“ADVANCED METERS INFRASTRUCTURE (AMI) AT AZERENERJI’S

DISTRIBUTION NETWORK
CONCEPT DESIGN AND PILOT PROJECTS EVALUATION”

INOGATE Technical Secretariat (ITS) and Integrated Programme in support of the

Baku Initiative and the Eastern Partnership energy objectives

Contract No 2011/278827

A project within the INOGATE Programme

Implemented by:
Ramboll Denmark A/S (lead partner)
EIR Development Partners Ltd.
The British Standards Institution
LDK Consultants S.A.
MVV decon GmbH
ICF International
Statistics Denmark
Energy Institute Hrvoje Požar

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Authors: Non Key Expert Team

Document title ADVANCED METERS INFRASTRUCTURE (AMI) AT AZERENERJI’S

DISTRIBUTION NETWORK CONCEPT DESIGN AND PILOT PROJECTS
EVALUATION

Prepared by Achilleas Gekas, Ananth Chikkatur, Saleh Nasir, Petros Papadimitriou, Nick
Tourlis, Zaur Mamadov,Rusudan Nonikashvili

Checked by Nikos Tsakalidis, Mark Allington, Albert Zwering

Date August 2014

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Acronyms
AAA Authentication, Authorization and Accounting
AMI Advanced Metering Infrastructure
AMS Advanced Metering System
CEER Counsil of European Energy
DLC Distribution Line Carrier
ERP EnterpriseResourses Planing
EUDR Electricity Usage Detail Record
GPRS General Packet Radio Service
HMI Human Machine Interface
HV High Voltage
IMS Information Management System
ITS Inogate Technical Secretariat
LV Low Voltage
MDC Meter Data Collection
MDM Meter Data Management
MDR Meter Data Repository
MMS Meter Management System
MV Medium Voltage
OPMG Owners Project Management Group
PLC Power Line Communication
RADIUS Remote Authentication Dial In User Service
REN Regional Electrical Networking
RS 485 Standard for Serial Interface for Data
Communication

SMS Short Message Services

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Contents
1 Introduction .......................................................................................................................................... 5
1.1 Objectives of the study ................................................................................................................. 5
1.2 Azerenerji goals for System Implementation ............................................................................... 5
1.3 Conclusions of the report.............................................................................................................. 6
1.4 Study Team ................................................................................................................................. 11
1.5 Data collection and steps for the completion of the work ......................................................... 11
2 Assessment of Azerenerji’s System..................................................................................................... 14
2.1 Existing Distribution System ....................................................................................................... 14
2.2 Existing Metering System............................................................................................................ 19
2.3 Existing MDM .............................................................................................................................. 22
2.4 IT and Billing System ................................................................................................................... 28
3 Pilot Projects ....................................................................................................................................... 29
3.1 Current Technical Requirements ................................................................................................ 29
3.1.1 Meters ................................................................................................................................. 30
3.1.2 AMI ...................................................................................................................................... 31
3.1.3 Billing System and IT infrastructure .................................................................................... 37
3.2 Pilot project implementation ...................................................................................................... 40
3.2.1 Meters ................................................................................................................................. 42
3.2.2 MDMS ................................................................................................................................. 54
3.2.3 Billing System and IT infrastructure .................................................................................... 55
3.3 Proposed Technical Requirements ............................................................................................. 55
4 Evaluation of Pilot projects – Recommendations ............................................................................... 55
4.1 Evaluation Methodology and Results ......................................................................................... 55
4.1.1 Meter System ...................................................................................................................... 55
4.1.2 MDMS ................................................................................................................................. 56
4.1.3 Billing System and IT infrastructure .................................................................................... 66
4.2 Proposals and Further Actions .................................................................................................... 66
4.2.1 Meter System ...................................................................................................................... 66

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 4.2.2 MDMS ................................................................................................................................. 67
4.2.3 Billing System and IT infrastructure .................................................................................... 69
5 Project Implementation ...................................................................................................................... 70
5.1 Project Organisation for the Future Deployment ....................................................................... 70
5.2 Smart Meters Deployment Examples ......................................................................................... 72
5.2.1 United Kingdom .................................................................................................................. 72
5.2.2 Uzbekistan........................................................................................................................... 74
5.2.3 Australia .............................................................................................................................. 75
5.2.4 Japan ................................................................................................................................... 76
5.2.5 Italy...................................................................................................................................... 77
5.2.6 Conclusions ......................................................................................................................... 77
5.3 Implementation risks and mitigation measures ......................................................................... 78
5.4 Selection and Prioritisation of Distribution Networks ................................................................ 80
5.4.1 Infrastructure and Equipment considerations .................................................................... 81
5.4.2 Resource-related considerations ........................................................................................ 83
5.4.3 Preliminary prioritisation .................................................................................................... 86
5.5 Organisation structure to implement the Project ...................................................................... 88
5.5.1 Organisation of Owner’s Project Management Group ....................................................... 88
5.5.2 Project Management Consultant-Scope of Work ............................................................... 90
6 Study Tour ........................................................................................................................................... 92
7 Appendices .......................................................................................................................................... 93
7.1 List of Documents received by Azerenerji .................................................................................. 93
7.2 AMI Presentations during the kick-off meeting .......................................................................... 93
7.3 Minutes of Kick-off meeting ....................................................................................................... 93
7.4 Photos of Pilot Smart meters .................................................................................................... 103
7.5 AMS performance test .............................................................................................................. 103
7.6 Letter for study tour.................................................................................................................. 105
7.7 ENEL presentation..................................................................................................................... 105
7.8 Strategic overview of a billing system for electricity grid suppliers ......................................... 105
7.8.1 Introduction ...................................................................................................................... 106
7.8.2 Electricity Usage Detail Record (EUDR) generation .......................................................... 106

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 7.8.3 Tariffs ................................................................................................................................ 108
7.8.4 Pre-paid/Post-paid Billing and Smart Meters ................................................................... 109
7.8.5 Smart Meters and associated deployment ....................................................................... 110

Figure 1: Regional Electricity Network in the Republic of Azerbaijan ........................................................ 15

Figure 2: Demand forecasts for the 7 RENs of Azerenerji .......................................................................... 17
Figure 3: Comparison of Smart Meter Penetration Rates in 7 RENs of Azerenerji and their capital cities 21
Figure 4: Evolution of T&D losses in several INOGATE PCs and the EU (average)...................................... 22
Figure 5: Azerenerji’s current metering information collection, storage and billing options .................... 23
Figure 6: Azerenerji’s new concept of metering information collection, storage and billing .................... 24
Figure 7: Groups of functionalities in the Uzbekistan Advanced Electricity Metering Project................... 25
Figure 8: High level design for AMI (Source: Azerfon) ................................................................................ 33
Figure 9: Location of the Pilot projects. Source: Google Maps................................................................... 41
Figure 10: Single Phase meters from Star, Inhemeter and Hexing ............................................................. 43
Figure 11: Three Phase Direct Connection meters from Star, Inhemeter and Hexing. Source: Vendor
manuals. ...................................................................................................................................................... 46
Figure 12: Hexing CT meters (HXE34-KP and HXE310). Source: Technical/User manuals.......................... 50
Figure 13: Allocation of Azerenerji distribution personnel per REN........................................................... 83
Figure 14: Open loop distribution network (example) ............................................................................... 85
Figure 15: Organisation Chart of Owners' Project Management Group .................................................... 90

Table 1: Distribution lines in Azerbaijan ..................................................................................................... 15

Table 2: Consumption at Azerenerji's distribution networks per customer group (2012) ......................... 16
Table 3 Definition of long, short and transient interruptions..................................................................... 18
Table 4: Customers, Metering, Losses and Collection Rate in Azerenerji's Distribution Networks (2013) 20
Table 5: Pilot project implementation – types of meters installed (December 2013) ............................... 40
Table 6: Pilot project implementation – types of communication systems installed (Dec 2013) .............. 40
Table 7: Comparison of Azerenerji requirements for Single Phase meters and Vendor specifications ..... 43
Table 8: Meter specifications for Three Phase meters: comparison between requirements and vendor
meter specifications .................................................................................................................................... 46
Table 9: Meter specifications for three phases CT meters: comparison between requirements and
vendor meter specification ......................................................................................................................... 50
Table 10: Meter evaluation......................................................................................................................... 57
Table 11: Prioritisation criteria for the roll-out .......................................................................................... 86
Table 12: Prioritisation of RENs in regard of the AMI rollout ..................................................................... 87

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Executive summary
Azerenerji requested INOGATE to comment on and evaluate its Smart Metering pilot projects.

The INOGATE experts consider that starting with pilot projects, in order to create and evaluate the
proper conditions for rolling out Azerenerji’s Smart Metering plan in future, is an appropriate approach.
However, there are several important issues that need to be addressed to improve the management of
the pilot projects, so that they yield results that are valuable in planning the subsequent roll-out.

The following conclusions and recommendations deal with the INOGATE findings and are divided into
two parts. The first part is dedicated to the current vendors and focuses on the elements that are not
very well developed yet and need to be improved. This part suggests actions that Azerenerji might
consider taking in this respect.

The second part relates to the overall company strategy that should be considered for development for
a future, successful roll out of the meters.

Vendors:

 The general requirements for the AMI system present sufficient guidance for vendors. However,
it is necessary for the vendors to test the meters’ performance related to the out-of-tolerance
parts of the distribution network, to ensure that required outcomes are achieved in these
conditions.
 Network connectivity (for communicating with the smart meters) has been shared with three
mobile phone providers: Azerfon; Backcell and Azercell. In this agreement, obligations are
placed on both parties for the proper operation and retrieval of data. The mobile phone
providers are required to ensure uninterrupted connectivity between the AMI and Information
Management System (IMS) via their networks. Therefore an extensive testing procedure should
apply to ensure that all of the AMI requirements concerning connectivity are being followed by
the providers.
 No pilot installation of MDMS has been witnessed for the pilot projects. According to the
vendors’ technical manuals, there are elements of MDMS mentioned, such as application of
different tariff structures, transfer of information to billing systems, etc. Based solely on the
technical manuals provided, Hexing appears to have met most of the technical criteria that were
set by Azerenerji. However, to assist with vendor selection and in line with international
practice, vendors should be requested by Azerenerji to demonstrate the functionality of the
features of their respective systems during the pilot phase.
 Azerenerji should make use of the wealth of data stemming from the pilot projects in order to
study the demand profiles of its consumers. Such analysis can help Azerenerji in proposing
specific tariff option to the Tariff Council.
 Two evaluation tables have been developed. In the first table, the various technical
requirements for the Azerenerji smart meters are shown and compared against the technical

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 specifications of the three pilot vendors. The requirements meet international standards and,
from inspection of the meter manuals, the vendors comply with these requirements (and hence
the standards). The performance test procedure submitted to Azerenerji (Appendix 6.5) should
be developed further and applied. The functions of the AMI should be tested separately, in
isolation, so that the performance test is not affected by the weaknesses of the mobile phone
connectivity and/or the low, out-of-tolerance voltage that prevails on parts of the distribution
network. International practice is for the vendors to establish test laboratories in the field, in
which to check the functionality of each meter before installation.
 A second table shows how the MDMS requirements compare with information from the three
vendors. Omissions and derogations from the specification have been highlighted and
additional information and clarifications from the vendors are necessary to judge whether these
are truly limitations or not. The completion of the table with the development of a procedure
for the performance test of the MDMS will allow Azerenerji to evaluate the vendors on this
critical aspect.
 It is recommended that Azerenerji modifies the specifications to enable the MDM system to
operate independently of the particular smart meter supplier. Azerenerji should insist that
vendors provide an open data communications protocol (rather than proprietary protocols) and
that systems are tested with different smart meters, to avoid becoming dependent on a
particular vendor. In this respect the interconnectivity between different vendors’ meters and
the MDMS is the most important issue. A special procedure should be developed, to allow the
performance of each proposed MDMS to be tested in the field with alternative meters.
 Field communication testing must be conducted for each vendor, including how the data
concentrators installed in each substation will work, along with how the MDMS will compare the
data received from each meter with the data of the respective concentrator. This feature will
allow Azerenerji to identify both the location and quantity of technical and commercial losses.
The main reason for smart meters development is the establishment of a prepaid system
covering the majority of residential areas. The INOGATE experts consider it important that
Azerenerji should evaluate performance of the pilot systems for a reasonable time (at last six
and preferably twelve months) to capture performance variations in a range of different
conditions.
 Azerenerji should consider how it wants to use the information collected from the deployment
of both PLC and GPRS/GSM communication systems. The choice of communication medium is
very important and analysis of advantages and disadvantages for the specific geographical areas
and costs (primarily capital expenditure for PLC and operating expenditure for GRPS) is
necessary. PLC systems (which use the power line as the medium through which digital data are
communicated) are a common alternative to cellular communications, because of reduced
operational costs and increased reliability.

