energies

Article
The Impact of Smart Prepaid Metering on Non-Technical Losses
in Ghana
Gideon Otchere-Appiah 1,2 , Shingo Takahashi 2 , Mavis Serwaa Yeboah 3 and Yuichiro Yoshida 2,4, *

1 Engineering Services Department, Northern Electricity Distribution Company, P.O. Box TL 77 Tamale, Ghana;
gideonotchere@yahoo.com
2 Department of Development Policy, Graduate School for International Development and Cooperation,
Division of Development Science, Hiroshima University, Higashihiroshima 739-8511, Japan;
staka29@hiroshima-u.ac.jp
3 Department of Computer Science, Faculty of Applied Science and Technology, Sunyani Technical University,
P.O. Box 206 Sunyani, Ghana; mavisotchere@ymail.com
4 Network for Education and Research on Peace and Sustainability (NERPS), Hiroshima University,
Higashihiroshima 739-8511, Japan
* Correspondence: yuichiro@hiroshima-u.ac.jp

Abstract: The high incidence of electricity theft, meter tampering, meter bypassing, reading errors,
and defective and aged meters, among others, increases utility losses, especially non-technical losses
(NTL). A utility in Ghana piloted a non-technical loss reduction program in 2019 to replace postpaid
meters with anti-tamper, anti-fraud, and anti-theft smart prepaid meters. By using customer-level
residential billing panel data from 2018 to 2019 obtained from the utility, we assess the effectiveness
of this program using the difference-in-differences fixed-effect approach. On average, the results
indicated that the reported amount of customers’ monthly electricity consumption increases by 13.2%





 when any tampered postpaid meter is replaced with a smart prepaid meter, indicating the NTLs
Citation: Otchere-Appiah, G.; by customers. We further employed quantile difference-in-differences regression and observed that
Takahashi, S.; Yeboah, M.S.; Yoshida, reported energy consumption has increased for all households except those at the lower quantile
Y. The Impact of Smart Prepaid (25th quantile). We conclude that smart prepaid metering could be a remedy to reduce NTLs for the
Metering on Non-Technical Losses in electricity distribution sector in areas where electricity theft is rampant.
Ghana. Energies 2021, 14, 1852.
https://doi.org/10.3390/en14071852 Keywords: smart meters; electricity theft; non-technical losses; difference-in-differences; quan-
tile regression
Academic Editor: Jesús
Manuel Riquelme-Santos

Received: 25 February 2021

1. Introduction
Accepted: 23 March 2021
Published: 26 March 2021
Access to a reliable and adequate supply of electricity is central to the achievement
of socioeconomic and environmental development in any country [1,2]. The growth of
Publisher’s Note: MDPI stays neutral
different sectors of an economy is highly dependent on the development of the electricity
with regard to jurisdictional claims in
sector. The quality of life and poverty of the citizenry are all linked to the vibrancy of the
published maps and institutional affil- electricity sector.
iations. Over the years, the Government of Ghana (GoG) has shown considerable commitment
to providing adequate electricity to its citizenry through the National Electrification Scheme
(NES), Self-Help Electrification Project (SHEP), Ghana Energy Development and Access
Project (GEDAP), and some decentralized renewable power projects [3,4].
Copyright: © 2021 by the authors.
Despite the tremendous contribution of electricity to the country’s total gross domestic
Licensee MDPI, Basel, Switzerland.
product (GDP), it is evident that Ghana faces some major serious challenges in the electricity
This article is an open access article
sector, such as high losses and power reliability. Not only in Ghana, globally, power utilities
distributed under the terms and are faced with issues of losses, and several efforts are being made to reduce them, as they
conditions of the Creative Commons have serious cost implications [5]. The losses affect the finances of the utilities such that
Attribution (CC BY) license (https:// the utilities are unable to raise the needed funds to invest in logistics for their operations,
creativecommons.org/licenses/by/ conduct maintenance, or invest in new projects that can help power reliability [6,7]. Losses
4.0/). lead to electricity shortages and unreliable power supply that affect businesses, firms,

Energies 2021, 14, 1852. https://doi.org/10.3390/en14071852 https://www.mdpi.com/journal/energies

Energies 2021, 14, 1852 2 of 16

agricultural enterprises, unemployment, health systems, transportation systems, and the

