Energy theft: switched-on solutions to the UK power sector’s £440m problem

Energy theft is a serious issue and Ofgem figures reveal that 86% of energy companies are missing the UK regulator’s residential targets, despite being required to detect, investigate and prevent the crime. Julian Turner talks mitigation strategies with Grosvenor Services Group MD Lloyd Birkhead.

Inaccurate billing, the nationwide roll out of smart meters, teaser tariffs and rip-off rates, the pay packets of the UK’s ‘Big 6’ energy company bosses. All of these subjects regularly command media column inches, while the rather more prosaic issue of energy theft is often side-lined or ignored.

In reality, ‘meter cheating’ – the illegal practice of tampering with a gas or electricity meter or its connections so that it does not properly log the energy used – constitutes a serious financial issue for the UK energy sector, with more than £400m worth of electricity and gas being stolen each year.

This not only impacts energy suppliers, it also has a detrimental effect on consumers by adding £20 annually to the average household bill. Energy theft can also result in unsafe gas and electrical supplies, putting the public at risk of electric shocks, fires, and, in some extreme cases, explosions.

The government’s gas and electricity regulator Ofgem requires energy firms to play an active role in detecting, investigating and preventing the theft of electricity as part of the electricity supply licence. Worryingly, however, recent research suggests that, thanks to budget and resource pressures, some suppliers are engaging in a damaging false economy by not carrying out robust energy theft checks.

“Some 150,000 cases of suspected energy theft and abstraction cost the UK £440m each year, but as figures supplied by Ofgem show, 86% of energy companies nationwide are falling short of Ofgem targets to tackle the crime,” explains Lloyd Birkhead, managing director at Grosvenor Services Group, part of Echo Managed Services, a provider of energy theft investigation solutions.

“However, what is more concerning is that, despite the severe safety risks the practice presents, some are prioritising financial concerns above a social responsibility to tackle the crime and keep the communities they serve safe.”

/ Energy theft leads to a death or serious injury every 10 days in the UK. /

Beating the meter cheats: detection and investigation strategies

‘Energy Theft: A Focus on Consumer Awareness and Attitudes’ studied 2,000 households across the UK to identify strategies in the battle against energy theft, and build public awareness and support.

The research revealed 86% of bill-payers believe companies should be working harder to tackle the crime, potentially impacting brand reputation. To this end, the UK Revenue Protection Association (UKRPA) has actively encouraged collaboration between suppliers to detect theft and abstraction.

Part of the solution, says Birkhead, is for energy suppliers to eschew budgetary concerns in favour of prioritising careful and proactive detection and investigation, including highly-trained field teams.
“Measures to combat the issue are often not prioritised, given that deploying revenue protection teams to investigate energy theft can be seen as taxing on both resource and budget,” he says. 

“In an attempt to keep tamper investigations cost-neutral, some suppliers are not focusing on the bigger picture. In the long-run, investigating and resolving cases of energy theft brings financial benefit through both recovering monies already owed and preventing future losses.

/ Energy theft leads to a death or serious injury every ten days in the UK. /

Businesses have scope to be smarter with regards to investigation resourcing, he says, adding that the majority of energy theft investigations do not require the technical know-how of an engineer.

“In fact, work with Grosvenor Services Group proved that 75% of cases can be investigated by non-technical resource – with the same, or even better, outcomes,” he states. “Following this approach allows engineers to focus solely on more complex cases and can generate significant long-term savings for suppliers.”

“However, this crime is not only financially detrimental to both energy suppliers and honest bill paying customers, but also potentially fatal,” Birkhead adds. “In some form, energy theft leads to a death or serious injury every ten days in the UK, due to electric shocks and, in the case of gas theft, large explosions are a real risk.

“It is time that the sector placed the issue of energy theft higher on its priority list.”

/ 44% of people would be apprehensive to report energy theft due to worries about potential repercussions. /

Safety first: community education and perception

Of the minority of survey respondents that didn’t see energy theft as inherently wrong, 39% justified this view by saying that energy prices are unfair and too high. Therefore, tackling this perception, as well as showing how theft increases costs for all consumers, was deemed likely to have most impact.