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Azerenerji company strategy:

 Some limitations apply to investment and renovation of the distribution network. These are
likely to present a serious obstacle to the use of smart metering to decrease losses. For example,
as previously mentioned, some parts of the network operate on voltages which are out-of-
tolerance, which is likely to adversely affect the operation of advanced meters. Azerenerji has
focused on improving generation and transmission infrastructure, but has lacked capital to
invest in the distribution network, resulting in some areas operating outside the tolerance of
standard distribution voltages. These limitations should be reduced or removed before the
installation of the AMI system, since it is unlikely to operate to required levels of performance,
with the existing distribution network. The main unknown is how the AMI system will perform
when the distribution system is not operating within tolerance. Tests and supplier guarantees
are needed to ensure the Ami system can cope with real conditions.
 A Strategic Plan for the Information Technology department at Azerenerji needs to be further
developed. Such a plan is needed to identify the present and future needs for the various
systems, to work automatically and to inter-connect through an on-line network, in order to
retrieve data from the meters. This Plan should include the needs for hardware, software
packages and personnel (both skills and quantities).
 The experts evaluating the MDMS and Billing system concluded that, based on the evidence
presented, no Integrating System has been described to bring together the AMI, MDMS and the
Billing System. Without such an Integrating System, the benefits of integration (such as
automated meter reading, billing and performance monitoring) cannot be realised. The experts
consider that, to improve its robustness, the system should be designed with clear specifications
that allow the involvement of any GSM operator and cash collection mechanisms, without
committing to specific suppliers for these services.
 Azerenerji should conduct surveys in the pilot areas to ascertain how customers are being
affected by the new meters, and to understand their level of knowledge about the meters and
their attitudes to them. Customer education and information dissemination is a crucial element
in the meters becoming successfully deployed and used.
 Azerenerji, when planning its own organization approach, should consider the experience and
lessons learned by other organisations. The INOGATE experts analysed five examples of smart
meter deployment and the conclusions show that usually the preparation period is longer than
the implementation one.
 The main steps that Azerenerji needs to undertake for the future project are: to ensure that the
pilot projects are successful and cover all AMI activities, communications, interactions; to
evaluate lessons learned from the pilot projects; to describe in detail what needs to be further
done and, to cover the gap of experience on new technologies, to hire a consultant to manage
the deployment and procurement process.

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  Experts proposed the responsibilities and the skills of the group that will manage the project
implementation, and what should be done by the consultant. Azerenerji should adjust the
suggestions to meet the specific conditions and characteristics of their organisation.
 There are several risks that could affect the way in which Azerenerji will deploy the AMI system.
The experts have indicated several risks and mitigation measures. The risks presented in this
report are indicative, to demonstrate to Azerenerji how to assess risks and to take the necessary
measures to mitigate their likelihood and impact.
 Selection and prioritisation of distribution networks is an important element of the roll-out. In
order for Azerenerji to be able to measure, validate and effectively achieve the envisaged
benefits of the AMI solutions, the condition of the distribution networks needs to be at an
optimal operational level. When such a baseline has been established, it is suggested that
Azerenerji might usefully focus the implementation of the roll-out in locations where the impact
is expected to be higher (i.e. network segments serving a high electricity demand, losses are
higher, etc.) and the respective costs (i.e. network preparatory investments, stranded costs
owed to existing metering) are lower. The expert team proposes a prioritisation and selection
methodology for Azerenerji to consider once the prerequisite of successfully completed pilots is
duly fulfilled.

Conclusions:

During the second meeting of the experts to Azerenerji for the finalization of the present AHEF,
Ajerenerji informed ITS that :

 The installation of smart meters has finished and the meters operate in parallel with the old
ones. The operation is not reliable due to power failures (deteriorated distribution network)
and poor capacity of mobile providers. Vendors provide Data to Azerenerji, in batches because
they are not connected on line with Azerenerji’s MDM system.
 Ajerenerji, taking into consideration the INOGATE suggestions and the observations of the pilot
installations, decided to proceed first to the rehabilitation of the distribution network and then
to the installation of the AMI.
 Asian Development Bank (ADB) agreed in principle to finance the project of rehabilitation and
already ADB commenced the conduction of the detailed economical evaluation study.
 Azerenerji requested Mobile providers to improve their capacity in the interesting by Azerenerji
areas so mobile networks to be adequately strong, when the AMI installation will restart.
 The INOGATE report affected positively the proper development of the project providing
information and suggestions already utilized by the beneficiary. ITS will be available to disuss
with Azerenerji any further collaboration with Azerenerji during the development of the project.

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1 Introduction

1.1 Objectives of the study

The overall objective of the Technical Assistance that the INOGATE programme has agreed with
Azerenerji JSC is to assist the development and installation of an integrated system of Advanced
Metering Infrastructure (AMI) across the electrical distribution network of Azerbaijan, and to assist the
connection of the AMI with a Metering and Data Management System (MDMS) and the corresponding
Billing System. INOGATE’s Technical Assistance has been split into two stages:

 The first stage consisted of the preparation and submission of the present report regarding the
optimum AMI system design and the evaluation of the pilot AMI projects that have been
installed and performed by three candidate vendors;

 The second stage (subject to EC approval) will consist of technical support to the preparation of
a Request for Proposals (RFP) and the evaluation of bids. It is anticipated that (subject to EC
approval), this support will continue during the installation and commissioning of the system.

This present study deals only with the first stage and if Azerenerji, upon successful completion of the
first phase, decides to proceed to the implementation phase, INOGATE Technical Secretariat will
prepare a separate detailed plan and Terms of Reference for the second stage and submit this for EC
approval.

The specific objectives of this study report were to:

 Review Azerenerji’s existing Metering and Data Management System;

 Review and evaluate the AMI pilot systems installed by three vendors;

 Evaluate various AMI system design alternatives with due consideration of geography of
networks, customer concentration and communication channels;

 Evaluate the Azerenerji strategy for the implementation of AMI project and comment on
alternative options.

 Identify missing issues and the challenges that the organisation is likely to face in
implementation of the integrated AMI, MDMS and Billing System.

1.2 Azerenerji goals for System Implementation

The Advanced Smart Meters strategy of Azerenerji is driven by the following objectives:

 Reducing technical and commercial losses (thefts);

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  Improving receivables and operational performance;
 Managing demand side consumption.

Upon completion of the project, the main targets that are expected to be accomplished are:

 100% collection of accounts (with a maximum number of meters being prepaid);

 Preventing bad debts;
 Reducing commercial losses;
 Implementing theft and tamper detection approaches;
 Implementing demand management and consumption efficiency improvement approaches;
 Improving supply sustainability;
 Enabling faster outage notification;
 Supporting the implementation of the Azerenerji Distribution Master Plan.

1.3 Conclusions of the report

The present report covers the requirements of the Azerenerji application and the specific objectives of
the Terms of Reference listed in section 1.1 above. A summary of the contents of each chapter is given
in this section.

Chapter 2 deals with the existing Azerenerji electrical distribution system and describes the installed
meters and the existing data management and billing systems.

The electricity consumption in the Azerenerji area in 2012 was 8,424 GWh and the annual demand is
expected to continue growing in line with GDP growth rates. Progress in Azerbaijan’s gasification, along
with the latest increase in electricity tariffs has resulted in lower consumption growth rates and
gradually switching of heating supply from electricity to gas.

Azerenerji provides electricity to the areas of Azerbaijan that are outside Baku, in which 43% of the
distributed electricity is consumed by the residential sector. Azerenerji has an estimated 1.5 million
residential customers. Electricity supply for the Baku area is provided by a separate, state controlled
company called Bakielektriksebeke.

Both electrical companies have made a strong commitment to implement metering installation
programmes, in order to decrease non-technical losses and to improve their income.

Some limitations apply to investment and renovation of the distribution network, which are likely to
present a serious obstacle to the decrease of losses (for example some parts of the network operate on
voltages which are out-of-tolerance, which is likely to adversely affect the operation of advanced
meters). Azerenerji has focused on improving generation and transmission infrastructure, but has lacked
capital to invest in the distribution network. These limitations should be reduced or removed before the
installation of the AMI system, since it cannot operate with the existing distribution network.

The overall losses on Azerenerji’s Regional Electricity Networks (RENs) in 2012 were 16.6%, comprising
10.4% for technical losses (such as heating of distribution cables) and 6.2% for non-technical losses (such

6
as theft or non-payment of bills). The level of these losses presents a very strong incentive for the
technical improvement of the distribution network (addressing technical losses) and the installation of
Advanced Metering Infrastructure (addressing non-technical losses). The introduction of AMI will
address non-technical losses, by providing reliable information on electricity use by specific consumers,
as well as identifying areas where major technical losses exist (by enabling comparison of consumption
levels at different points within the electricity distribution system).

In certain areas (Ganja, Mingechevir and Shrivan), Azerenerji has already installed an extensive number
of meters with prepaid cards. In 2012 it began a project to design and install an AMI system.

At present there is no functioning MDMS in the Azerenerji system. All meters, both electrical and
mechanical, are currently working independently, with data manually retrieved and transferred to a
storage data base. The Billing System does not currently receive input data automatically and it is not
connected with the company’s Enterprise Resource Planning (ERP) platform.

It is recommended that Azerenerji develops and implements a strategic plan, which describes: the
missions to be accomplished (prepaid consumption, tariffs, statistics, etc.);, the features of the main
system components (Billing System, Metering Data Management System, Smart Meters, Data
Communication); the obstacles for implementation ; the time schedule, resources and organisation. This
plan should identify the present and future needs for the various systems, to work automatically and to
inter-connect through an on-line network, in order to retrieve data from the meters. The Plan should
include the needs for hardware, software packages and personnel (skills and quantities).

In chapter 3, the components of the pilot projects are discussed.

The goals of the pilot projects were to test the ability of the new AMI system to handle prepaid
customers, and to enable data gathering from the 1.5 million customers. Three pilot projects were
supported by Azerenerji, led by the Chinese companies Star, Hexing and Inhemeter.

The Technical Requirements for these pilot projects, as described by Azerenerji, lead to the following
observations:

 It was requested that meters adhere to the IEC62053-21 standard;

 Meters are mainly of the single phase prepayment type with keypad. There are a few three
phase prepayment type with keypad;
 Most of the meters are based on GPRS1 modem telecommunications. There are also a few that
use Power Line Communication2;
 It is not clear which facilities will receive three phase meters, or where the Power Line
Communication (PLC) meters will be installed and why there are only a small number of PLC

1
General packet radio service (GPRS) is a packet oriented mobile data service on the 2G and 3G cellular
communication system's global system for mobile communications (GSM).
2
Power Line Communication involves the transmission of digitally encoded data along the power line, using a high
frequency signal overlaid on the lower frequency alternating current used to deliver the power.

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 systems. In the west, industrial facilities would generally require three phase metering and PLC
systems are sometimes adopted to reduce the operational risks and costs associated with GPRS
systems.
 The general requirements of the AMI system present sufficient guidance for vendors.
 Network connectivity has been shared with three mobile phone providers: Azerfon; Backcell;
and Azercell.
 INOGATE has received the agreement information for Azerfon.
 In this agreement, obligations are placed on both parties for the proper operation and retrieval
of data. Azerfon is required to ensure uninterrupted connectivity between the AMI and
Information Management System (IMS) via its network. Therefore an extensive testing
procedure should apply to ensure that all of the AMI requirements concerning connectivity are
being followed. It is recommended that Azerenerji requires mobile phone providers to prove
reliable connectivity in all areas that smart meters will be installed and if interruption happens,
to explain the automatic corrective actions that will be taken to avoid consequent power cut-off
in the affected households. According to the vendors’ technical manuals there are elements of
MDMS mentioned, such as application of different tariff structures, transfer of information to
billing systems, etc. Based solely on the technical manuals provided, Hexing appears to have met
most of the technical criteria that were set by Azerenerji. However, to assist with vendor
selection, vendors should be requested by Azerenerji to demonstrate the functionality of the
features of their respective systems during the pilot phase. Since a prime function of the AMI
system is to interact with MDMS and Billing Systems, it would be helpful to describe these
interactions in the manuals.
 Finally the experts evaluating the MDMS and Billing system concluded that, based on the
evidence presented, that currently no Integrating System has been described to bring together
the AMI, MDMS and the Billing System. Without such an Integrating System, the benefits of
integration (such as automated meter reading, billing and performance monitoring) cannot be
realised. The experts expressed their concern that the integration of specific GSM3 operators
and the inclusion of a specific bank already at this design stage appears premature. The experts
consider that the system should first be designed with clear specifications for the involvement
of any GSM operator and cash collection mechanisms, using open protocols and without
committing to specific suppliers for these services.