economy [8–10].
The losses are of two types: (1) technical losses and (2) non-technical losses (NTL)
or commercial losses. Technical losses are inherent in electrical equipment, and they are
associated with heat dissipation as current passes through them to reach the customer. Im-
provements in equipment and power system design can reduce these losses, although this
requires a substantial amount of capital [11]. Electricity theft, meter tampering, incorrect
meter reading, defects, and aged meters cause NTLs [12,13].
NTLs have severe effects on generation capacity, as the situation requires generation to
meet the growing demand for legitimate and illegal consumers. NTLs overload generating
plants and make the planning of supplying reliable power very challenging. To ensure a re-
liable power supply at all times, NTLs must be taken into account, and studies have shown
that NTLs constitute approximately 10–50% of the total generation capacity, especially in
developing countries [14–16]. Other authors in their studies have shared similar concerns
in many countries, such as India [17], Nepal [18], Nigeria [19], Ghana [20], Uganda [21],
Kenya [22], and Tanzania [23].
This study focuses on NTL in the distribution sector, since the economic viability of
the whole electricity sector hinges on distribution [24]. The distribution sector, especially
in Africa, is bedeviled with high NTL caused mostly by electricity theft, meter bypassing,
meter tampering, defective and aged meters, incorrect meter readings, deliberate submis-
sion of false meter readings (sometimes by utility meter readers), precise measurement of
consumption for flat-rate customers (unmetered customers), and customers connected but
not yet receiving bills.
Electricity theft constitutes nearly 80% of non-technical losses [25]. Electricity theft
simply means defrauding or stealing electricity from a utility. It can also be defined as
when a consumer illegally obtains services without the supplier’s required agreement or
contract [16,20]. It is an unlawful way of obtaining energy for various uses without being
measured for billing, resulting in losses to utility companies. The essence of such theft is to
avoid paying for the electricity used, and as long as power is required for essential services,
people may indulge in these illegal practices [14,16,26,27].
Rajwanshi [27] asserts that the act necessitates changing the metering of electric
energy, which has the potential to alter the metering voltage, current, and power factor.
The most common ways of stealing electricity found in the literature are directly tapping
electricity from a distribution line, grounding the neutral wire, tampering with meters,
and interchanging the input–output connection terminals of the meter. Inserting a disc
to stop the meter coil from rotating, injecting foreign materials and drilling holes into
electromechanical energy meters, depositing a highly viscous fluid, and inserting film are
also methods of perpetrating electricity theft. Other ways include resetting energy meter
readings, using strong neodymium magnets, damaging the pressure coil of the meter, and
improperly exposing the meter to mechanical shock [14,16,26,27].
Notably, in addition to the development of state-of-the-art technology, electricity theft
is a widespread global phenomenon. Studies performed on a sample of 102 countries
around the world between 1980 and 2000 suggest that electricity theft is on the rise world-
wide [20], with dire consequences for the economy of any country where it is committed. It
is estimated that approximately $58.7 billion in revenue is lost because of electricity theft
annually by power utilities among the top 50 emerging market countries [28]. Saikiran
and Hariharan [29] assert that, globally, $20 billion is lost every day because of electricity
theft, and electricity theft causes annual economic losses of approximately $4 to $6 billion
in the USA [25,30,31]. Additionally, in the UK, an estimated £173 million is lost annually
because of electricity cheating [17,32]. This problem is even worse in developing countries.
For example, India loses $12 billion annually through electricity theft [29], and a study
conducted by the World Bank indicated that India’s GDP has decreased by 1.5% as a
consequence of electricity theft [33].
Energies 2021, 14, 1852 3 of 16

Similarly, Ghana continues to struggle with high reported cases of electricity theft
and other illegal activities, leading to approximately 30% loss of electricity supplied by
the utilities [34]. Nunoo and Attachie [20] argued that Ghana’s utilities lose over $1 billion
because of electricity theft. Electricity theft is the fundamental cause of the financial crisis
facing distribution companies in Ghana, and the high rate of electricity theft is worrisome
and needs to be curbed. It is noted that the high NTL is commonly associated with
customers using a postpaid metering system [35].
Detecting electricity theft involves conducting regular on-site visual inspections to
identify illegal meter connections. Doing so is a very tedious exercise and is very expensive
for utilities. Most residential consumers indulge in unlawful connections at night when
utility workers are not working. Another method of checking electricity theft involves
studying a consumer’s consumption patterns to identify very low or zero energy recordings
and then following up at the consumer’s premises to ascertain what the cause may be.
These approaches and many others used to detect electricity theft are cumbersome, and the
expected gains or results are unsatisfactory.
In response, to address this problem, the Northern Electricity Distribution Company
(NEDCo) implemented an NTL reduction program in 2019, which sought to replace post-
paid meters with anti-tamper, anti-fraud, and anti-theft smart prepaid meters. The purpose
of the implementation of smart prepaid meters is to curb electricity theft and retrieve
lost energy.
In recent years, smart metering has gained popularity in the energy sector, especially
in electricity and gas, as it eliminates NTLs by inhibiting customers’ cheating behaviors
that are common with conventional meters. Often, the introduction of smart metering aims
to change customers’ consumption behavior toward energy saving [36–41]. For example,
Qui et al. [42] employed the matching approach and a difference-in-differences method
to estimate the impact of a prepaid electricity plan with smart metering on residential
electricity consumption in metropolitan Phoenix in the USA. They recorded a 12% reduction
in electricity usage upon switching to a prepaid program. Jack and Smith [43] examined
the effect of prepaid metering on residential consumption and returns to the electricity
utility in South Africa. The study employed the fixed-effect strategy and concluded that
electricity usage fell by 13% as a result of the switch from postpaid to prepaid. Similarly,
Bager and Mundaca [44] examined the relationship between loss aversion and consumer
behavior in a nonprice policy intervention through smart meter technology in Copenhagen,
Denmark. The study also used the difference-in-differences strategy. The results suggest
that the control group reduced their daily consumption by an average of 7%, while the
treatment group reduced their daily consumption by an average of 18%.
Conversely, in developing countries where electricity cheating is common, the intro-
duction of this technology tends to benefit utilities through electricity theft management
rather than energy saving management. These suggest that any increase in the reported
amount of electricity consumption from smart metering constitutes (the lower bound of)
the reduced NTLs. We review some of the literature to elaborate on this point. Several stud-
ies have highlighted the use of smart meters or prepaid meters as a major option to curb
electricity theft [45–49]. However, such studies failed to use a causal inference approach to
estimate the quantity of electricity that could be retrieved or recovered using smart meters.
There is a lack of empirical studies that quantitatively estimate the causal impact of smart
meter programs on NTLs, of which electricity theft constitutes approximately 80%. Thus,
our paper makes the methodological contribution to the existing body of knowledge in the
literature by applying the difference-in-differences with fixed effects to evaluate the impact
of smart prepaid metering on NTL.
In this paper, we try to investigate the impact of smart prepaid metering on NTL
in Ghana. It focuses on 1666 residential customers in NEDCo. We used their monthly
electricity consumption reports for 24 months (from 2018 to 2019) for the study. A total
of 46.3% of these residential customers were switched to smart prepaid meters in 2019
and were compared with the remaining 53.7% of residential customers who continued
Energies 2021, 14, 1852 4 of 16

