems Loss that
below the Systems Loss cap.

AMI as a Modern Tool to reduce Systems Loss and Interruption

Here comes the AMI Technology. With AMI or Automated Metering Infrastructure, new solution
to combat Pilferage and monitor Outages is introduced using Information Technology.
Conceptually, it is envisioned as a deployment of automatic meter reading using smart meters
with integrated communication facility. In the case of Ceneco, all its 200,000 consumers will be
installed with smart meters whose periodic readings (say hourly readings) will be transmitted to
Ceneco's computer on a real-time basis (say hourly also) by way of different communication
infrastructures: GSM, Radio Frequency, wired area network.

Such reading data will undergo computer data analysis. Every Consumer-meter will be created a
profile based on their class and hourly consumption patterns. Any variation to the pattern versus
actual reading will be reported by the computer system and will be subjected to actual possible
pilferage evaluation. It will be sorted and prioritized and be endorsed to apprehension unit for
consequent field inspection;

Another application of such meters is that they can be used as check meters for every Transformer
to monitor real time Systems Loss per transformer. Areas with the high Transformer Systems Loss
can be identified and put into priority for pilferage field inspection.

It can also provide information of areas suffering from possible outage before the affected
consumer complains about it.

Procurement Options

AMI is pioneering project, and in the case of Ceneco, its deployment could require an investment
of up to P1Billion. However, the cost of implementing the said project may be NULL if the DU
or EC agrees to simply replace its existing metering operation as far as metering is concerned by
AMI Technology. This study may be further commissioned to quantify the COST, BENEFIT AND
RISK.

The method of procurement for costly projects usually undergoes public bidding as prescribed in
Government bidding law and NEA procurement law. It is presumed to be transparent. The Bidder
just make sure it is compliant with the Terms of Reference and the Eligibility Requirements.
However, another approach may be explored, that is the OPEX approach. The scheme is that, the
Buyer agrees to contract the said project on a long-term or staggered basis (say 10 years) through
gradual and progressive implementation of AMI. The mode of payment may also be progressive.
Thus, a Project Gantt Chart will then be established as part of the contract.

I.2 Statement of the Problem

a. Is there a significant degree of appreciation by the Management in deploying AMI over the
existing metering operation?
b. Is there an emerging need to deploy AMI as perceived by Board, Management and Staff?
c. Is there a difference in perception by the Board, Management and Staff on the benefits of
deploying AMI over the existing metering operation?

I.3 Objectives of the Study

a. To understand what is AMI and what are its features

b. To determine whether AMI is beneficiary to Ceneco by what degree and level
c. To compare AMI to Ceneco’s existing metering operation
d. To determine whether or not AMI can help Ceneco achieve greater regulatory compliance
e. To determine whether or not AMI can help Ceneco achieve greater productivity
f. To determine whether or not AMI can help Ceneco improve its Apprehension activities
g. To determine what is the impact of AMI to Ceneco as an organization
h. To determine what is the impact of AMI to Ceneco consumers

I.4 Hypothesis

Using NULL Hypothesis:

“There is no emerging need for AMI to be deployed by Ceneco as perceived by Ceneco employees
compared to Ceneco existing operation..”
“There is no significant benefits by AMI as perceived by Ceneco employees as compared to
Ceneco existing operation.”
“There is no significant advantages by AMI as perceived by Ceneco employees as compared to
Ceneco existing operation.”

I.5 Importance/Significance of the Study

This study is conducted to determine whether Ceneco needs AMI as a better solution for Ceneco
to achieve better viability and regulatory compliance compared with its existing Metering
Operation as part of Ceneco’s pursuit for Total Quality Management

I.5.a Assumption of the Study

It is assumed that in the conduct of the study:

a. The respondents will provide their honest answers to the questionnaire;
b. The respondents are proficient to answer the questionnaire;
c. The respondents are competent/qualified to answer the questionnaire;
d. That the technology on issue can be realistically procured;
e. That Ceneco can adapt to the said technology;

I.5.b Study of Variables and Indicators

Variables and Indicators may be anchored on the perceived change in operational performance of
the following:

A. Metering operations:
Ceneco currently undertakes its metering operation under the following activities:
1. Meter Reading 4. Load Evaluation
2. Billing 5. Bill Rendering
3. Disconnection 6. Reconnection

B. Anti-pilferage Operations
1. Identifying suspect pilferers
 C. Emergency Operations
1. Identifying Outages

I.5.c Theoretical Framework

a. Information technology
increases productivity and
reduces manpower resource
requirements:

Figure 1.
a.1 Computer-based Automation is one of the implementations of Information Technology. Its
success is guaranteed by adherence to the 7 basic phases of development to produce quality
Information System (IS).

Figure 2

a.2 The Users of the IS must undergo/acquire substantial training/orientation to the IS operation
and functionality to acquire the needed proficiency upon the IS deployment
a.3 There were observations that older generation have a hard time adapting and appreciating IT
related projects. That is why more time and attention is needed to convince them because their
policy support is significant to the success of the project.
 a.4. It must be substantially proven that the project benefit outweighs the cost in the acceptable
rang of time.

b. Performance of a regulated utility company is measured on its compliance to Regulatory Policy.

Figure 3

b.1 Substantial effort is needed for a utility company to identify and gather complete list
of the updated regulatory policies like rules and regulations, implementing guidelines,
performance standards, governing principles, etc. to make sure that target compliance are
based on complete considerations.
b.2 Compliance Plan must then be put in place to ensure that full compliance is achieved.

I.5.d Conceptual Framework

Success in the deployment of a technology project must be anchored on the following
foundations:
a. Positive appreciation on the part of the Board, Management and staff on the risk and
benefits of the project
b. Positive Benefit-Cost ratio
c. Credibility and track record of the solutions provider
d. Readiness of the institution to operate the project
e. Quality of the project
f. Timeliness of the deployment of the project
g. Reliability of project operation
 h. Identified improvements to Ceneco operation and increased adherence to regulatory
compliance

Figure 4

I.6 Scope and Limitations of the Study

The scope and limitations of the study is confined on how Ceneco improve itself to achieve better
compliance to regulatory prescribed Systems Loss standard.

I.7 Significance of the Study

To determine whether or not Ceneco can significantly benefit from the deployment of AMI over
its existing operation

I.8 Definition of Terms

Automatic Metering Infrastructure
Regulatory Policy
Regulatory Compliance
Phases of Software Development
Information System
Information Technology