When the INOGATE experts visited the sites, the implementation of the pilot projects had not yet been
completed, the vendors were not present and no MDM System from any vendor had yet been installed.
A few monthly reports from vendors showed the partial operation of the pilot meters and the various
reasons for malfunctions. Relevant observations are:
 The existing distribution network in the visited areas was found to be in poor condition, creating
problems for the normal power supply and for the performance of meters. The rehabilitation of
the distribution system will need to be implemented in parallel with the installation of the AMI,

3
Global System for Mobile Communications

8
 otherwise the AMI system will fail to meet the business objectives. A key reason is that the
functioning of the AMI system would be adversely affected by the distribution system operating
out of tolerance.4
 For the meters, a table is presented, based upon the vendors’ manuals, showing that in general
the requirements are met by the vendors’ specifications. However the various meter features
should be tested in suitable testing laboratories. These tests should prove the performance of
the meters independently of the power network problems and the poor connectivity in some
areas. This approach would follow international practice and allow the isolation of any
problems.

In chapter 4, the conclusions and recommendations of the INOGATE team for the proper selection of
the AMI vendor are presented:

For the Meters

 The vendors to conduct specific laboratory tests of the meters before installation in houses.
 Under low voltage conditions, some of the meters may not perform to specifications, and
additional testing may be necessary to assess meter performance under these conditions.
 Azerenerji needs to conduct tests of the distribution system before installing smart meters to
ensure that customers who are currently getting relatively poor power service will not be
excluded from service due to the meter installations.
 Mobile providers and Azerenerji to improve the GSM network in parallel with the installation of
pilot meters. If the network connectivity is weak, due to prepaid control, it is possible that
customers will have interruptions in power supply.5
 Azerenerji needs to conduct surveys in the pilot areas to assess how the consumers are being
affected by the pilot installations and to test their attitudes to and level of knowledge about the
new meters, to guide future, more widespread installations.

For the MDM System

 The INOGATE team has compared how the information submitted by the vendors to INOGATE,
matches up with what Azerenerji has requested of them, as in the technical annexes. A table
shows how the AMI requirements compare with information from the three vendors. Omissions
and derogations from the specification have been highlighted and additional information and
clarifications from the vendors are necessary to judge whether these are truly limitations or not.
 Azerenerji should modify the specifications to enable the MDM system to operate
independently of individual smart meter vendors. Azerenerji should insist that vendors provide
an open data communications protocol and that systems are tested with different smart meters.
This will improve robustness of the system and avoid dependence on a particular vendor.

4
More details on the existing distribution network and how affect the AMI system are given to section 3.2.2
5
For details on the prepaid function and its failure due to weak network connectivity please refer to section 4.1.1

9
  The prepaid systemrequirements appear to be met, from examination of the vendors’ manuals.
However, due to the importance of this feature, the installed meters should be allowed to
operate on the prepaid mode for an extended period (at least six and preferably twelve months)
beforethe final evaluation, to ensure operational performance under a full range of conditions is
checked.
 Field communication testing must be conducted for each vendor, including how the data
concentrators will work.
 Azerenerji should consider how it will use the information collected from the deployment of PLC
and GPRS/GSM communication systems. The choice of communication medium is very
important and analysis of advantages and disadvantages for the specific geographical areas and
costs (primarily capital expenditure for PLC and operating expenditure for GRPS) is necessary.
 During the pilot period data must be collected on the communication load (i.e. how many
kBytes of data were transmitted per meter per month).

In chapter 5, various necessary actions for the completion of the pilot phase and the organisation of the
second phase are discussed, along with recommendations for Azerenerji to promptly take corrective
actions:

• The assessment of the pilot projects is not yet complete and significant review and analysis of
the pilot projects need to be conducted before Azerenerji takes the next steps towards the
larger deployment.
• Azerenerji needs to undertake certain steps in order to prepare itself for this larger deployment:
 Ensure that pilot projects are successful and make sure sufficient analysis is conducted
to draw the key lessons for the future deployment
 Evaluate lessons learned from the pilot projects
 Assess what needs to be done, as part of the planning, in the infrastructure of the
electric network and in the communication system
 Hire a contractor/consultant who can manage the deployment and procurement
process.
• The experience of AMI systems deployment in five countries (UK, Uzbekistan, Australia, Japan
and Italy) should be considered by Azerenerji in planning its own project organisation approach.
• During implementation of such complex project, there are several potential risks that could
affect the way in which Azerenerji will deploy the smart meters. Some of these risks are
presented, along with mitigation measures that suggest how Azerenerji can prepare itself to
avoid risks or reduce their impact.
• The selection and prioritisation of the parts of the networks on which an AMI project is
envisaged to be rolled-out, compromises an integral part of the roll-out strategy. A
comprehensive analysis of the existing network of Azerenerji, using specific criteria, is needed to
identify a specific action plan for the larger deployment. It is noted, however, that the exercise
of prioritising the Regional Electricity Networks (RENs) has been performed with the purpose of
illustrating the criteria and the ranking logic, rather than to come up with a definite plan. The

10
 reasons are that the distribution rehabilitation plan is still not agreed among the stakeholders
and measures of the expected benefits i.e. non-technical losses have only been indirectly
addressed in this analysis. Gradually, as the elements of this multi-criteria analysis solidify,
Azerenerji might revert to this analysis, revise and re-apply it as appropriate in order to develop
the final implementation schedule.
• Taking into consideration all above parameters, a detailed organisation chart is presented,
which can be used as the basis for Azerenerji to build up its project team. Part of this owner’s
team should be a consultant, who will transfer experience to Azerenerji personnel and support
the successful implementation of the project to the required cost, time and quality criteria.

In conclusion, Azerenerji following the suggestions of the report and the actual observations on the pilot
projects decided to implement first the rehabilitation of the network and then to proceed to the AMI
deployment.

1.4 Study Team

In accordance with their expertise field, the following individuals undertook the Study:

Organization

Nikos TSAKALIDIS Senior Programme Coordinator, LDK

assure the overall quality
control of the deliverables

Achilleas GEKAS Project Manager Free Lance Consultant

Ananth CHIKKATUR Senior AMI and MDM Expert ICF International

Saleh NASIR Advanced Metering ICF International

Infrastructure Expert

Petros PAPADIMITRIOU Senior IT and Communication First Telecom

Expert

Nick TOURLIS Senior Electrical Expert LDK

Zaur MAMADOV Electrical Engineer-Country Ministry of Industry and Energy

Expert of Azerbaijan

1.5 Data collection and steps for the completion of the work
The TOR for implementation of the first phase of the project; “Technical Assistance for Consultancy
services on Advanced Meter Infrastructure at Azerenerji Distribution Network” was approved by the EC
on 11th November 2013.

11
Upon EC approval, the experts prepared for the kick off meeting, and began collecting the necessary
material for the presentations, questionnaires for the initial data gathering and clarifications on
Azerenerji smart meters pilot projects.

The visa procedures and the availability of Azerenerji personnel and INOGATE Experts led to the
organisation of the kick off meeting in early December 2013.

By the end of November 2013, INOGATE experts submitted the agenda and questionnaire to Azerenerji,
to enable collection of the necessary information for the kick-off meeting.

The kick off meeting was conducted on 10, 11 and 12 December 2013 in Baku.

At the kick off meeting the INOGATE experts presented on the following topics:

 An overview of AMI Technology in EU & US

 The AMI Business Case (Examples of cost benefit analysis, Evaluation Criteria and Project Pitfalls)
 INOGATE scope of work and tentative schedule
 Information necessary for the study.

The Azerenerji personnel were involved in the following activities:

 Presented the goals of the Project

 Discussed the status of the Pilot Projects and the first results
 Arranged meetings with:
o Mobile service providers: Azerfon, Backcell
o Express Bank that will design, install and operate the Billing System
o The IT department and
o The Investment, Strategic and Planning department of Azerenerji.
 Arranged for a visit to the three areas where vendors have installed the pilot smart meters.
Details of the meetings are in the Appendix 6.3 along with the minutes of the kick-off meeting, and
Appendix 6.2 has the presentations made by INOGATE during the kick-off meeting.

The experts visited the three areas Hokmeli, Qobu and Atyali where the pilot meters have been installed
(see Appendix -6.4 Photos of Pilot Smart Meters). They observed the various types of communication
systems (GPRS, PLC, data concentrators in transformer substations).

The vendors of the pilot projects were not present, so it was not possible to discuss the operation and
performance of the system, especially regarding the data collection, data management and
communication with the existing billing data base of Azerenerji. INOGATE was informed that the
vendors were under no obligation to implement their MDMS during the pilot operation period. From the
monthly reports that Azerenerji submitted to INOGATE, it was clear that at least one of the vendors was
collecting the metering data to its own MDMS. References to this can be found in chapter 3.

12
INOGATE experts met representatives of the Ministry of Energy. During the meeting they were
requested to take into consideration the parallel project that the Baku Electric Distribution Company,
Bakielektriksebeke, is working on to install smart meters. When deregulation and tariff systems will be
applied in Azerbaijan, the regulation authority will control both of these two systems. Therefore the two
systems should be compatible. However the local INOGATE expert was unable to find data for this
project, and the Ministry was unable to provide relevant information. The INOGATE team understands
that the Baku project has now been postponed.

From January to March 2014, data and information that have been collected by Azerenerji were
submitted to INOGATE experts. In January, upon request of Azerenerji, a sample of description of
Performance Tests of smart meters was prepared by INOGATE experts and submitted to Azerenerji (see
Appendix 6.5 AMI performance tests) .

During the preparation period, INOGATE Technical Secretariat organised a Study Tour of Azerenerji
personnel to a European company which operates a wide network of smart meters and an advanced
MDM and Billing System (ENEL, the Italian Power Distribution Company, with an operational capacity of
over 30 million smart meters). On 24th February an official letter was submitted to the president of
Azerenerji presenting the organisation of the Study Tour (Appendix 6.6 Letter for Study Tour).

ENEL sent in advance their presentation (Appendix 6.7 Presentation of ENEL’s AMI system) in order to
familiarise the Azerenerji personnel with their system.

The Study Tour was held after the decision of the management of the company to postpone the
commencing of the AMI installation, up to the renovation of the powerline network. ITS provided to
Azerenerji the necessary information and contact data to communicate and arrange their visit to ENEL
installations when they consider the appropriate time .
On July 17th 2014 the first draft of the report was submitted to Azerenerji for their review and
comments. Due to missing information regarding the performance of the pilot meters and the MDMS, it
was not possible to address all the issues that were initially planned under the evaluation, e.g. to assess
the performance of the pilot projects. This report however, contains a thorough evaluation of the
specifications of the meters and MDMS, based on information provided by Azerenerji, including
information from the pilot vendors STAR, HEXING and INHEMETER. The report also has
recommendations for further performance tests on the meters and the MDMS, which are necessary
before the final selection of the preferred vendor.

On August 12th 2014 Azerenerji reverted to the INOGATE team with comments on the submitted report.
Experts reviewed the comments and submitted their responses on September 5th 2014, to be discussed,
agreed and incorporated in to the final draft report.

In September 2014 experts finalised section 5, “Project Implementation” in which the INOGATE experts
suggest how to organise the project for the successful completion.

13
These suggestions are based on the status of the Azerenerji project at the time of the review, along with
the experience of 5 countries that recently implemented or are implementing similar projects. The
revised draft report has been submitted to Azerenerji on September 29th and discussed in the meeting
of 8th and 9th of October 2014.

On October 8th and 9th, 2014 the INOGATE team arranged a meeting in Azerenerji’s offices to review and
discuss the report conclusions and recommendations. During the meeting, Ajerenerji informed ITS that :

 The installation of smart meters has finished and the meters operate in parallel with the old
ones. The operation is not reliable due to power failures (deteriorated distribution network)
and poor capacity of mobile providers. Vendors provide Data. To Azerenerji, on batches
because they are not connected on line with Azerenerji’s MDM system.
 Ajerenerji, taking into consideration the INOGATE suggestions and the observations of the pilot
installations, decided to proceed first to the rehabilitation of the distribution network and then
to the installation of the AMI.
 Asian Development Bank (ADB) agreed in principle to finance the project of rehabilitation and
already ADB commenced the conduction of the detailed economical evaluation study.
 Azerenerji requested Mobile providers to improve their capacity in the interesting by Azerenerji
areas so mobile networks to be adequately strong, when the AMI installation will restart.