using postpaid meters. Compared to the existing research in this area, this study is novel
and contributes to two aspects. Firstly, to the best of our knowledge, the paper is the first
causal-inference study of smart meters’ impact on non-technical losses, controlling both the
other macro shocks and unit-intrinsic heterogeneities by using a difference-in-differences
approach. Secondly, we employ quantile DID regression to estimate the impact at the
various customer categories, such as low-demand and high-demand customers, to give a
policy direction for the utility. The study analyzes the heterogeneous effects of electricity
theft for various customer categories. It provides policy directions to utilities and the
government about customer behavior regarding electricity cheating and measures to adopt
to resolve these problems. Finally, it provides vital policy significance for utility companies
and energy policies.
However, there are a number of limitations to our research. As the installers installed
the smart meters “as if” random, a notable limitation of our research stems from the
strong assumption of unconfoundedness of our treatment assignment that is not perfectly
random, as indicated by the balance test. In addition, the limitation of this paper is a lack of
demographic and other characteristics data on the customers. Unfortunately, the utility did
not have this information. We could not control for other variables, and further research is
needed to examine its impact on the treatment effect. Finally, further research is needed to
verify the validity of our result by comparing it to a direct measure of non-technical losses
that are possibly observed through capturing the daily consumption of customers using
advance nonintrusive load monitoring (NILM) devices.
The remainder of this paper is organized as follows. Section 2 gives a brief background
on the smart prepaid metering program. Section 3 lays out the discussion of our data and
identification strategies. Section 4 presents the estimation results and discussion. Finally,
Section 5 concludes.

2. Smart Prepaid Metering Program in Berekum

In this study, we intend to evaluate a smart meter program that has been piloted by a
power utility to curb NTL. NTL has both economic and environmental implications that
need immediate attention [49]. We proposed the flowchart in Figure 1 to arrive at the
results. Details of the flowchart are explained in this and the remaining sections.
The study area was Berekum. Berekum is the capital of the Berekum Municipality
located in the Bono Region. It is located 32 km and 43 km northwest of Sunyani, the regional
capital, and Accra, the national capital, respectively. Its latitude is between 7’15” S and 8.00’
N, and its longitude is between 2’25” E and 2’50” W. Berekum covers approximately 1635
km2 (i.e., 0.7%) of the 233,588 km2 total landmass of Ghana (https://web.archive.org/web/
20120622101800/, http://berekum.ghanadistricts.gov.gh, accessed on 12 March 2021).
In 2013, Berekum had a population of 62,364 (“World Gazetteer online”. World-
gazetteer.com, accessed on 12 March 2021). The average household size in the municipality
is four (4) persons per household. In the 15–65 age group, 67.3% are economically active,
while 32.8% are economically inactive [50]. A small proportion of the economically active
population, 7.7%, consists of unemployed or underemployed individuals, students, and
homemakers, while 92.3% of the economically active population is employed [50]. Notably,
63.3% of the economically active population is self-employed without employees. The
nature of the employment is skilled agricultural forestry and fishery (43.7%), services
(22.4%), and craft and related trade (18.8%) [50]. Compared to the regional averages, access
to essential services and facilities is encouraging (https://web.archive.org/web/20140303
162353/, http://berekum.ghanadistricts.gov.gh/?arrow=atd&_=34&sa=4855, accessed on
12 March 2021).
Power is distributed to the municipality by NEDCo. NEDCo serves the municipality
with 34.5 kV (kilovolt) and 11.5 kV, and the majority of the people in the municipality have
access to grid-based electricity. Ghana Statistical Services (GSS) [50] asserts that the rate of
access to electricity in the municipality is 78.1%, with urban Berekum having an access rate
Energies 2021, 14, 1852 5 of 16

Energies 2021, 14, x FOR PEER REVIEW 5 of 16

of 84.0%. The utility has a district office in Berekum with staff to handle both technical and
commercial activities.

FigureFigure 1. Flowchart
1. Flowchart diagram.diagram.

