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Fiat Lux | “Yanking a Cat”

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Source: Brasil Econômico.

Electricity theft is a major drag on Brazilian energy  distributors, along with pirated intellectual property, satellite TV and Internet, cooking gas, and other components of the grid.

In this interview, the president of Light (Rio de Janeiro) reveals a new strategy against «puxando um gato» — «yanking a cat», the term used for shimmying up a transformer pole and hooking up for free, bypassing the meter.

Paulo Roberto Ribeiro Pinto, CEO of Light, says the problem is one of his major concerns and that it affects R$ 2 billion in annual revenues.

Light is all too familiar with the dimensions of the problem. Every year, the company loses R$ 2 billion — equivalent to the income from the entire state of Espírito Santo — to electricity theft. Since the privatization of the energy distribution sector in 1996, the percentage of energy stolen in the region of Light’s concession has grown from 16% to 22%.

Last year, to combat the problem, 30 Zero Loss Areas (APZs, in Portuguese) were created: regions with up to 15,000 consumers currently serviced by outsourced teams that receive a bonus for reducing theft and default on energy bills.

In recent years, Light has been under pressure to make new investments due to such episode as the explosion of manhole covers in Rio de Janeiro. How has the company adjusted its costs to the needs of the market?

Starting in 2006, Light had no problem with investments. We have invested R$ 700 million per year on average. Just to give you a rough idea, the depreciation of the company is some R$ 400 to R$ 450 million. This is the minimum we need to recycle in terms of investment. In the last five years, the last period in the current rate cycle, we managed to achieve 27% more than the regulatory scheme called for. We have invested R$ 1 billion alone over the past five years in combating theft and other losses.

The investments are being made. Light is a century-old business covering a 55,000 km area above ground, 6,000 km of underground network, as well as high-tension and medium-tension, substations. These investments must continue, as the market grows, which makes theft the key aggravating factor. I have made my investments, the substations, the transformers, adjusted to the dimensions of the public who pay, who are registered customers. Those who connect illegally to the transformer are being unfair to those who pay.

This is a chronic problem, is it not?

This is a problem that is very characteristic of Rio de Janeiro state. There are other states in which losses are high, but there the problem is directly related to income, with the socioeconomic situation of the consumer. That is not true here. Here in Rio, it is a cultural phenomenon. We have seen energy theft in upper middle-class condominiums, gasoline stations, gyms, and many private residences. With the new technology we are installing, we are able to identify these thefts.

But did you not experience a resurgence in late 2012?

The temperature is an enemy of ours. It should be a favorable condition, if everything were normal, because it increases my revenue. The company’s formal market grows 2.5% per year. The informal market grows 6%. The hotter it gets, then, the bigger the problem. In other states, where personal income is on the rise, there has been a significant reduction in energy theft and defaults. It used to be the humbler sector of society which did not pay and stole out of necessity. In Rio, it is different, there is this attitude of wanting special privileges. We have a new program called Light Legal which is a bit like a Dry Law: We visit a given neighborhood and conduct a thorough inspection of gas stations, fish shops, bakeries, restaurants, in search of irregularities.

Has the company also worked on the issue internally. In some cases, the clandestine hook-ups are performed by Light’s own outsourced workers …

From the internal point of view, we are working on the issue of self-esteem. Light is a very meritocratic company and it is in this way that you affect the outsourcer in this climate. Over outsourced field work, we have more or less control, but we are watching these workers closely. At the endo f the year, we will raffle two cars among in-house and outsourced electricians, based on metrics such as reducation of losses. We are also investing in the APZs, the Zero Loss Areas.

We are putting together groups, using SEBRAE, [the Brazilian Service for the Support of  Small and Micro Businesses] as a training partner for our suppliers.

These are people who work under the Simples scheme. They pay practically no income tax and run a company with five or six persons. They have a cost structure that Light approves: “This here is your fixed cost.” Fuel, transportation, payroll. We assign it an area serving between 10,000 and 15,000 consumers. And he is rewarded for performance. He has a table that tells him that default  in his region is 70% and theft is 90%. This This provides him with information that links loss reduction to a decrease in past-due accounts. He might earn five or six bonus salaries depending on his performance. I have no need to oversee his work. I track him according to his performaqnce. If he does well, he is rewarded, and this protects him from the R$ 100 bribe that some guy from the bakery might offer him.

Is it possible to measure results in the APZs?

The APZs began a year ago and are achieving fantastic results.  começaram há um ano e já estão trazendo resultados fantásticos. … Areas in which we suffered 40% losses we have reduced to 15%, 12%. Defaults, formerly 80%, are down to 30%, 40%.

Has technology been important to the reduction of losses?

This is an important point: in these areas, we install a secure network that enables use to cut off and reestablish supply from a distance. The people at APZ mostly work out of their office, they spend very little on fuel, and they offer rapid service to 10,000 users. You associate technological innovation with the presence of this worker. He knows he is being monitored. If his performance is not good, I have a means of control, without having to go and see him. This differs from the usual outsourcing model, which requires a person to conduct oversight. We no have 30 APZs in operation and our plan is to have 150 in operation by year end. If each area covers 20,000 customers, we are talking about 3 million consumers.

And what areas are the focus of this initiative?

The communities and the Baixada Fluminense region.

What influence has the installation of the UPPs — «Pacification Police Units» — had on the theft of energy?

We can look at the case of Dona Marta, a hillside shantytown in the Southern Zone of Rio, where the UPP has operated for two years. When we entered the community, the rate of theft was 70%. We collected from only 30% of our customers and 60% would not deal with us. Today, prompt payment of the energy bill is 98% and energy theft is practically zero.

And the consumer who stole energy and spent the entire day with the air conditioning on?

He has changed his habits. The process that brought the UPP and Light into the community was accompanied by an energy efficiency initiative.  We try to help the consumer reduce their bills to fit their budgets. Average consumption is high, between 260 and 300 kW/h. We have to get the community on our side. What is most difficult for us? Selling the consumer a product he has received for free for his entire life. It does no good to say “We are going to formalize this system and I will provide you with better quality.” Quality? He is going to say: No one has paid for energy here since my grandafather’s days. You have to offer them something that convinces them that paying the bill is worthwhile. For this reason, we invest in athletic fields, socio-cultural projects.

Has this type of work been expanded beyond the shantytowns?

We are also working with the city governments. In 2006, most city governments of Rio state did not pay. Even with the Fiscal Responsibility Law, there were municipalities that did not even include energy costs in their official budgets. It was at that point that we began to engage in sponsorhips. We told the mayors that we were willing to formalize the process, to guarantee continuity of current. Behind the scenes, we finance and facilitate as much as we possibly can.

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