The INOGATE report affected positively the proper development of the project providing information
and suggestions already utilized by the beneficiary.

2 Assessment of Azerenerji’s System

2.1 Existing Distribution System

The Azerenerji distribution system comprises the part of the HV6, MV and LV networks in Azerbaijan that
delivers electrical energy to nearly 50% of the total national demand. The company is responsible for the
electricity supply of Azerbaijan excluding the Baku region and Nakhchivan Autonomous Republic. Power
distribution and supply in Baku is the responsibility of the 100% state-owned company Baku Electric
Company JSC (Bakuelektrikshebeke).

Azerenerji is a vertically integrated enterprise, owner of all the generation capacity, except for some
small private producers, and also the transmission system operator of the country. It is organised as
seven subsidiary grid companies namely Sumgayit, Ganja, Mingachevir, Shirvan, Imishli, Shaki and
Khachmaz Regional Electricity Networks (REN). The geographic representation of the regional
distribution regions is shown in Figure 1 below:
6
Baku Electricity Grid owns 110 kV lines for the purposes of distribution of electricity in Baku region. The
remainder of 110 kV networks which is owned by Azerenerji is considered as part of the transmission assets.

14
Figure 1: Regional Electricity Network in the Republic of Azerbaijan

Source: ADB, 2013: Update on the Power Sector Master Plan for the country of Azerbaijan for the years 2013 - 2025

As an indication of the size of the distribution network, Table 1 presents the length of lines per
distribution voltage level for the two companies:

Table 1: Distribution lines in Azerbaijan

Component Unit Baku Electric Seven Distribution

Distribution Regions
Company of Azerenerji
35 kV and 20 kV substations pcs 136 430
10/6 kV transformers pcs 3,785 17,920
20 kV and 35 kV distribution km 1,570 4,046
lines
6 kV and 10 kV distribution km 7,200 29,126
lines
0.4 kV distribution lines km 5,000 56,776
0.4 kV SIP7 cables km 11,251 6,000

7
SIP stands for “Samonesushchaya Izolirovannyy Provodnik” in its Russian abbreviation which can be translated as
“Self-supporting insulated conductor”. In the western markets this type of distribution cable is usually termed as
ABC – Aerial Bundle Conductor and therefore is should not be confused with “Session Initiation Protocol” as
mentioned in some the background studies retrieved by Azerenerji.

15
Source: ADB, 2013: Update on the Power Sector Master Plan for the country of Azerbaijan for the years 2013 - 2025

Furthermore, looking at the demand structure in 2012, it seems that the largest representation in
Azerenerji client base comprises the residential sector with a 43% share followed by a mixed industrial
category i.e. industry, transport and construction which in turns represents 34% of the total electricity
consumption. In absolute terms, the overall Azerenerji consumption in 2012 has been recorded to be
8,423.7 GWh and its breakdown per customer category is presented in Table 2.
Table 2: Consumption at Azerenerji's distribution networks per customer group (2012)

Consumer Groups Consumption (GWh) Share on total consumption (%)

Residential 3,623.8 43
Public sector 1,382.5 16
Trade and services 380.7 5
Industry, transport and 2,843.1 34
construction
Others 193.6 2
Total 8423.7 100
Source: Azerenerji, 2012 Data: Response to INOGATE questionnaire

It is important however to look at the evolution of demand as described in the demand forecasts.
Specifically, for the networks of Azerenerji, demand forecasting has been elaborated from 2007 to 2009
on an annual basis with a horizon up to 2025. The forecasts showed a rather steep increase of demand
up to 2009 (growing at around 11% per year), and from 2009 and onwards this increase was estimated
to be relatively stable in the long-run (i.e. less than 5% annual increase). It is to be noted that the long-
run incremental rate seems to be consistent with the International Monetary Fund’s (IMF) projections
on GDP development.

Figure 2 below describes the baseline demand evolution scenario per Regional Electricity Network (REN)
of Azerenerji and was developed in September 2010. A quick comparison of the reported total energy
consumption for 2012, which was 8,423.7 GWh shows that the respective forecasted value has already
been surpassed by some 21%. Despite the current consumption being much higher than forecasts, there
are reasons why the annual demand increases are expected to stabilise relative to the GDP growth
rates. More specifically:

 Consumers are gradually switching from electricity to gas to cover their heating needs. At the
moment there is no specific pricing policy to support this, since both electricity and gas are sold
at flat rates with no provision for informative price signals to the consumers.
 The latest tariff review has resulted in a new increased electricity rate that has inhibited the
steep increase of electricity demands and nearly halved the demand growth rate in 2009-2010.
Though electricity tariffs should be cost-reflective and transparent, thus avoiding demand
shocks, on this occasion it was unavoidable, given the need to ensuring the electricity sector
commercial viability.
 The strong commitment of both electricity undertakings i.e. Azerenerji and Baku Electricity
Company in implementing metering programmes has had a (desirable) influence in controlling

16
 demand. By enhancing and accelerating this effort, distribution companies will be able to have
the necessary infrastructure in place to continue improving their technical and commercial
capabilities while ensuring a viable future. An integrated AMI, MDMS and Billing System could
help with ensuring an effective response to this demand growth pattern.

Figure 2: Demand forecasts for the 7 RENs of Azerenerji

Source: ADB, 2013: Update on the Power Sector Master Plan for the country of Azerbaijan for the years 2013 - 2025

Alongside the response to demand growth, the smart metering system will need to operate within and
respond to the reliability constraints of the distribution system, therefore an understanding of relevant
reliability indices is fundamental to AMI system design.

A JICA8 study undertaken in 2013 concludes that: “Reliability indexes such as the System Average
Interruption Duration Index (“SAIDI”) and the System Average Interruption Frequency Index (“SAIFI”) are
not applicable for the distribution line section”. Since reliability indicators can only be calculated in the
presence of adequate metering infrastructure, Azerenerji should make use of this feature in its AMI
system. Currently, there is no requirement placed on Azerenerji regarding Quality Regulation. However,
reliability indicators can be used as screening criteria for targeting the investment programmes i.e.
investing in infrastructure in areas that present low reliability indicators. While there is an extensive list
of reliability indices describing continuity of supply in distribution networks, we understand that the
proposed two indices are a proper starting point. It should however be investigated how this AMI
project will best serve this functionality minded that it should be able to record interruptions of a
duration that it is lower than the usual integration time (15 min). Table 3 below presents the definition
of long, short and transient interruptions as recorded by CEER in their 4th Quality Benchmarking Report.

8
Japan International Cooperation Agency (JICA) Tokyo Electric Power Services Co. LTD, May 2013: Republic of
Azerbaijan Study for Electric Power Sector in Azerbaijan, Final Report

17
Table 3 Definition of long, short and transient interruptions

Source: CEER, 2008: 4th Benchmarking Report on Quality of Electricity Supply

For the sake of clarity in the definitions of SAIDI and SAIFI indices we are also presenting the definitions
as they have been recorded in CEER’s in their 4th Quality Benchmarking Report:

SAIDI, or System Average Interruption Duration Index, gives the average amount of time per year that
the supply to a customer is interrupted. It is expressed in minutes per customers per year and calculated
using the following expression:

where the summation is taken over all incidents, either at all voltage levels or only at selected voltage
levels; ri gives the restoration time for each incident; Ni gives the number of customers interrupted by
each incident; NT gives the total number of customers in the system for which the index is calculated.
(Note that the restoration time is different for different groups of customers involved in the same incident;
therefore, the sum must be extended to each group of customers experiencing the same restoration
time).

SAIFI, or System Average Interruption Frequency Index, gives the average number of times per year
that the supply to a customer is interrupted. It is expressed in interruptions per customer per year and
calculated using the following expression:

18
From the discussions with various stakeholders and also from own knowledge of the country, it appears
that investment in distribution networks have been ranked (up to now) rather low in the prioritization of
investments. This can be attributed to various reasons: distribution has been privatized and then re-
nationalised, leading to a neglect of this area, and local decision makers have had to ensure
supply/demand balance and have focused on generation. The latter can be understood as a response to
capital-constrained conditions, which might have dictated investing on generation and transmission
even at the expense of the overall performance efficiency.

The field visits to the AMI pilots (please refer to Appendix 6.4) - which were organised by Azerenerji,
gave a realistic view of the network conditions. The visits verified the poor conditions of certain parts of
the distribution network. Most notably, the exposed distribution feeders which can be accessible and
susceptible to pilferage, as well as the outdoor distribution transformers and circuit breaker terminals
without an enclosure, which can attract illegal off-takes.

In closing this brief distribution network overview, it should be noted that the situation is rapidly
changing with the implementation of metering programmes in order to control non-technical losses and
that a phased rehabilitation plan would aim to the reduction of technical losses and the improvement of
service quality. In our discussions with the Ministry of Energy, we have been informed of a preliminary
budget allocation of 8 billion AZN9 up to 2025 in the electricity sector, mainly for the improvement of
transmission and distribution networks.

2.2 Existing Metering System

Metering and network losses management coincide in utility management practices when it comes to
revenue protection by minimising non-technical losses10. Technical losses11 are also relevant to metering

9
The exchange rate between AZN and EUR is close to unity
10
Non-technical losses are commercial losses which consist of delivered and consumed energy that cannot be invoiced to an
end user. This category of losses can be split into fraudulent losses such as theft, or non-metered public lightning and hidden
losses such as the in-house consumption of equipment in the distribution network (e.g., the power needed to cool transformers
and to run control systems).

11
Technical losses are physical losses that include load losses (copper or Joule effect) and no load losses (Corona losses, iron
losses in transformers)

19
for monitoring and verification purposes but in this case metering does not have a direct effect on the
losses mitigation.

Reverting back to the client base structure of Azerenerji and with a view to understand the relationship
between consumer categories, metering and losses, Table 4 provides data from 2012:

Table 4: Customers, Metering, Losses and Collection Rate in Azerenerji's Distribution Networks (2013)

Number of customers Metering Losses (%) Collection

Total Residential Non- Number of which Total Technical Commercial rate (%)
residential of all smart
meters prepaid
meters
1,454,961 1,343,390 111,571 1,433,316 271,428 16.6 10.4 6.2 85.3
Source: Azerenerji, 2012 Data: Response to INOGATE questionnaire

Interpreting the data provided in Table 4 in conjunction to those provided in Table 2, it can be observed
that 92% of the client base of Azerenerji’s RENs comprise residential customers, yet their overall
consumption is only the 43% of the total distribution demand (2012 figures). This means the remaining
8% (collectively all non-residential customers) represents 57% of the annual demand. In terms of
metering it seems that there is only 1.5% (or in absolute figures 21,645) of meters missing to complete
the 100 % coverage for the Azerenerji’s RENs. The Year 2012 figures presented above suggest a
penetration of prepaid electronic meters of 19% while in recent study for ADB this figure is reported to
be at nearly 25%.

Breaking down the prepaid electronic meters penetration rate per Azerenerji’s REN it seems that Ganja
and Mingechevir are the pioneers in terms of prepaid electronic meters penetration whereas Sumgait is
seriously lagging behind. Focusing on the pioneer RENs in big cities, the situation is even more promising
as the penetration rates of Ganja Mingechevir and Shirvan cities have reached nearly 100 % already
from 2012. This signifies a tendency of Azerenerji to control demand patterns over the big load centres
and later on to reach out to the rural areas. Figure 3 presents the penetration rates of the seven
Azerenerji RENs (in bars) in comparison to the penetration rates of each RENs capital city.

20
Figure 3: Comparison of Smart Meter Penetration Rates in 7 RENs of Azerenerji and their capital cities

Azerenerji's Prepaid Electronic Meter Penetration Rates

Penentration @ REN's Capital

40% 120%
(2012)
Penetration @ REN level

35% 100%
30%
25% 80%

level
20% 60%
15% 40%
10%
5% 20%
0% 0%

REN Capital of REN

Source: JICA, 2012: Study for Electric Power Sector in Azerbaijan: Final Report

As previously mentioned, metering comprises perhaps the best opportunity for utilities to control their
non-technical losses. Table 4 shows a losses level of 16.6% on Azerenerji’s RENs, which can further be
broken down into 10.4 % for technical and 6.2 % for non-technical losses. The economic perspective of
losses is quite different when discussing technical against non-technical losses. Technical losses rely on
laws of physics and are to a certain extent unavoidable in network operation. Furthermore, the interest
in reducing them is not with the utility (for they are recoverable through the tariffs) but with the state
(in liberalized markets this is a task assigned to the National Regulatory Authority) which is responsible
for the overall optimization of the energy system. In order to counteract this network operators are
provided with incentives through the regulatory system in order to invest on technical losses mitigation.
The level of investment is therefore a trade-off between costing the needs and the ability to achieve a
reasonable return on investment through the tariffs.