Most
Power ofisthe customers
distributed to in
theNEDCo, especially
municipality at the NEDCo
by NEDCo. municipal andthe
serves district levels,
municipality
including Berekum, use the postpaid metering system (conventional
with 34.5 kV (kilovolt) and 11.5 kV, and the majority of the people in the municipality metering system).
With
havepostpaid
access tometering,
grid-basedan electricity.
energy meter is installed
Ghana at the
Statistical customer’s
Services (GSS)premises, andthat
[50] asserts at the
the
end of every month, the customer’s meter is read by the utility’s meter
rate of access to electricity in the municipality is 78.1%, with urban Berekum having an reader to capture
energy
access consumption.
rate of 84.0%. The The utility
recorded hasreading
a districtis office
used toin generate
Berekuman electricity
with bill for both
staff to handle the
customer [35].
technical and commercial activities.
This kind of metering system has some challenges, such as reading errors, accumulated
Most of the customers in NEDCo, especially at the municipal and district levels, in-
bills, and delays in bill payments [35]. Additionally, the location of the postpaid meters at
cluding Berekum, use the postpaid metering system (conventional metering system).
the customers’ premises allows the customers to tamper with the meter and steal power. In
With postpaid metering, an energy meter is installed at the customer’s premises, and at
2018, the rates of electricity theft, meter bypassing and meter tampering were alarming,
the end of every month, the customer’s meter is read by the utility’s meter reader to cap-
informing the decision of the utility to switch to the smart prepaid metering system [51].
ture energy consumption. The recorded reading is used to generate an electricity bill for
Smart prepaid metering is convenient for both the utility and the customer. The
the customer [35].
utility is able to generate revenue in advance, as customers are supposed to purchase units,
This kind of metering system has some challenges, such as reading errors, accumu-
i.e., kilowatt-hour (kWh), before use. Thus, it eliminates the issues of late electricity bill
lated bills, and delays in bill payments [35]. Additionally, the location of the postpaid me-
payment and nonpayment by defaulting customers. The burden of hired meter readers
ters at the customers’ premises allows the customers to tamper with the meter and steal
for meter reading and sending customer bills are eliminated with the use of smart prepaid
power. In 2018, the rates of electricity theft, meter bypassing and meter tampering were
meters [35]. For the customer, it helps in planning electricity consumption, as he receives a
alarming,
daily informing
notification of histhe decision
energy of the utility
consumption. Per to
theswitch
meter to the smart
design, it gives prepaid metering
notification of
system [51].
when the units (kWh) will be exhausted to enable the customer to plan ahead [52–54].
Smart
The prepaid
utility metering
introduced theis convenient
smart prepaid for both the utility
metering and the
program customer.
in May 2019 The
afterutil-
a
ity is able to generate revenue in advance, as customers are supposed
customer education process. The utility purchased a limited quantity to pilot because to purchase units,
of
i.e.,cost
the kilowatt-hour
of the smart(kWh),
prepaid before
meter.use.
TheThus, it eliminates
first batch the issues of
of approximately 1000latesmart
electricity
prepaid bill
payment and nonpayment by defaulting customers. The burden
meters was installed in Berekum “as-if” randomly on top of the service pole. The smart of hired meter readers
for meter
prepaid reading
meters wereand sending
initially customer
loaded withbills
10 kWhare eliminated with supply
units to ensure the use continuity
of smart prepaid
even
meters [35]. For the customer, it helps in planning electricity consumption, as he receives
a daily notification of his energy consumption. Per the meter design, it gives notification
of when the units (kWh) will be exhausted to enable the customer to plan ahead [52–54].
Energies 2021, 14, 1852 6 of 16

if the customers were not at home, but these units (kWh) were deducted at the instant of
customer first purchase. The decision to install the meter on the pole top was made to
prevent the customer from obtaining access to the meter. The customer only has access
to the meter keypad, where he can key his units (kWh) in the event that the meter is not
loaded automatically from the vending point.
The meter is the sole property of the utility in Ghana. It is not sold to the customer
whenever the customer request for service. The service is in the form of a new service
connection, temporal connection, separate meter connection, and meter transfer connection.
The utility delivers these services with the type of meter available at the instant of customer
service request and within the permitted time stipulated by the Public Utility Regulatory
Commission of Ghana (PURC). The cost of the meter replacement is borne by the utility. The
intent of the smart prepaid meter pilot program by the utility was to derive the usefulness
and the benefit that comes with the smart prepaid meter technology for both the customer
and the utility.
The utility further hoped to expand the program if the objectives are met. It is against
that background that only a subset of customers were provided with the smart meters,
primarily due to their costs. The utility generated a list of customers capturing all the
various customer categories in the program area. The list of customers generated for the
meter installation was more than the smart prepaid meters available. It was given to
meter installers to install the meters “as-if” randomly at the program location provided the
customer’s information is found in the list.

3. Data and Empirical Strategy

3.1. Data Description
We obtained a panel dataset of customers’ monthly electricity consumption from 2018
to 2019 that are reported and recorded by NEDCo. It comprises a 24-month electricity
bill for each customer. Control group and pre-treatment treatment group data are only
monthly, available from the utility’s customer billing management system (CBMS), while
the post-treatment treatment group data were obtained from the smart prepaid vending
system. A smart prepaid vending system provides daily data; however, since the control
group (and pre-treatment treatment group) data are only monthly, our unit of observation
is bounded to be monthly.
Our dataset contains a total of 39,982 monthly customer observations followed over
24 months (i.e., 1666 customers for 24 months), consisting of 18,502 observations for 771
customers who have been switched to the smart prepaid metering system (treatment group)
and 21,480 observations for 895 customers who are still using the postpaid metering system
(control group).
In Ghana, customers fall under three tariff categories, namely, residential, nonresiden-
tial and special load tariffs (SLTs). Domestic users are classified as residential customers,
while commercial users whose energy consumption falls below 100 KVA (kilovolt-amperes)
are classified as nonresidential customers, and commercial users whose energy consump-
tion is equal to or greater than 100 KVA are classified as SLT customers [55–57]. Our study
focused on residential customers, so we excluded nonresidential and special load tariff
(SLT) customers. Details of the summary statistics of our data are reported in Table 1.
The selection of the municipality was not informed by any major decision by the utility;
however, customer education on the introduction of the smart prepaid metering system
commenced earlier in that municipality. The households whose meters to be replaced were
randomly chosen by the meter installers; however, since it is not purely randomized, we
will conduct a series of robustness checks.
Energies 2021, 14, 1852 7 of 16

Table 1. Summary statistics.

Dependent Variable N. Obs. Mean s.d. Min Max

Electricity Consumption (kWh/month)
39,982 89.576 86.984 0 1674
Total Sample
21,480 88.511 91.331 0 1674
Control
Treated 18,502 90.813 81.634 0 1319
Before 26,654 86.595 87.153 0 1674
After 13,328 95.539 86.342 0 1046
Notes: The data are from a 24-month (2-year) panel consisting of 1666 residential customers. The months
January 2018 to April 2019 are before the program (customers on postpaid metering), and the months May
2019 to December 2019 are after the program was introduced (smart prepaid metering). The energy retrieved
(consumption) is a dummy variable that takes a value of one for residential customers who had their postpaid
meter replaced with a smart prepaid meter and zero otherwise.

