Effect of prepaid electricity billing on revenue collection costs at Kenya power company

Abstract

Kenya Power‟s electricity revenue is twofold: postpaid and prepaid. Sales made on credit exposes the business to credit risk and attract additional collection costs which may as well be eliminated if prepaid billing system was used. This study sought to establish whether this system affected revenue collection costs for Kenya Power. As Kenya Power converts more meters into prepaid, it is expected that it will enhance its revenue collection capabilities at the same time reduce costs associated with collection. The researcher used a case study to assess the effect of prepaid billing on the company‟s revenue costs. Secondary data used was obtained from the company‟s Management Accounts and Financial Statements since prepaid meters were installed (2009) to the end of financial year 2013/14. A combination of observation, informal interviews and examination methods of data collection in documents and records were used to gather data from the company‟s databases. This was achieved by querying the company‟s financial systems through the use of appropriate system profiles. Statistical packages for social science (SPSS) were used as an aid to analysis. By use of regression models, the study anticipated an observable relationship between these variables. The study established that with more installation of the number of prepaid meters revenue collection costs reduced. The study concluded that the use of prepaid billing system has reduced revenue collection costs for Kenya Power. It further recommends that Kenya Power should convert more meters into prepaid, as it will enhance its revenue collection capabilities at the same time reduce costs associated with collection.