On the contrary, non-technical losses comprise an inherent interest of the utility since they are (usually)
not recovered by the tariffs and lead to bad debt. Apparently, non-technical losses have been treated
with a certain degree of priority in Azerbaijan as a whole and have been the primary driver for the
installation of new meters with anti-tampering features and also dictated the use of SIP cabling. Figure 4
presents a multi-year comparison of transmission and distribution losses as they are recorded by IEA
statistics.

21
Figure 4: Evolution of T&D losses in several INOGATE PCs and the EU (average)

Electric power transmission and distribution

losses (% of output)
40

35 Kyrgyz Republic
Moldova
30
Azerbaijan
Tajikistan
25
Ukraine
(

%
Georgia
)

20
Turkmenistan
Belarus
15
Kazakhstan
Uzbekistan
10
European Union

05
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: IEA Statistics – Electricity Information (transmission and distribution losses, includes pilferage)

Apparently Azerbaijan shows a fluctuating pattern in regards of losses in both the transmission and
distribution networks over the decade covered by the dataset. Focusing on Azerenerji’s RENs the JICA
report calculated technical losses on 0.4–10 kV distribution lines at an average rate of approximately
11–12% due to the continuous effort and commitment of Azerenerji in combating losses and
modernising its networks. The same report suggests 1-2% of commercial losses in the form of unpaid
energy consumption. Should this estimate be valid, it leaves the remainder of 4-5 % to be accounted as
fraudulent losses.

2.3 Existing MDM

At the moment, metering data is addressed by different RENs differently, which can make the overall
system hard to integrate among RENs. Smart card meters seem to operate independently whereas the
existing (non-AMI pilot) electronic meters are manually retrieved (via handheld readers) and then the
meter data are transferred to the billing system and RENs storage databases. The following schematic
(Figure 5) presents the existing situation.

22
Figure 5: Azerenerji’s current metering information collection, storage and billing options

Source: Azerenerji, 2013

In the existing situation there is no Meter Management System functionality and there is no evidence
that metering and billing information are being integrated at any level with the company’s Enterprise
Resource Planning (ERP) platform. Even setting aside the AMI-MDM-ERP discussion, international
experience shows that many utilities that omitted to incorporate the MDM together with the AMI
have discovered that they were unable to use the main features of the metering system.

Azerenerji recognises the need for an efficient and reliable MDM system to be in place to enable
aggregation of metering data and to provide a single approach for data storage and handling. This is
depicted in the following schematic (Figure 6) which represents the concept of the metering and billing
architecture Azerenerji envisages deploying:

23
Figure 6: Azerenerji’s new concept of metering information collection, storage and billing

Source: Azerenerji, 2013

Azerenerji, during the kick-off meetings, briefly described the desired functionalities for an MDM
system. These included:

 Energy profiling capabilities

 Meter data validation

 Ability to fill-in missing measurements based on predefined routines and the respective
individual energy profiles

In accordance with industry experience, an AMI system is usually complemented by a meter data
management (MDM) system and a meter data repository (MDR) – although some commercial vendors
provide both functionalities in one package. MDM is a software package specifically designed to receive
and process readings and other information sent by the meter (alarms, etc.) in order to enable proper

24
and timely action by the company. The MDR stores data for future use. MDM is absolutely crucial to
fully use the powerful functionality of an AMI system.

A recent example comes from the Advance Electricity Metering project in Uzbekistan for the World
Bank. The organisation of the MDM system there involved three regional distribution companies in
which each of the respective distribution branches (RES) was equipped with PC terminals/clients to act
as customer service centers having access to metering and billing data for customers in their districts.
The common functions of the system are presented in Figure 7 below:

Figure 7: Groups of functionalities in the Uzbekistan Advanced Electricity Metering Project

Source: World Bank, 2012

Looking at the same issue from a different angle – i.e. the improvement of retail markets functioning -
The Council of European Energy Regulators (CEER) has in 2012 reviewed the situation in the EU Member
States with regards to the meter data management (MDM) model(s) and consequent regulatory
developments. The key aspects addressed in the CEER survey covering Austria, Belgium, Denmark,
Germany, Italy, Norway, Spain, the Netherlands and the United Kingdom, are as follows:

 Responsibility for meter management: The findings suggested that the majority of the
respondents have placed the sole responsibility to the Distributed System Operator (DSO) with
only Germany and UK having allowed for third parties to administer metering.

 Diversity of approaches to meter data management: The most common approach seems to
have centralised access and decentralised storage. This was true in five of the cases; Two of the
cases have a strictly centralised approach with centralised access and storage; Denmark (for

25
 electricity only, not for gas) and Norway. Italy is moving from a decentralized approach to a
strict centralised approach and will join Denmark and Norway in this category. There was one
case where there is a strict decentralised approach, Germany. This is particularly interesting
considering the vast number of stakeholders in the German market – about 2,000 stakeholders
in electricity market and over 1,500 in the gas market. The rationale for centralised MDM seems
to be strengthened in a smart metering environment because of the increased amount of
information exchanged.

 Important factors for supporting and choosing a particular MDM model: These were primarily
identified to include cost efficiency, transparency, data security and efficient processes. Other
values that have also be considered as important factors on decision making included the
greater ability to facilitate the development of smart grid services, governance and
proportionality

 Access privacy and security: data privacy and access to data are important issues from the
customer’s point of view. Smart meters offer the possibility to collect much more granular data
than before and these are also essential for the operations of the market actors (i.e. operators,
suppliers, etc.). In view of balancing the need for market actors functioning against the sense of
data privacy on behalf of the customers “CEER considers that one way ensure customer trust in
smart metering systems is to ensure that customers always control/have the right to control the
data and that they know what data is available and to whom”.

Since MDM is considered an integral feature of the smart metering programme and that there is some
experience both in the region and in the EU it would be advisable that Azerenerji takes good knowledge
of the lessons learnt and avoid possible shortfalls in their investment decisions.

26
 Smart meter data management market structure in the UK

Between 2015 and 2020, the UK plans to roll out 54m smart meters to households to ‘end
estimated billing and enable consumers to cur their energy bills and better manage their energy
use’ (Dept of Energy and Climate Change, 15 Aug 2013).

The following contracts have been let to service providers, concerning provision of
communications, data management and governance services:

 The Data and Communications Company (Capita) is responsible for operating the data and
communications hub at the heart of the smart meter system.
 The Data Service Provider (CGI) is responsible for developing and operating the system that
controls messaging between smart meters.
 The Communication Service Provider in the north of England and Scotland (Arquiva) manages
smart meter communications in that region. Trials of its ‘Sensus’ technology have proven
communications with smart meters including locations ‘deep inside buildings that other
communication technologies have struggled to reach’ (Arquiva, 2013).
 The Communication Service Provider in the Midlands, East Anglia and Wales is Telefonica,
based on cellular technology using its established network, backed by ‘mesh technology to
connect meters in areas without cellular coverage’ (Telefonica, 2013).
 The Smart Energy Code Administrator and Secretariat (Gemserv) provides day-to-day
governance activities in relation to the Smart Energy Code, which establishes rules on smart
metering, which operators, such as energy suppliers, will have to adhere to.

As well as removing the need for bill estimation and manual meter reading, the UK Government
anticipates a more sophisticated approach to the management of supply and demand than is
possible with conventional meters. It hopes that by giving consumers near real-time information
on energy use, including showing them how much they are paying for energy at a particular time,
they will reduce peak time consumption. The ultimate goal is for a smart grid infrastructure that
will deliver supply more efficiently to meet demand. Such a system would incorporate extensive
load management (for example allowing the utility to control and schedule the consumption of
‘smart appliances’ such as electric water heaters and refrigerators, in return for favourable tariffs).

An important aspect of the evolving UK smart meter market is that third parties (i.e. companies
that are not energy suppliers or consumers with smart meters), can participate in the market.
Under controlled conditions, governed by the Smart Energy Code and data protection legislation,
such third parties will be given access to the flow of data from smart meters. The Government
anticipates that this will result in innovative solutions that will ultimately contribute to
decarbonisation, energy security and competitiveness/affordability goals in line with UK and EU
energy policy.

27
2.4 IT and Billing System
Based on the lengthy interviews conducted with numerous members, especially the Head of the “IT
team” of Azerenerji (Mr. Telman Anadov) the following observations can be made in terms of IT and
billing integration:
 First, there are effectively three IT teams within the organisation, namely one unit that is
mostly responsible for networking and hardware related issues and one that over several
years in the past has partly developed and maintained the developed applications around
Billing and the third that it is responsible for data base and datacenter related issues.

 At the same time, according to the statements made, significant investment has been made
recently for infrastructure within the “first” IT team,on storage, servers and a Data Centre
infrastructure.

 The “first” IT team has also deployed a quite reasonable logical separation between
processing components in the sense that metering records were separated from a series of
interactions (bill production and validation, banking transactions related to payments
thereof).

 A significant drawback established during the interviews was the inability of the department
to process the records produced by manual meter readings, along with a series of semi-
automatic prepaid readers introduced recently

 Finally it was discovered, that the implementation of a corporate ERP (of Russian origin) was
not part of the overall concept of integrating all components of Enterprise Resources.

It is noted that, as is apparent for both Azerenerji and other “younger organisations” that take on the
burdens of legacy corporate infrastructures, the discussions highlighted the following main
disadvantages for a properly conceived and implemented billing IT solution:
 There is no coherent IT strategy in terms of manpower allocation and organisational
infrastructure that would enable IT to function as a one-stop-shop for the whole organisation.
This means that IT is not currently considered as a single unit with various aspects of activity
that are strategically important for Azerenerji’s success, but rather as different smaller units
based on historical activity profiles, which are primarily fulfilling disparate operational functions.
As such it is difficult for IT professionals to make a difference to the corporate achievements of
the company.

 There is almost a complete lack of strategy in terms of scope, management and methodologies
in order to obtain maximum synergies and efficiencies from a well-defined IT team, which
nowadays forms a strategic unit in every larger organisation.

 A number of decisions on several aspects (metering being a paramount example) have been
made based upon what the market has to offer at each point in time, rather than being part of a
stated goal and its implementation strategy. In this manner IT decisions are not contributing
efficiently to overall corporate objectives.

 In addition, the INOGATE experts concluded that Azerenerji would benefit from a strategy / plan
stating the proposed dimensioning of IT needs for the next 3-5 years, concerning the desired

28
 amount of data to be collected, processed, stored and reported on, which would produce a
blueprint on what/how/when effort and investment should be budgeted and spent for:
◦ Data stewardship;
◦ Hardware and networking infrastructure;
◦ Decisions on in house development or outsourcing of applications;
◦ Especially based on above, strategic direction of internal developers and acquisition of
relevant software development platforms or training on outsourced solutions;
◦ Knowledge of current global software trends.

3 Pilot Projects
Azerenerji issued (in 2012) a request for smart grid vendors to develop pilot projects in the area under
Azerenerji’s control. Based upon the responses to this request, Azerenerji selected four vendors to
install about 2,500 meters each.

As noted previously, the present metering system in the pilot areas is manual reading (AMR) of meters.
About 300-500 readings per month are conducted per person in residential areas and about 100-200 per
month per person in rural areas. The smart prepaid meters are intended to reduce the Azerenerji
burden of meter readings.

The goal of the pilot projects was to test the new AMI system to handle prepaid customers, and enable
data gathering from the >1 million customers. The hardware was to be tested against the specifications,
and at the end two vendors would be chosen based on the performance of both the smart meter and
accompanying MDMS. The first will supply the 70-80% of the meters and the rest will be purchased from
the second vendor12, who will be used as alternative source. Azerenerji intends to use a contractor for
the installation of the hardware (the software will be developed in-house).

At present, there are three pilot projects supported by Azerenerji, led by Star, Hexing, and Inhemeter.
The fourth vendor declined to install pilot meters in the area of Sovkxoz due to insufficient capacity
(source: Azerenerji). All three vendors are of Chinese origin.

3.1 Current Technical Requirements

The technical requirements for the three pilot projects were detailed in an appendix to the contract that
Azerenerji signed with each of the vendors. The appendix has functional requirements for:

 AMI
 Integrated Single Phase Prepayment, Two Element Keypad Meter
 Integrated Three Phase Prepayment Keypad Meter (A, B, and C type)
 Three Phase CT meter (A, B, and C type)
 Data Concentrators

12
Minutes of Kick off Meeting, pp 2/13

29
3.1.1 Meters
Azerenerji required the prepaid meters to meet a number of technical specifications.