3.2. Identification Strategies

Smart prepaid metering is more expensive for the utility to acquire compared to
postpaid metering. The utility introduced smart prepaid metering as a pilot in the Berekum
municipality to reduce NTL. Our main objective is to evaluate the causal effect of smart
prepaid metering on NTL. We used two methods for this study. The first method aims
to establish an average treatment effect, and the second method aims to know the exact
impact for the various customer categories—namely, low- and high-demand customers.

3.2.1. Difference-in-Differences with Fixed Effects (DID-FE)

First, we employed the difference-in-differences with fixed effect (DID-FE) approach
to investigate the potential causal effect of smart prepaid metering on NTL. By doing so,
any time-invariant confounders that may have occurred due to the nonrandomness of
the program implementation would be captured [58]. Specifically, we define two dummy
variables, Policy and Treated. The variable Policy indicates the month-year (post-May 2019)
when the program was implemented, and the variable Treated indicates those residential
customers whose postpaid meters have been replaced with smart prepaid meters as follows:

= 0 be f ore program ( Jan 2018 − Apr 2019)
Policy = (1)
= 1 a f ter program ( May 2019 − Dec 2019)

= 0 residential customers on postpaid meters
Treated = . (2)
= 1 residential customers on smart prepaid meters
The standard DID model estimates the pooled ordinary least squares (OLS) [59]
as follows:

Consumptionit = β 0 + β 1 Treatedi + β 2 Policyt + δ1 Treatedi ∗ Policyt + uit (3)

where Consumptionit is the outcome that captures the reported energy consumption
amount of customer i in month-year t; Treated is the treatment dummy; Policy is the
two periods (i.e., month-year) dummy, and uit is the error term. The coefficient β 1 captures
the difference in energy consumption between the control and treatment groups in period
one (2018), the coefficient β 2 captures the temporal change in energy consumption for the
control group, and the coefficient δ1 is the interaction that captures the effect of the treat-
ment, that is, how the treatment group changed in period two (post-May 2019) compared
to the control group.
To accommodate any heterogeneity across units and time, we add unit and time fixed
effects to the above standard DID. That is, we include fixed effects ai and vt using the within
regression estimator. The fixed effect (ai ) captures any omitted variable that is constant or
relatively constant over time. Thus, all time-invariant terms in the treatment (Treatedi ) are
dropped by this time-invariant unobserved heterogeneity term [53]. Similarly, Policyt must
Energies 2021, 14, 1852 8 of 16

be replaced by time-fixed effects. Therefore, our model (Equation (3)) is reduced to the
following explanatory variables:

Consumptionit = δ1 Treatedi ∗ Policyt + ai + vt + uit (4)

where vt is the time (month-year) fixed effect.

3.2.2. Quantile Difference-in-Differences

The DID-FE approach estimates the average treatment effect across the various cus-
tomer categories in terms of electricity demand. In this study, we further want to establish
which of the various customer categories engage in more profound electricity cheating:
would more cheating be found among low electricity-consuming customers (low-demand
customers), median electricity-consuming customers (middle-demand customers), or high
electricity-consuming customers (high-demand customers)? To answer this question,
we employed our second method, which is quantile regression or quantile difference-in-
differences. Scholars [60–64] have argued that quantile regression explains the conditional
quantiles of the outcome variable in relation to covariates against modeling the mean.
In support of this argument, we used quantile difference-in-differences to identify the
customer category where energy is lost the most. Consider y to be the outcome of interest
and x are vectors of observed covariates. In our case, it becomes as follows:

Qq (yi ) = β 0 (q) + β 1 (q) Treatedi + β 2 (q) Policyt + δ1 (q) Treatedi ∗ Policyt + uit (5)

where Qq (yi ) is the qth quantile of the electricity consumption and δ1 (q) is the treatment
effect of the customer at the qth quantile, while β i (q) for i = 0, 1, 2 are parameters for the
other covariates for the customer at the qth quantile.

4. Results and Discussion

4.1. Results of DID Fixed Effects
The impact of the smart prepaid metering program on monthly energy consumption
was estimated using the DID-FE model. Table 2 shows that on average, 12.656 kWh more
energy consumption per month is now reported by smart metering, which is significant
at a 1% level. Compared with the mean pre-treatment energy usage level of 95.539 kWh
for treatment customers, this increase in electricity demand is equivalent to retrieving
approximately 13.2% of electricity losses. It is straightforward to interpret this as the
recovered NTL, as cheating is now more difficult after smart meters are installed.

Table 2. Average treatment effect on the energy consumption (kWh/month).

Dependent Variable: (1)

Electricity consumption (kWh/month) DID-FE
Treatment Effect: 12.656 ***
(2.372)
Household fixed effectsTime fixed effects YesYes
Observations 39,982
Number of households 1666
R-squared 0.025
Robust standard errors are in parentheses. Statistical significance at 1% is indicated as ***. The model uses the
entire sample size of 24 months: January 2018 to December 2019.

Robustness Checks
We conducted the following robustness checks to confirm the superiority of our chosen
model. They are as follows:
(a) Statistical tests to confirm common trend assumption
 R-squared 0.025
Robust standard errors are in parentheses. Statistical significance at 1% is indicated as ***. The
model uses the entire sample size of 24 months: January 2018 to December 2019.

Robustness Checks
Energies 2021, 14, 1852 9 of 16
We conducted the following robustness checks to confirm the superiority of our cho-
sen model. They are as follows:
(a) Statistical tests to confirm common trend assumption
Figure 2 depicts the average electricity consumption pattern i.e., the electricity con-
Figure 2 depicts the average electricity consumption pattern i.e., the electricity con-
sumption in kWh/month of the residential customers in Berekum municipality for both
sumption in kWh/month of the residential customers in Berekum municipality for both
the control and treatment groups.
the control and treatment groups.