The results also suggested that if energy companies are seen to be acting ‘unfairly’, incidents of energy theft may well increase, and that the onus is on energy companies to build trust with customers in order to help tackle criminal behaviour. The survey also illustrated the need for better education; for example, 12% of the aforementioned group see energy theft as a ‘victimless’ crime, while 75% of consumers don’t currently know how to spot signs that energy theft is taking place.

/ 44% of people would be apprehensive to report energy theft due to worries about potential repercussions. /

Highlighting not just the financial issues, but also the safety risks for individuals and communities, should therefore continue to be a priority for the gas and electricity sector, as Birkhead explains.

“A huge factor in proactively reducing meter tampering is education on the serious safety risks it presents – the nature of which more than a third of the public are oblivious to,” he states. “It is a concerning figure that the industry is working to reduce. Crimestoppers set up its Stay Energy Safe campaign to highlight the dangers and provide communities with the resources to spot incidences.

“Our study found that 44% of people would be apprehensive to report energy theft due to worries about potential repercussions. Raising customer awareness of advice and resources available to them, such as the UKRPA’s reporting service and the Crimestoppers anonymous tip-off line, is a good way of reducing this figure.”

/ Working proactively to engage with customers will simultaneously improve suppliers’ reputation and prevent crime before it occurs. /

Future proof: customer engagement and Ofgem targets

From an industry standpoint, energy suppliers have a unique opportunity to engage with customers via PR, social media interaction and email campaigns in order to increase knowledge of the risks of energy theft. Just 14% of people recalled seeing media coverage related to the issue in the last year.

“Energy theft is a growing issue which must be challenged,” Birkhead concludes. “A considered approach to education is required to equip communities with the knowledge to detect and report incidences. Working proactively to engage with customers will simultaneously improve suppliers’ reputation and prevent crime before it occurs.”

/ Working proactively to engage with customers will simultaneously improve suppliers’ reputation and prevent crime before it occurs. /

Ultimately, a coordinated campaign aimed at raising public support in the battle against energy theft coupled with innovative investigation resourcing strategies from suppliers – giving them a better chance of hitting Ofgem energy theft detection targets – will benefit both the UK gas and electricity industry and the consumers it serves.

“The suppliers that look to innovate by implementing new strategies for investigation resourcing stand to save significant revenue,” says Birkhead. “A change in methodology will alleviate the substantial pressure on workforces and make targets more obtainable, driving the sector forward into a brighter future.”

Playing catch-up in the US

“In Europe, offshore wind has been there for a number of years, but I think in the United States we're a little bit behind that,” said Karustis.

Should it be successful, Halo’s approach could lead to a surge in US onshore wind, which has historically lagged behind other regions in terms of wind installation and production. Since 2016, according to the International Energy Agency, the US has installed just 22.6GW of new onshore wind capacity, compared to 30.7GW in the EU, and 50.3GW in China, struggles that Karustis hopes to address.

Last December, the Chinese Government approved a number of new offshore wind projects, totalling 13GW of production and costing around $13.3bn, as the country continues to invest in utility-scale power. Karustis hopes projects like Halo’s distributed turbine can contribute to a more balanced wind sector in the US, with both large- and small-scale operations expanding renewable power.

“The large-scale wind turbines wouldn't be phased out, it's kind of an ‘all of the above’ thing,” he said. “The large wind farms play a very important role for us in reducing the carbon footprint globally, and hopefully the micro wind market is going to augment that by producing energy where energy is being used. It's a good two-pronged approach.”

This two-pronged approach also includes other renewable power sources, including solar and utility-scale wind; Halo is not trying to replace all clean energy with its turbines, but offer another option for people eager to engage in renewable power, who may have been historically sidelined due to the high costs of building utility-scale facilities or the unsuitable geographical characteristics of the places they live.

“When you look at that market we're very excited because just as megawatt-scale wind is a large market, I think distributed wind can be as big of a market or bigger over time,” said Karustis.

“When you have incentives and improvements in the technology, the costs go down, so you can be more competitive and compete, and that's certainly the case with megawatt-scale wind,” he continued. “Just 15/20 years ago, it wasn't competitive with natural gas [and] coal, but it is now. So those government policies have helped and they've driven the technology improvements, so it's all bundled together.”