In particular, the meters need to adhere to International Electrotechnical Commission13 IEC62053-21

standard, which provides specific technical minimum values for the proper functioning of a meter under
normal working conditions. The Standard applies to newly-manufactured static energy (watt-hour)
meters of accuracy classes 1 and 2, for the measurement of alternating current electrical active energy
in 50 Hz or 60 Hz networks.14

There were three main types of meters that Azerenerji requested from vendors:

 Integrated Single phase prepayment meter, with keypad

 Integrated three-phase prepayment meter with keypad (of three different voltage types)
 Three phase (four wires) Current Transformer and Potential transformer meters

Azerenerji has requested specific quantities of different type of meters. The PDP agreement requests
2392 single phase meters (with a majority of them using GPRS modem), 9 three-phase type A meters, 63
three-phase type B meters, 4 three-phase type C meters, 66 three-phase type A CT meters, and 244
three-phase type B CT meters. Although most of the meters are based on GPRS modem, there are some
using power line communications (PLC). It is not noted where there meters will be installed nor is it
known which facilities will get the three-phase meters. It is also not known which meters will be using
PLC, and why there are only a small number of PLC systems.15

In terms of prepayment, Azerenerji wanted the option of customers entering a code that they receive
(after payment) using the meter’s keypad to continue their electricity supply, as well as remotely
charging the meters by GPRS or PLC. They also wanted the option of these meters being converted to
post-paid, rather than prepaid over time. In addition, the payment process can also be tested using an
online process.

For remote reading, the meter needed to collect, store, and transmit/provide data on meter readings,
energy quality data, and to be able to customise the data collection intervals (up to a minimum of about
15 minutes). The data collection can be on a specified schedule or on-demand.

Azerenerji specified the meters to have the following remote features:

 to be configured and upgraded;

 changes to parameterisation of the tariff structures can be updated in the meters and data
concentrators;

13
The IEC is a standards organization made up of all national electrotechnical committees (IEC National
Committees), and IEC is aimed at promoting international co-operation on standardization in the electrical and
electronic fields.
14
http://webstore.iec.ch/preview/info_iec62053-21%7Bed1.0%7Db.pdf
15
Based on 3_Extract from PDP agreement.

30
  to synchronise the meter clock remotely;
 to have on/off switching capacity in case of non-payment or load management scheduling;
 to manage unauthorised access and intervention attempts to the meters and to provide alarms
(signals visible to customers and remotely to data centres), including “Last-Gasp” outage
detection signal, indicating a power-off event to the data centre.

A more detailed analysis of how the technical requirements for the meters requested by Azerenerji were
complied with by the three pilot vendors is given in the next section.

3.1.2 AMI
Each smart meter vendor was expected to provide its AMI software for handling data collection,
processing, parameterisation, and network management. The AMI system needs to control the network
operability, and ensure data base management and centralised authorisation for access to the metering
equipment. The AMI system must also enable consumption data validation and monitoring on an ‘as
required’ basis. The vendor will also be required to support the integration of the AMI with Azerenerji’s
central server and billing system.16

In terms of communication capabilities of the smart meters, Azerenerji required the smart meters to
comply with the following requirements:

 Prepayment (remote charging by GPRS or PLC) / post payment (remote changing to prepaid and
post-paid)
 Remote meter control
 Accurate information to the billing system (meter reading, customizable interval selection)
 Applying flexible tariff plans
 Monitoring energy quality
 Event logs and remote management
 User friendly interface and support of Azerbaijani language
 Detailed Enterprise Resource (ER) diagram of meter’s data base
 Adjusting the frequency of data storage and data transmission from software (min. 15 minutes).
 New data groups establishments for the classification of information within the groups as per
each feeder.
 Assign ID code for each meter or other device
 Create a new entry field in the data base within software and entry of new information.
 Azerbaijani version of AMI system
 Store all the information regarding the meter seal in the memory of meter (to prevent
tampering)
 Changes of meters and installation of new meters
 Detailed information about customers

16
Document #8: PDP Agreement Extract

31
 Transferring of subscriber’s debt to new meter and track debt’s payment process
 Detailed breakdown of the reports on the feeder and transformers
 Possibility of reading selected meters simultaneously at the same time
 In case of network disconnection, meter memory should memorize the time of any intrusion to
electronic stamp.

Azerenerji requires the AMI system to be based on standard data models and protocols. The system
for each vendor needs to be modular so that it can be integrated with other systems and
manufacturer solutions. The architecture of the system needs to be scalable, and be supported in
popular platforms such as MS Windows and Net. The system needs to be upward and download
compatible through different versions, and be compatible with keypad meters.

32
 Network Connectivity
Azerfon signed agreements with Sumgayit RES 17 to provide two-way connections between
Azerenerji and the pilot projects. As part of its agreement with Sumgayit, Azerfon will use GPRS and
SMS systems to communicate with the meters and provide data to Azerenerji (see Figure 8 below).

Figure 8: High level design for AMI (Source: Azerfon)

Azerfon required the smart meters to have the following technical requirements:18

 Idle Timeout Disconnection

 Smart Meter / GPRS Module should support reconnection attempts
- Automatic Reattempt
- Activate Data Session via Push SMS for reconnection
 Device should have continuous GSM connection
 Device should be able to receive SMS Commands anytime

17
Sumgayit is Affiliate Company of Azerenerji, responsible for the management and administration of the AMI
project.
18
Document #12: Azerfon Technical Requirements.

33
 Azerfon assumed that the meters will send out electric usage info up to three times in a day.
Conversely, Azerfon expects to send from its terminal server the following signals to the smart
meters, which would then take appropriate action:

 Smart Meter Control (Open / Close)

 Remote Configuration / Upgrade
 SMS Push Feature to activate data session
 SMS Commands

Some of the IEC standards that the meters are expected to conform to include:

a. IEC62055 -41: Provides Standard Transfer Specifications (STS) for one-way token carrier
systems. The STS is a secure message protocol that allows information to be carried
between point-of-sale (POS) equipment and payment meters and it caters for several
message types such as credit, configuration control, display and test instructions. It
further specifies devices and codes of practice that allows for the secure management
(generation, storage, retrieval and transportation) of cryptographic keys used within the
system.19
b. IEC62055-51: Provides standard encoding and decoding specification for the physical
layer protocol for one-way numeric and magnetic card token carriers. A token carrier is
the physical device or medium used to transport the information from the vending
system to the payment meter.20
c. IEC62056-46: Specifies the data link layer for connection-oriented, HDLC 21 -based,
asynchronous communication profile for electricity meters.22
d. IEC 62-056-21: Describes hardware and protocol specifications for local meter data
exchange. In such systems, a hand-held unit (HHU) or a unit with equivalent functions is
connected to a tariff device or a group of devices.23
e. IEC62056-5-3: specifies the DLMS/COSEM application layer in terms of structure,
services and protocols for COSEM clients and servers, and defines how to use the
DLMS/COSEM application layer in various communication profiles.24
f. IEC62056-47: Specifies the transport layers for COSEM communication profiles for use
on IPv4 networks. These communication profiles contain a connection-less and a
connection-oriented transport layer, providing OSI-style services to the service user
COSEM application layer. The connection-less transport layer is based on the Internet

19
http://webstore.iec.ch/preview/info_iec62055-41%7Bed1.0%7Den.pdf
20
http://webstore.iec.ch/preview/info_iec62055-51%7Bed1.0%7Den.pdf
21
High-level Data Link Control
22
http://webstore.iec.ch/preview/info_iec62056-46%7Bed1.1%7Den.pdf
23
http://webstore.iec.ch/preview/info_iec62056-21%7Bed1.0%7Db.pdf
24
http://webstore.iec.ch/preview/info_iec62056-5-3%7Bed1.0%7Db.pdf

34
 standard User Datagram Protocol. The connection-oriented transport layer is based on
the Internet standard Transmission Control Protocol.25

Azerfon is expected to provide free SIM cards for each meter and each meter is to have a unique ID.
The SIM cards are not portable and will only be used for the meters. Azerenerji is expected to follow
required protocols so as to not cause overloading of the Azerfon’s network. In addition, a testing of
the system is necessary to ensure that all of the AMI requirements and protocols are being
followed—in particular for the first 100 meters.

While Azerfon provides the connectivity, Azerenerji (Sumgayit REN) is technically in charge of
customers’ smart meters. Among other items, Azerenerji needs to provide Azerfon with information
on location, operation, use, and condition on each of the SIM cards from time to time.

Azerfon is required to ensure uninterrupted connectivity between the AMI and IMS system via its
network. In addition, Azerfon is to provide the following services:

 Set contact with all meters and concentrators in 24/7 working regime based on mechanisms
which meet Azerfon’s requirements
 Eliminate urgently shutdowns in any form (if it occurs on the Azerfon side).
 Provide written detailed information about shutdowns on the end of each months-agree time of
shutdowns
 Manned telephone support
 Monitored email support
 Remote assistance using Remote Desktop and a Virtual Private Network where available
 Monthly checking of working condition of the system.
 Solvency of shutdowns in connectivity.

For these services, Azerenerji is to provide payment to Azerfon for all support costs and provide
adequate human resources to resolve problems.

According to the requirement each meter vendor was expected to provide its AMI software as well as
documentation for evaluation. Inhemeter has supplied a document entitled 14_4_Azerenerji -
INHEMETER SMART VENDING SYSTEM SOLUTION 201310.pdf which is not as detailed as the
documentation provided by Star and Hexing. The document summarizes the functionality of the vending
stations, it addresses draft security issues, vending communication with the data centre but it lacks of
information about AMI and MDMS. This report could be a part of the whole system but it is not
sufficient regarding AMI and MDMS. Star and Hexing provided documentation which clearly states how
the AMI and MDMS works. Additionally Hexing has provided a separate document about AMI
Installation.

25
http://webstore.iec.ch/preview/info_iec62056-47%7Bed1.0%7Den.pdf

35
Since the current infrastructure has no MDM functionality, and obviously is not connected with ERP, the
system has to be redesigned in such way it supports MDMS, integration of the current and the new core
to the billing system, communication with old and future installed meters. According to the
documentation, the AMI architecture introduces specific characteristics for satisfying its functionality
with the billing system. Both Star and Hexing describe how AMI works, but a close comparison of the
documentation leads to the conclusion that the documentation produced by Hexing has much more
detailed information, and is presented in a much more professional and analytical way, using a solid
document structure, which addresses all aspects of AMI functionality. Both Star and Hexing demonstrate
the architecture of their network using network diagrams.

Comparing the diagrams and the documentation it is clear that, for both vendors, AMI consists of a
model, which relies on a centralised database and that the software is based on a Windows server.

• The installation manual of Hexing splits the structure of the system into 4 layers, which is a
common practice for IT deployments26 . Hexing is using a ‘Data Store Layer’ for database
integration and computation services. This is the core of the system regarding all data going in
and out of the database. The ‘Application Layer’ consists of other components, like the MDM,
the meter data collection point, the interface services that are connected to the vending
functionality and the security of the system. In addition, the ‘Communication Layer’ is defined as
the layer dealing with all kind of communication of the core system with the meters, hardware
and customers, by integrating different kind of gateways. Finally the ‘Field Device Layer’ is the
layer which includes all devices that communicate with the core using GPRS.
• Star defines also27 a network architecture, using 3 network maps. The third map describes a
similar architecture (to Hexing’s), which also consists of a database core service. The AMI data
access server and other functionalities, like the billing and alarm server, are connected to the
database, with all other systems defined as a sub network of those two. The AMI data access
server is connected and available to the meters using both PLC and GPRS technologies. The
connection is through Internet/GPRS, which can also use GSM and SMS for communication with
the customers. The alarm subsystem is connected to the alarm and billing server. The latter is
connected to the IP network and can service points of sales, pay-points and the connection with
the core network of the bank.
• Documentation provided from Inhemeter does not include an analysis of the network/platform,
and it is not clear how the AMI and MDMS operates, due to insufficient details in their manual.

The software for controlling AMI functionality introduces a number of operations for both Star and
Hexing vendors. The installation of the system software is described by both vendors. The same applies
for the client and vending management system. AMI integrates functionality for asset management,
organisation and permission management covering power grid, feeds, meter customer's management,
data collector and SIM management interfaces. The systems also introduce a number of functions for

26
13_3_Installation Manual for AMI-G3 System.pdf/page 5
27
15_4_STAR AMI SYSTEM.pdf/pages.2,3,5

36
controlling archives, installation and terminal management, along with time-synchronized tasks (like
changing tariffs). Line loss or power outage analysis is available from both vendors, with Hexing offering
more operations than Star. Real time data management, communication, concentrator functionality and
firmware tasks are integrated in both architectures.