Figure2.2.Average
Figure Averageconsumption
consumptionpattern
pattern(kWh/month)
(kWh/month)for
forboth
boththe
thetreatment
treatmentand
andcontrol
controlgroups.
groups.

Theconsumption
The consumptionpatternpatternof ofthe
theresidential
residentialcustomers
customersininBerekum
Berekumwas wasaffected
affectedby by
seasonalityand
seasonality anda aproject
project that
that Ghana
Ghana Grid
Grid Company
Company (GRIDCo)
(GRIDCo) andand NEDCo
NEDCo werewere embark-
embarking
ing upon
upon during
during the smart
the smart prepaid prepaid metering
metering program.
program. There
There are twoare twoweather
main main weather
seasonssea-in
sons
the in the Berekum
Berekum municipality:
municipality: hot and
hot and cool. The cool. The hot
hot season season
mainly mainly
starts starts in
in January andJanuary
ends
inand ends while
March, in March, while
the cool the cool
season season
starts starts
at the endatofthe end
June of June
and ends and ends in September.
in September. During
During
the samethe sameofperiod
period of the program,
the program, the majorthe majortransmitter
power power transmitter
(GRIDCo) (GRIDCo) and the
and the power
power distributor
distributor in the northern
in the northern part of(NEDCo)
part of Ghana Ghana (NEDCo) constructed
constructed a bulk
a bulk power power
supply sup-
point
(BSP) and 161
ply point (BSP)kVandline161
from
kVSunyani
line fromtoSunyani
Berekum. The construction
to Berekum. of this project
The construction resulted
of this project
inresulted
some planned
in some outages
plannedand may and
outages havemay
affected
have customers’ consumption
affected customers’ patterns,pat-
consumption as
depicted
terns, asin Figure 2.inHowever,
depicted Figure 2. we observed
However, wethat the planned
observed outages
that the affected
planned the control
outages affected
and
the treatment
control and groups equally
treatment and at
groups the same
equally andtime,
at thesince
samethey aresince
time, all onthey
the are
same allfeeder
on the
and in the same community. Indeed, Figure 2 shows that the unobserved factors that have
affected the control group have also equally affected the treatment group, since these two
groups share a common trend over time before treatment. This presence of the parallel
trend in the consumption pattern of residential customers suggests the robustness of DID
as the identification strategy.
We further conducted a robustness test on pre-trends to ascertain the validity of
our identification [65–67]. Using the DID-FE model, we checked whether the coefficients
were statistically significant when we perturb the treatment timing to other time points.
The coefficients of these falsification tests for the placebo treatment timing starting from
February 2018 up to May 2019 were not statistically significant, indicating that there
were no heterogeneous trends in the pre-treatment period and that the parallel trend
assumption was satisfied. However, the coefficients of the post-trends for the interaction
terms from June 2019 to December 2019 were statistically significant, indicating the causal
effect of the smart prepaid metering program. This is shown in an event study plot of the
average treatment effects of the coefficient estimates and their confidence intervals for the
interaction terms in Figure A1 of Appendix A.
(b) Simple comparison of post-treatment values between treatment and control groups
Energies 2021, 14, 1852 10 of 16

Based on the “as if” randomness of the smart meter installations performed by the
installers, we conducted a naive comparison between treatment and control, i.e., those
installed with smart meters and those who stay with the conventional meters. We first
conduct a two-sample test to evaluate whether there are statistically significant differences
between the control and treatment groups in their post-test electricity consumption. Table 3
presents the results that show that the p-value is significant at the 1% level, and this is an
indication that the treatment and control customers had statistically significant differences
in their electricity usage after the treatment customers switched to smart meters.

Table 3. After treatment comparison between the groups.

Treatment Control
Dependent Variable Obs. Mean Obs. Mean Diff S.E t_Value p_Value
Electricity consumption
6168 101.305 7160 90.571 10.734 1.497 −7.15 0.000 ***
(kWh/month)
Robust standard errors in parentheses *** p < 0.01.

(c) Balance Test

To ascertain the validity of the above results, a simple comparison of the electricity
consumption values for customers in the control and treatment groups before implementing
the program is conducted, and the results are presented in Table 4. The result indicates
possible unbalancing with weak (10%) statistical significance, implying that the smart
meter installations were not perfectly random, which therefore justifies the use of DID to
eliminate potential time-invariant confounders.

Table 4. Baseline comparison between the groups.

Treatment Control
Dependent Variable Obs. Mean Obs. Mean Diff S.E t_Value p_Value
Electricity consumption
12,334 85.567 14,320 87.481 −1.914 1.071 1.8 0.074 *
(kWh/month)
Robust standard errors in parentheses * p < 0.1.

4.2. Results of the Quantile DID Regression

This study further aims to understand the conditional quantiles of the recovered NTLs
for different customer categories rather than only obtaining the average impact of smart
metering. Figure 3 shows the density distribution of the monthly electricity consumption
of the households treated by the smart prepaid metering program. We separated the
treatment group data into two time periods: before and after the implementation of the
smart prepaid program. Figure 3 shows that the number of customers with zero (or very
small) electricity consumption (the bar on the far left in each panel) sharply dropped after
the smart prepaid metering program was implemented. This also indicates that cheating,
such as meter bypassing, is now difficult after the smart meter is installed, at least for these
low-demand customers. Thus, we give a closer look at the heterogeneous impact of smart
metering on the households with different demand intensity in this section.
To this end, the results from the quantile DID regression are presented in Table 5. As
a referencing benchmark, column 1 shows the average treatment effect (ATE) estimated
by using the entire sample, which tells that the recovered energy is 12.648 kWh/month at
1% significance.
 of the smart prepaid program. Figure 3 shows that the number of customers with zero (or
very small) electricity consumption (the bar on the far left in each panel) sharply dropped
after the smart prepaid metering program was implemented. This also indicates that
cheating, such as meter bypassing, is now difficult after the smart meter is installed, at
Energies 2021, 14, 1852 least for these low-demand customers. Thus, we give a closer look at the heterogeneous
11 of 16
impact of smart metering on the households with different demand intensity in this sec-
tion.

