1. An ISO 9000 certifiable Revenue Assurance &Audit process (RA&AP)
An ISO 9000 certifiable Revenue Assurance &Audit process (RA&AP)
Rui Mano
Manager/Principal Consultant, KEMA Brazil
Denis Maciel Maia
CEO, Choice Technologies S.A.
Renato Cespedes, PhD
Director, KEMA Latin America
                                                               

2. Introduction Why RAAP (Revenue Assurance & Audit Process)?
Non-technical losses (NTLs) may exceed 20% in some countries
Lack of efficient NTLs processes
Loss numbers are not precise

3. Introduction
Lack of human and financial resources to perform all necessary actions
Field investigation, service orders
Debt negociation, consumer disconnection
Internal process auditing

4. Non-technical Losses - NTL
Commercial
Administrative
Receivables
Energy theft (illegal connections)
Meter frauds, meter by-passes
Meter errors & metering errors
Frauds may be done by employees or third-party service providers

5. NTL Internal process flaws and database inconsistencies Commercial
Administrative
Receivables
Internal process flaws and database inconsistencies
Errors
Incorrect tariff
May not avoid internal fraud

6. NTL : Delayed Payment Defaulter consumer Commercial Administrative
Receivables
Delayed Payment
Defaulter consumer
High volume & aging of receivable accounts
HIGH CO$T

7. NTL consequences – a vicious circle
Reduce EBITDA
Reduce CAPEX
Reduce Investment Capacity
and Operational Efficiency
NTL reduce EVA
NTL may increase tariffs
NTL prevention is demanded by Stockholders and Regulators

8. Current NTL prevention methods
New meters
New billing systems
What else ?
New seals
More investigation teams
Why NTL keep rising?
Frauds are dynamic
Fraud is now a criminal activity done by professionals
How far can we ever avoid fraud?

9. Revenue assurance process requirements
Efficient process, integrated
to other company’s departments
Revenue
Assurance
Process
Operational Resources are
Limited
Market Requires:
R, C - Reduce tariffs
SH - Increase revenue
Historical data, Team knowledge
Field / administrative actions

10. RAAP Process is based on ISO 9001 (PDCA )
Detect, Analyze, Correct and Feedback/Review

11. RAAP

12. Why automate processes ?
Make better decisions based in high volume of data available in different databases
Provide reliable information to field / administrative teams and to management
Log / document / control all events Workflow
Constant improvement by tuning / optimization Feedback

13. Macro-function : DETECTION
Function : to develop investigation rules
Transform non-structured knowledge in logical rules, formed by logical clauses
Compare several independent information sources simultaneously
Rule = a combination of logical clauses and filters
Examples :
Rule for reduction of consumption
Rule for investigating non-regularities in installations
Rule for verification of field measurements (against historial data)
Ex.: Rule A = (Clause 1) AND ((Clause 2) OR (Clause 3))
Manipulate high volumes of historical information

14. Macro-function : DETECTION

15. Macro-function : DETECTION
Functions : to develop alarms, execute investigation rules and check the alarm rules
Define weight for each rule
Define alarms for each rule
Define priority levels
Define responsible persons
Send alarm via
Guarantee analysis events are generated

16. Macro-function : ANALYSIS
Function : to identify behavior patterns for consumer contracts
Find out indications of possible loss/fraud through multiple dimensions (consumption patterns, field data, type of service order, etc)
Filter information by any dimension (geographical area, type of consumer, etc.)
Multidimensional analysis
Filter hierarchical dimensions
Uncover behavior patterns

17. Macro-function : ANALYSIS
Function : to develop and execute investigation profiles
Profile = a combination of investigation rules and filters
Examples :
Profile of consumers that are susceptible of paying their debt in 90 days or a profile of defaulter above 360 days
Profile of a geographical area or a specific type of business (for example, a shopping center, a bakery, an industry)
Ex.: Profile A = (Rule 1) AND ((Rule 2) OR (Rule 3))