It is recommended that the billing solution adopted should guarantee the following:

• Flexible billing platform able to deliver the functions described in the manuals. The AMI model
should be implemented and tested in order to evaluate the system accuracy, reliability and
functionality.
• Continuous connectivity of AMI with the meters. The more frequently the readings are updated,
the better the statistical sample will be. In other words, customers benefit from the MDMS and
have access to the latest data.
• Documentation for AMI (and the rest of the system) is the written proof that the system can
execute specific operations. If the vendor includes a functionality in the manual, then the
vendor is obliged to provide that functionality. Based on the documentation, Azerenerji can
choose how to design their core system strategically.

Additionally, after a comparative analysis of the documentation received from Hexing, Star and
Inhemeter, it was concluded that Hexing is more flexible on the functions provided and has more precise
documentation manuals. Its documentation and the data presented is of better quality and looks more
professional than the other two vendors.

Star covers most of the functions provided by Hexing, but the data is less clear; the document lacks
description of features that may exist.

Inhemeter does not cover any of the previous information in their manual.

From this comparison, Hexing satisfies the majority of the smart meter communication capabilities
(listed on page 21) that Azerenerji required as of its manual. This is the documentation base which
should be followed, as it is clearly illustrates and describes a fully professional solution, offering the best
possible options.

It is important to note that the above comparative analysis and evaluation is based only on the available
manuals. The INOGATE experts consider that, for proper selection, each vendor must be requested to
prove the functionality of their features during the pilot phase.

3.1.3 Billing System and IT infrastructure

For the billing and IT infrastructure, Azerenerji required the contractor to provide for data collection and
processing, parameterisation and network management. It must also control the network operability,
and ensure data base management and centralised authorisation for access to the metering equipment.
Moreover, the AMI system would need to enable consumption data validation and monitoring as
required. The selected vendor would be required to support the integration of the AMI with Azerenerji’s
central server and billing systems, whose system has the following mandatory support requirements:

37
  Prepayment / post payment
 Accurate information to the billing system;
 Applying flexible tariff plans
 Monitoring energy quality
 Event logs and remote management
 User friendly interface and support of Azerbaijani language
 Detailed Enterprise Resource (ER) diagram of meter’s data base
 Adjusting the frequency of data storage and data transmission from software (min. 15 minutes).
 New data groups establishments for the classification of the information within the groups as
per each feeder.
 Assign ID code for each meter or other device
 Create a new entry field in the data base for entry of new information.
 Azerbaijani version of AMI system
 Store all information regarding the seal in the meter memory
 Changes of meters and installation of new meters
 Detailed information about customers
 Transferring of subscriber’s debt to new meter and track debt’s payment process
 Detailed breakdown of the reports on the feeder and transformers
 Possibility of reading selected meters simultaneously
 In case of network disconnection, meter memory should record the time of any intrusion as an
electronic stamp.

Lastly, it was specified that all keypad meters should support and comply with the STS protocol.

In terms of key functions, Azerenerji set out some specifications for:

 Prepayment
 Remote reading
 Measuring data management
 Remote control
 Alarms and events
 Reporting

It also specified that the data management system must be Integra table with third parties’ Customer
Relationship Management (CRM), Outage Management System (OMS) and Geographic Information
System (GIS) if needed.

In analysing these specifications, the following comments can be made.

Based on the strategic requirements defined in section 1.2, a core finding is that the underlying goal of
integrating the AMI/MDMS does not currently form part of a coherent strategy of improving
Azerenerji’s service offering and collection efficiency.

38
Specifically, whereas any AMI and resulting MDMS should comprise clearly defined parts of a well-
structured strategy, leading towards an integrated approach to consumption tracking and billing
infrastructure, the pilot projects implemented by Azerenerji seem to be a mere attempt to evaluate
vendor offerings within their own merits. For example:

 There is no evidence to show reduction in technical losses, however some evidence has been
reported to show reduction in commercial losses in the pilot projects that were assessed by ITS.

 The improvement of “receivables” compared to the already deployed “prepaid meters” is was
not actively addressed. ITS experts were not provided with any evidence in order to have clear
picture of the direct benefits of the pilots on revenue collection.Of coarse the improvement of
payments will be achieved in general as a by-product of any Smart Meter implementation.

 Demand side (consumption profile) management is not currently taken into consideration
within the expected operations of the meters, which might lead to a missed opportunity. A main
benefit of smart meter systems is that ability they offer to manage the timing of consumer
demand for certain uses (such as water heaters and air conditioners), to limit demand at peak
periods.

The experts consider that the lack of a clear vision for integration of AMI/MDMS infrastructure is a
considerable impediment to the success of the system, which should be addressed with high priority by
Azerenerji before further steps are taken.

To illustrate this point, the purchase of a couple (or thousands for that matter) of Point of Sale systems
(POS) will not make a trading multi-store business better, if they are deployed in the absence of a
strategy to integrate them into the overall supply chain and the ERP using a vision of what kind of data
they want to collect and process.

Furthermore, while Smart Meters comprise the less “intelligent” part of any AMI and the MDMS part is
the “heart and brains” of the overall solution, none of the manufacturers has installed, provisioned and
reported on their MDMS solution. Thus, the INOGATE team was unable to assess in practical, hands-on
terms whether or not the system(s) will deliver overall benefits to the operator. Only the documents
presented by the manufacturers could be checked.

Similarly, while “common logic” would suggest the use of PLC technology for concentrating meter
readings, at least to the next available transformer (as a concentration point), the experts were unable
to explain why an extreme majority of the deployed Smart Meters were equipped with GSM/GPRS
modules. GSM/GPRS is a mechanism which, if nothing else, introduces an unnecessary potential point of
failure and cost into the whole deployment, together with a significant vagueness in terms of service
availability and data collection responsibility. PLC systems that use Azerenerji’s own cables would not
suffer these problems.

No specific information was submitted concerning the split of responsibilities regarding IT infrastructure
utilization/sharing and billing intelligence handover (and associated revenue). Therefore this point has
not been assessed.

39
Also no specific documents have been provided, to justify the benefits that involving an additional bank
as a strategic partner are intended to bring to Azerenerji's existing collection mechanism. This existing
mechanism (which includes banking and postal services) does not seem to suffer from any significant
drawbacks.

In this respect both the integration of the GSM operators (in the current implementation scenario) and
the inclusion of a bank at this earlier design stage, produce a significant feeling of discomfort concerning
the expected goals and verifiable indicators of improvement of the whole process.

3.2 Pilot project implementation

As of December 2013, about 2,500 meters from each vendor have already been installed, with most of
them being single phase meters, as planned (See Table 5 below).

Table 5: Pilot project implementation – types of meters installed (December 2013)

Star
Company Hexing (China) (China) Inhemeter (China)
Pilot area Atyali Hokmeli Qobu
1 phase installed meter 2369 2694 2097
3 phase installed meter 39 38 14
CTPT meter 29 28 31
Total 2437 2760 2142

The type of communication GPRS/PLC for the installed meters are shown in Table 6.

Table 6: Pilot project implementation – types of communication systems installed (Dec 2013)

Meters 1 phase
lot area PLC GPRS Total
Atyali 233 2136 2369
Hokmeli 90 2604 2694
Qobu 78 2019 2097

The projects are located in the outskirts of central Baku (to the west of Baku) and are relatively close to
each other. The villages were in the vicinity of Baku, around twenty to thirty km from the center of Baku.

 INHEMETER has installed their meters in Qobu,

 STAR has installed their equipment in Hokmeli, and
 HEXING has installed meters in Atyali.

40
A map of the location of the pilot projects is shown in Figure 9 along with an inset showing where the
pilots are located relative to central Baku.

Figure 9: Location of the Pilot projects. Source: Google Maps

On the 11 December, 2013, the INOGATE team visited the pilot projects in all three areas. Photos of the
visit are in Appendix 6.5.

During the visits, there were no representatives from the three vendors present, and therefore no
verification of the compliance to the specifications was possible, nor was there any discussion on their
data basis and data collection and management systems.

41
The existing distribution network in the visited areas was found to be in poor condition. The
rehabilitation of the distribution system is necessary, in parallel with the installation of Advanced
Metering System; otherwise the AMI system will fail to meet its potential.

The INOGATE team noted that the architecture of the system is simple and follows the logic of the radial
organisation of feeders. There are concentrators in each MV/LV substation covered in the pilot project,
despite the fact that the vast majority of meters are individually equipped with a SIM card and can
therefore transmit directly to the database. Should a universal GPRS option prevail, the data
concentrator may only have a verification role in the AMI. On the other hand, if the PLC option were to
be selected more broadly, then data concentrators are an indispensable part of the system.

The team noticed that smart meters have also been installed in some substations – this allows for the
monitoring of distribution-level losses. In some cases, smart gas meters have also been installed in the
visited areas (a SOCAR project).

3.2.1 Meters
In Tables 7-9, the various technical requirements for the smart meters that Azerenerji required are
shown and compared against the technical specifications of the three pilot vendors. Following the
tables, some analysis of the meters is provided. It is, however, important to note that this analysis is
ONLY based on information provided in the technical manuals and NOT on the evaluation of actual
performance of the meters in the field or by inspecting a sample of the meters to verify whether they
are performing as specified.

42
Figure 10: Single Phase meters from Star, Inhemeter and Hexing

Table 7: Comparison of Azerenerji requirements for Single Phase meters and Vendor specifications

Integrated Single Phase Prepayment, Two Element Keypad Meter

Inhemeter Hexing Characteristics
Parameters Azerenerji Requirements STAR Characteristics
Characteristics (HXE12-KP)
1phase 2wire, direct
Integrated Single Phase connected, keypad
Prepayment Keypad Single-Phase Prepayment prepayment energy Integrated Single Phase
Meter type Meter Keypad Watt-hour Meter meter Prepayment Keypad Meter
IEC62053-21 IEC62053-21:2003 IEC 62053-21 2003 IEC62053-21
Standards IEC62055 -41 IEC 62055-41 2007 IEC62055-41
IEC62055-51 IEC 62055-51 2007 IEC62055-51

43
Integrated Single Phase Prepayment, Two Element Keypad Meter
IEC62056-46 IEC62056-46
IEC62056-21 （
IEC 62056-21 IEC 62056-21 IEC61107）
IEC62056-53 IEC62056-53
IEC62056-47 IEC62056-47
IEC62056 (in general) IEC 62052-11 2003 IEC62052-11
IEC 62055-31 2005 IEC62053-31
SANS 1524-1 2010
ESKOM DSP 34-1635 IEC62056-61
BS5685-1997/ DIN
IEC62056-62
43857
With LCD, keypad and
Display LCD Display LCD Display MCU LCD Display
Rated voltage 220V 220V / 240V 220V 220 V
Frequency 50Hz +/- 5Hz 50Hz 50Hz+5Hz 50Hz+5Hz
Accuracy Active energy: Class 1.0 Class 1.0 Class 1.0 Class 1.0
Rated current (Ib) 5A 5A 5A 5A
Maximum current 60A 60A 60A; 100A 60A
Starting current 0.4%Ib 0.4%Ib < 20mA 4‰Ib
Maximum: 264V;
Maximum withstand
Operating voltage
voltage (48 hours): 70％Un～120％Un
range
Maximum: 264V 250/275V 500V
Minimum: 150V 150/165V Minimum: 150V
Active energy:
Meter constant 1600irnp/kWh 1600imp/kWh 1000 imp/kWh Active: 1600 imp/kWh
Power consumption
on voltage circuit < 1.5W, 10VA < 2W (or < 7VA) @ 220V ≤1.5W, 10VA

44
Integrated Single Phase Prepayment, Two Element Keypad Meter
Power consumption ＜ 0.2VA@ Base
on current circuit < 1VA Reference Current (Ib) ≤1VA
Event alarming by red Alarm/tip yellow LED
flashing LED Acousto-optic alarm function indication LED balance indicator
Indicators Low credit indicated by Low credit indicated by
visual red LED and flashing frequency of
buzzer yellow LED in 10s
Automatic scroll display,
manual scroll display and self- LED, photoelectric
External display unit Customer interface unit diagnose display isolation LCD full-screen display
Impulse voltage 6kV 6kV 6kV 8 kV
Internal latching
Disconnection device Internal relay contactor Internal relay
Operating
temperature range -25~+60°C -25~+45°C -25℃～+75℃ -25℃～+60℃
Limit temperature
range of operation -40°C~+70°C -40℃～+70℃
Limit temperature
range of storage and
transportation -40°C~+80°C -20°C~+80°C -40℃～+80℃
Humidity operating
range 95%RH < 95% ≤ 95%
Degree of protection IP54 IP54
Wiring arrangement Symmetrical (BS)
Meter has useful life of 15 Meter has useful life of 15
Reliability years years