Figure3.3.Histogram
Figure Histogramof of electricity
electricity consumption
consumption by month
by month of theoftreatment,
the treatment,
before before and
and after theafter the
treatment.
treatment.

Quantile
Table 5.To difference-in-differences
this end, the results from the(DID) regression
quantile results.
DID regression are presented in Table 5. As
a referencing benchmark, column 1 shows the average treatment effect (ATE) estimated
Dependent Variable:
by(1)
using the entire
(2)sample, which
(3)tells that the recovered
(4) energy
(5)is 12.648 kWh/month
(6) at
Electricity Consumption
1% significance.
(kWh/month) ATE q10 q25 q50 q75 q90
Treatment Effect Table ***
12.648 5. Quantile4.370 *** −1.810 (DID) regression
difference-in-differences 6.650 *** results. 20.600 *** 27.900 ***
(2.372) (1.075) (1.601) (1.675) (2.804) (5.385)
Observations Dependent Variable:
39,982 39,982 39,982 39,982 39,982 39,982(6)
(1) (2) (3) (4) (5)
R-squared Electricity
0.004 Consumption
0.002 0.006 0.006 0.004 0.003
(kWh/month) ATE q10 q25 q50
ATE stands for the average treatment effect. Robust standard errors in parentheses; *** p < 0.01.
q75 q90
Treatment Effect 12.648 *** 4.370 *** −1.810 6.650 *** 20.600 *** 27.900 ***
For instance, the quantile (2.372) (1.075)in column
DID result (1.601)3 shows(1.675)
that at the(2.804) (5.385)
25th quantile, the
treatment Observations
effect is −1.81039,982kWh/month 39,982and not39,982 39,982
significant. Therefore,39,982
one would39,982
make
R-squared
a poor decision if it is based0.004 0.002 estimation
on the overall 0.006 only.0.006
The results0.004 0.003
of the coefficients
forATEthestands
10th for the average
quantile treatment
(column 2) andeffect.
50thRobust standard
quantile errors
(column 4) in
areparentheses; *** p < 0.01.
4.37 kWh/month and
6.65 kWh/month, respectively, at 1% significance; however, a comparison with the overall
result For instance,
(column the quantile
1) shows that theDID result
latter in column 3 shows
is overestimated that
for these at the 25th
categories of quantile,
customers.the
Similarly, comparing the results of the coefficient for the recovered energy in the over- a
treatment effect is −1.810 kWh/month and not significant. Therefore, one would make
allpoor
ATEdecision
(columnif 1)
it is based on
indicates thethe
that overall
ATE is estimation only. Theforresults
underestimating of thecustomers
residential coefficients
for the 10th quantile (column 2) and 50th quantile (column 4) are
at the 75th quantile (column 5) and 90th quantile (column 6): 20.60 kWh/month and 4.37 kWh/month and
6.65 kWh/month,
27.90 kWh/month, respectively,
respectively. at 1% significance; however, a comparison with the overall
result (column
Figure 1) shows
4 provides thethat the latter
treatment is overestimated
effect for these
of smart metering by thecategories
demand of customers.
intensity of
the consumers. Horizontal dotted lines are the average treatment effect and its confidence
intervals. From the figure, it is clear that the recovered NTL is different across the quantiles.
Additionally, in the quantile DID, it was observed that the treatment effect decreases from
the lowest to lower quantiles (10th to 25th quantiles) and increases at higher quantiles
(toward the 90th quantile) with opposite signs across the quantile. This indicates that
only those households around the 25th quantile (i.e., the 1st quartile) did not conduct the
cheating, or they are the only honest customers. That is, electricity theft was rampant in
most of the customer categories in Ghana.
 Figure 4 provides the treatment effect of smart metering by the demand intensity of
the consumers. Horizontal dotted lines are the average treatment effect and its confidence
intervals. From the figure, it is clear that the recovered NTL is different across the quan-
tiles. Additionally, in the quantile DID, it was observed that the treatment effect decreases
from the lowest to lower quantiles (10th to 25th quantiles) and increases at higher quan-
Energies 2021, 14, 1852 tiles (toward the 90th quantile) with opposite signs across the quantile. This indicates that 12 of 16
only those households around the 25th quantile (i.e., the 1st quartile) did not conduct the
cheating, or they are the only honest customers. That is, electricity theft was rampant in
most of the customer categories in Ghana.