18. Macro-function : ANALYSIS
Function : to filter, sort and select Consumer Contracts
Select consumer contract sorted by :
Risk level = sum of the weights for all intercepted rules
Financial relevance = financial impact calculated for the offense
Prioritize offenses / actions by fraud probability and expected value to be recovered

19. Macro-function : ANALYSIS

20. Macro-function : CORRECTION
Functions :
Generate corrective actions with defined responsibles, and calculated financial relevance
Follow-up execution until finalized
Follow-up schedules per actions, per responsible, per sector, per type of action
Update Consumer Contract status though corrective actions
Provide information to other systems (billing, inspection..)
Statistics – effectiveness of rules and corrective actions
Feedback – tuning / optimization of rules / weights

21. Benefits of ISO 9000 certification
Guarantee the conformity with international standards
Guarantee the adequacy with other corporate processes
Guarantee to Stockholders that best practices for revenue assurance are being applied and return of investment is being maximized
RAAP is based on ISO 9000 principles – certifiable process.

22. Case Study

23. Case Study The Cataguazes-Leopoldina System (SCL)
5 distribution companies (Energipe, Saelpa, CELB, CENF, Cataguazes)
Founded in 1905
1.8 million consumers
ABRADEE Award 2002 NorthEast and SouthEast
ABRADEE – the Brazilian Association for Electric Energy Distribution Companies

24. Information used by RAAP in SCL
Information sources (databases) for commercial loss investigation :
Substations
Feeders
Consumer Contracts
Billing
Service orders

25. Example of a simple rule
BILLING database
(Consumption: Average of last 03 months is 25% lower than at least 02 consumptions in the 12 months period before the 03-months considered period.

26. Example of a more sophisticated rule
COMSUMER database
Group: B and
Status: Connected and
Class: Urban and
Connection: One-phase or 2-phase or 3-phase AND
G 1
AND
SERVICE ORDERS database
(Non-regularity: Glass of meter is broken or instalation is suspect of fraud or meter with wrong connection
AND NOT Service Order : reconnection with instalation of meter, or supply suspended with meter removed, or instalation of meter, or removal of meter, or meter test, or meter verification, or field inspection, or urgent reconnection with meter instalation or meter replacement when SO date is after date of metering.)
(G 3 AND G4)

27. Example of an actual rule created by RAAP
COMSUMER database
Group: B and
Status: Connected and
Class: Urban and
Connection: Monophase or 2-phase or 3-phase AND
G 1
AND
(Consumption: Average of last 03 months is 25% lower than at least 02 consumptions in the 12 months period before the 03-months considered period OR
BILLING database
(G 2 OR
(Non-regularity: Glass of meter is broken or instalation is suspect of fraud or meter with wrong connection
AND NOT Service Order : reconnection with instalation of meter, or supply suspended with meter removed, or instalation of meter, or removal of meter, or meter test, or meter verification, or field inspection, or urgent reconnection with meter instalation or meter replacement when SO date is after date of metering.))
(G 3 AND G4))
SERVICE ORDERS database

28. Rule implemented by RAAP

29. Results in SCL Results of RAAP in SCL : Find NTL, uncover unknown NTL
Increase recovered revenue, EBITDA and EVA
Reduce cost of recovery actions
Creation of a Loss Fight Intelligence Dept. to reduce NTL and keep it low
Auditable result statistics to demonstrate benefits to Management and Stockholders.

30. Conclusion

31. Benefits from incorporating RAAP with Revenue Assurance software
Compare data from several independent sources (consumer records, billing, service orders, fraud records, energy balance, GIS, real-time data, call center data, receivable accounts, social-economic information, etc)
Manipulate large volume of data (hundreds of millions records)
Transform human non-structured knowledge in structured knowledge – build a knowledge database
NTL analysts build / edit rules - human-friendly interface, no programming necessary.

32. Benefits from incorporating RAAP with Revenue Assurance software
Uncover fraud patterns
Optimization of the investigation process
Follow-up corrective actions
Workflow guarantees analysis and correction events
Feedback process for tuning and optimization
Integration with other departments
Based on ISO 9000 – subject to be certified.
SOUND RESULTS – VERIFIABLE AND AUDITABLE