Figure 4. Treatment effect by the quantile of the monthly electricity consumption measured in
Figure 4. Treatment effect by the quantile of the monthly electricity consumption measured
kWh/month.
in kWh/month.
5. Conclusions
5. Conclusions
To address the utility losses arising from electricity theft, meter tampering, and other
cheating behaviorsthe
To address ofutility
the customers, Northern
losses arising from Electricity
electricity Distribution
theft, meter Company
tampering, and other
(NEDCo), a utility in Ghana, piloted a non-technical loss (NTL) reduction program in 2019
cheating behaviors of the customers, Northern Electricity Distribution
to replace postpaid meters with anti-tamper, anti-fraud, and anti-theft smart prepaid me-
Company (NEDCo),
aters.
utility
This paper assessed the effectiveness of this program using the difference-in-differ-in 2019 to replace
in Ghana, piloted a non-technical loss (NTL) reduction program
postpaid meters(DID-FE)
ences fixed-effect with anti-tamper, anti-fraud,
approach. Through and anti-theft
the DID-FE, we obtainedsmart prepaid meters. This
an average
causal assessed
paper impact across
thealleffectiveness
residential customer
of this categories
program of 12.656
usingkWh/month. This con-
the difference-in-differences fixed-
cludes that smart prepaid metering could be a remedy to reduce NTL for the electricity
effect (DID-FE) approach. Through the DID-FE, we obtained an average causal impact
distribution sector in Ghana.
across all residential
Policymakers need tocustomer categories
be aware of of 12.656
the heterogeneity kWh/month.
of customer consumption This concludes that smart
behav-
prepaid metering
ior to formulate could
policies. be a remedy
Consequently, toestablish
to fully reducewhere NTLcheating
for theorelectricity distribution sector
energy recov-
ineryGhana.
is more profound in the residential customer categories and to propose a policy direc-
tion, Policymakers
we also conducted a quantile
need to be regression
aware of coupled with DID. The
the heterogeneity ofresults of ourconsumption
customer study behavior
showed that the energy loss is more profound with very low-demand customers and me-
todium-
formulate policies. Consequently, to fully establish where cheating or energy recovery is
and high-demand customers. These results provide insightful policy implications
more profound
for utilities. in the
The smart residential
prepaid meteringcustomer categories
policy for NTL and
reduction to propose
should focus on a policy direction, we
those
also conducted
high-demand a quantile
customers regression
(75th quantile coupled
and 90th with
quantile) fromDID.
whom The results
it can ofthe
retrieve our study showed
mostthe
that lostenergy
energy before
loss isinstalling for other customers.
more profound with very Onlow-demand
the other hand,customers
the very low-and medium- and
demand customers (10th quantile) are prone to cheating, suggesting that they are unable
high-demand customers. These results provide insightful policy implications for utilities.
The smart prepaid metering policy for NTL reduction should focus on those high-demand
customers (75th quantile and 90th quantile) from whom it can retrieve the most lost energy
before installing for other customers. On the other hand, the very low-demand customers
(10th quantile) are prone to cheating, suggesting that they are unable to afford the little
electricity they consume. The government of Ghana should consider tariff reforms other
than life-line customer subsidies (set by the Public Utility Regulatory Commission of Ghana
at 50 kWh/month) to address their needs.
However, there are a number of limitations to our research. As the installers installed
the smart meters only “as if” randomly, a notable limitation of our research stems from the
strong assumption of unconfoundedness of our treatment assignment that is not necessarily
perfectly done as indicated by the balance test. In addition, the limitation of this paper is
the lack of demographic and other characteristics data on the customers. Unfortunately,
the utility did not have this information. We could not control for other variables, and
further research is needed to examine its heterogeneity on the treatment effect. Finally,
further research is needed to verify the validity of our result by comparing it to direct
measure of non-technical losses, which are possibly observed through capturing the daily
consumption of customer using advance nonintrusive load monitoring (NILM) devices
(see [68–70] for example).
Energies 2021, 14, 1852 13 of 16

Author Contributions: Conceptualization, G.O.-A. and S.T.; methodology, S.T.; software, G.O.-A.
and S.T.; validation, S.T. and Y.Y.; formal analysis, S.T. and Y.Y.; investigation, S.T.; resources, G.O.-A.
and M.S.Y.; rata curation, G.O.-A.; writing—original, draft preparation, G.O. and M.S.Y.; writing—
review and editing, S.T. and Y.Y.; supervision, S.T.; project administration, S.T. and Y.Y.; funding
acquisition, Y.Y. and S.T. All authors have read and agreed to the published version of the manuscript.
Funding: This work is partly supported by the Ministry of Education of Japan Grant-in-Aid for
Scientific Research 16H03610.
Data Availability Statement: Due to the sensitive nature of this study, we assured the utility that
data provided would remain confidential and would not be shared.
Acknowledgments: We thank JDS, NEDCo and David Adomako Mensah for support. We are grate-
ful to Osei Peter, Isaac Appiah, and Naaman for helping with data collection and generation. The
authors are grateful to the anonymous reviewers and the editors of Special Issue, Innovation, Policy,
and Regulation in Electricity Market; Section—Energy Economics and Policy for their valuable sug-
gestions. However, any shortcomings that remain in this research paper are solely our responsibility.
Conflicts of Interest: The authors declare no conflict of interests.

Abbreviations
ATE Average Treatment Effect
BSP Bulk Supply Point
CBMS Customer Billing Management System
DID Difference-in-Differences
DID-FE Difference-in-Differences with Fixed Effects
FE Fixed Effects
GEDAP Ghana Energy Development and Access Project
GoG Government of Ghana
GRIDCo Ghana Grid Company
kV kilovolt
KVA kilovolt-amperes
kWh kilowatt-hour
kWh/month Electricity Consumption
NES National Electrification Scheme
NILM Non-Intrusive Load Monitoring
NTL(s) Non-Technical Losses
OLS Ordinary Least Squares
PURC Public Utility Regulatory Commission of Ghana
SHEP Self Help Electrification Project
Energies 2021, 14, x FOR PEER REVIEW 14 of 16
SLTs Special Load Tariffs

Appendix A
Appendix A

Figure A1. Average effects with 95% confidence intervals for the coefficients of placebo falsifica-
Figure
tion tests,A1. Average
where effects
the horizontal with 95%
axis represents confidence
the time intervals
of placebo treatment, forfor
except thethecoefficients
18th of placebo falsification
month where
tests, which is the
thetrue treatment timing.
horizontal axis represents the time of placebo treatment, except for the 18th month
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