45
Figure 11: Three Phase Direct Connection meters from Star, Inhemeter and Hexing. Source: Vendor manuals.

Table 8: Meter specifications for Three Phase meters: comparison between requirements and vendor meter specifications

Integrated Three Phase Prepayment Keypad

Parameters Requirements - "A" Type STAR Inhemeter Hexing
Three Phase Direct
Connection HXE34-KP
Integrated Three-Phase Three phase four wire direct keypad prepayment
Prepayment Keypad Three-Phase Prepayment connected keypad prepayment meter with PLC/GPRS
Meter type Meter Keypad Meter meter communication port
IEC 62052-11 2003
IEC6205 3-21 IEC62053-21:2003 IEC 62053-21 2003 IEC62053-21
Standards IEC62055 -41 IEC 62055-41 2007 IEC62055-41
IEC62055-51 IEC 62055-51 2007 IEC62055-51
IEC62056-46 IEC62056-46

46
Integrated Three Phase Prepayment Keypad
IEC 62056-21 IEC 62056-21 IEC62056-21（IEC61107）
IEC62056-53 IEC62056-53
IEC62056-47 IEC62056-47
IEC 62055-31 2005 IEC62052-11
IEC 62053-23 2003 IEC62053-31
IEC62056 (in general) SANS 1524-1 2005 IEC62056-61
ESKOM SCSSCAAA9 IEC62056-62
BS5685-1997/ DIN 43857
MCU with LCD, keypad and
replaceable communication
Display LCD Display LCD Display module LCD Display
Rated voltage (Type 3X220V/380V (Model B and
A and B) 3*220V /380V A) 3X220/380V 3*220/380VAC
Rated voltage (Type
C) 3*57.7/100V 3X100V (Model C) **None** **None**
Frequency 50Hz +/- 5Hz 50Hz 50Hz +/- 5Hz 50Hz +/- 5Hz
Active energy: Class 1.0 Active energy: Class 1.0 Active energy: Class 1.0 Class 1.0 for kWh
Accuracy
Reactive energy: Class 2.0 Reactive energy: Class 2.0
Rated current (Max
Current) Type A 3* 5(6) A 3X5 (6)A "Model B" **None** **None**
Rated current (Max
Current) Type B 3* 10(100) A 3X10（100)A "Model A" 10 (100) A "Type B" 10(100)A "Type B"
Rated current (Max
Current) Type C 5 (6) A 5 (6) A (Model C) **None** **None**
Starting current 0.4%Ib 0.4%Ib ≤20mA 0.4%Ib

Operating voltage Maximum: 264V; Maximum

range (Type A and B) Maximum: 250V (Model B withstand voltage (48 hours):
Maximum: 264V and A) 500V 120％Un

47
Integrated Three Phase Prepayment Keypad
Minimum: 150V (Model B
Minimum: 150V and A) Minimum: 150V 70％Un
Operating voltage Maximum: 120V Maximum: 250V (Model C)
range (Type C) Minimum: 80V Minimum: 150V (Model C) **None** **None**
Active energy: Active energy:
3200imp/kWh 3200imp/kWh 1000 imp/kWh Active: 1000 imp/kWh
Meter constant
Reactive Reactive
energy:3200imp!kvarh energy:3200imp/kVarh 1000imp/kVarh

Power consumption Voltage circuit each phase:：＜

on voltage circuit < 1.5W, 10VA 1.5W （or ＜4VA ）@220V ≤1.5W, 10VA

Power consumption Current circuit each phase ：

on current circuit < 1VA ＜ 0.2VA@ Base Reference ≤1VA
Event alarming by red Green LED alarm when
flashing LED Yellow LED alarm indicator enough remaining credit
Indicators Red LED alarm indicator:
Low credit indicated by red at low credit alarm
visual red LED and Low credit indicated by flashing level 1, flashing red at
audible buzzer of yellow LED level 2 alarm
Impulse voltage 6kV 6kV 6kV 8 kV
Operating
temperature range -25~+60°C -25℃～+75℃ -25℃～+60℃
Limit temperature
range of operation -40°C~+70°C -25°C~+45°C -40℃～+70℃
Limit temperature
range of storage and
transportation -40°C~+80°C -20°C~+80°C -40℃～+80℃ -25℃～+60℃

48
Integrated Three Phase Prepayment Keypad
At the maximum temperature
of 55℃, the relative humidity
range is : 0 ～ 95%
During the night: 100 % relative
humidity (Maximum)
Humidity operating During the day: 25 % relative
range 95%RH < 95% humidity < 95%
Degree of protection IP54 IP54
Wiring arrangement Symmetrical (BS)
Meter has useful life of 15
Reliability years

49
Figure 12: Hexing CT meters (HXE34-KP and HXE310). Source: Technical/User manuals

Table 9: Meter specifications for three phases CT meters: comparison between requirements and vendor meter specification

Three Phase CT Meter

Azerenerji
Requirements Hexing CT/CTPT Hexing HXE310 CT
Parameters (Type A and B) Characteristics - HXE34-KP Characteristics Inhemeter Characteristics
DTZ1513 (MCT405K4A-
Three-phase four wire CIU): Three phase four
prepaid keypad meter wire CT connected
Meter type
Three-phase four wire with GPRS, optical port keypad prepayment
Three-phase four wires prepaid keypad meter with and RS-485 for local meter
CT meter GPRS and optical port AMI/smart home Plug-in communication

50
Three Phase CT Meter
module (GPRS/GSM, PLC)

IEC62053-11
EC62053-22 IEC62053-22 IEC 62053-22 2003
EC62053-23 IEC62053-23 IEC62053-23 IEC 62053-23 2003
IEC62055-41 IEC62055-41 IEC 62055-41 2007
IEC62055-51 IEC62055-51 IEC 62055-51 2007
IEC62056-46 IEC62056-46 IEC62056-46
IEC62056-53 IEC62056-53 IEC62056-53
IEC62056-47 IEC62056-47 IEC62056-47
Standards IEC62056-21 （ IEC61107
IEC 62056-21 IEC62056-21 ）
IEC62052-11 IEC62052-11 IEC 62052-11 2003
IEC62053-21 IEC62053-21
IEC62053-31 IEC62056-42 IEC 62055-31 2005
IEC62056-61 IEC62056-61
IEC62056-62 IEC62056-62 SANS 1524-1 2005
IEC13757-2 ESKOM SCSSCAAA9
IEC13757-3 BS5685-1997/ DIN 43857
Display LCD Display LCD Display LCD (liquid crystal display)
3*220V /380V (Type A) 3*220/380VAC (Type A, CT) 3x230V (Type A) 3X220/380V (type A)
Rated voltage 3*57.7/100VAC (Type B,
3*57.7/100V (Type B) CTPT) 3x57.7V (Type B) 3X100V (type B)
Frequency 50Hz +/- 5Hz 50Hz +/- 5Hz 50/60 Hz 50Hz±5Hz
Active energy: Class
Accuracy
0.5s Class 1.0s Active energy: Class 0.5S Active energy: Class 0.5s

51
Three Phase CT Meter
Reactive Class 2.0s Class 2.0 Reactive energy: Class 2.0 Reactive Class 2.0s
Rated current (Ib) 5A 5(6)A 5A 5A
Maximum current
(Imax) 6A 6A 6A
Starting current 0.2%Ib 4‰Ib 5mA ≤10mA
Operating voltageMaximum: 264V Maximum: 264V
70％Un～120％Un 80％Un～120％Un
range (Type A) Minimum: 150V Minimum: 150V
Operating voltage Maximum: 120V
70％Un～120％Un 80％Un～120％Un
range (Type B) Minimum: 80V
Active energy: active energy constant
10,000imp/kWh Active: 10,000 imp/kWh 10000 imp/kWh 5000 imp/kWh
Meter constant
Reactive energy: reactive energy constant
10,000imp/vary Reactive 10,000 imp/vary 10000 imp/vary 5000imp/kVarh
active power without
module <2W
Power consumption apparent power without ＜1.5W （or ＜4VA ）
on voltage circuit < 2W, 10VA ≤1.5W, 10VA module <10VA @220V
Power consumption apparent power without ＜ 0.2VA@ Base
on current circuit < 1VA ≤1VA module <4VA Reference Current (lb)
Impulse voltage 8kV 8 kV 8kV 6kV
Operating
temperature range -25~+60°C -25℃～+60℃ -25℃ to +70℃ -40℃～+75℃
Limit temperature
range of operation -40°C~+70°C -40℃～+70℃ -40℃ to +70℃
Limit temperature
range of storage and
transportation -40°C~+80°C -40℃ to +85℃ -40℃～+80℃

52
Three Phase CT Meter

At the maximum
temperature of 55℃, the
Humidity operating relative humidity range is
range 95%RH : 0～95%
Degree of protection IP54 IP54 IP54

Wiring arrangement Symmetrical (BS)

Meter has useful life of 15 Meter has useful life of 15
Reliability years years

53
3.2.2 MDMS
The key to a successful smart meter implementation is ensuring interoperability between the various devices –
this means letting the three Chinese firms speak to each other to create an interoperable standard. At this stage,
there is no information on whether such interoperability is possible or that it has been tested.

Furthermore, the Azerfon agreement with Azerenerji indicates that Azerenerji intends to let the cellular
operators (Azerfon, Backcell and Azercell) work on the communication and MDM aspects of the pilot projects,
and the meter data is expected to be collected by them. It has not been possible to verify whether this has
applied in practice on the pilots, as no MDMS was in place at time of writing this report.

Azerfon has started working with the pilot projects since September 2013 (although the original plan was for
them to start the work in June 2013). So far, they have installed 5000 SIM cards. Fees have not yet been
decided, and neither has Azerfon sorted out the final implementation plans (i.e., how many concurrent GPRS
subscribers, rolling or simultaneous meter interrogation, etc.). It is not clear whether Azerfon has received
information on the mapping of how the SIM cards have been distributed to the meters.

At this point, Azerfon has developed fixed tariffs for 50 MB and 50 SMS, per month and meter. Azerfon is
expected to have prepared and submitted a “High Level Design Document” in English to Azerenerji. However,
INOGATE has not been provided this document. Hence, the experts have been unable to evaluate anything
further on the MDM, which is currently being implemented for the pilot projects.

In addition, Azerfon was expected to participate in testing of the AMI system for at least the first 100 meters.
INOGATE has not received any information regarding whether such testing has happened or what the test
results were.

In an email dated March 4, 2014, Hexing has noted that the pilot projects are not planning to install a full MDM
system, and it is only based on partial meter data collection (MDC) and a vending system. INOGATE has not
received any further information on meter data that has been collected, or what has been learned from this
process.

Similarly, in an email dated March 4, 2014, Star has also noted that “Due to the fact that the meters have only
recently been unlocked,…[they only] monitor the status of their work”. They are expected to provide additional
reports on how the MDM system will work in the second phase of the work. Therefore, INOGATE does not have
information to evaluate the progress and state of the MDM system.

Backcell is participating in the pilot projects by providing SIM cards to all three smart meter vendors, and about
1500 cards have been installed so far. They have tested the data concentrators with PLC, but have decided to
proceed with SIM cards for every meter. For two vendors, the SIM cards are only used for data, but for the other
one the SIM cards have SMS capability as well. Backcell has a microwave-based communication system between

54
Backcell and Azerenerji with about 100 Mb capacity. There is a dedicated SMPP28 gateway for Azerenerji. This
communication capability had been operational for 3 months at the time of the INOGATE mission. So, Azerenerji
will be getting 100 MB of information and 30 SMS per month per meter. A planned status review meeting was
expected on the week of December 15, 2013, but this meeting did not take place. Hence, INOGATE does not
have any further information on the progress.

3.2.3 Billing System and IT infrastructure

As there is no MDMS installed in any of the pilot regions, the billing system has not been altered to
accommodate any of the new AMI input.

3.3 Proposed Technical Requirements

For meters, a comparison of what Azerenerji requested and what the vendors provided suggest that the
requirements are mostly met in theory. But, without field testing and further evaluation/testing the meters,
MDM, and overall functionality of the system, it is difficult to provide any insights on additional technical
requirements at this stage.

Concerning the billing system, the INOGATE experts agree with the principle of the Azerenerji design as
presented in the document ‘Billing Architecture’.

4 Evaluation of Pilot projects – Recommendations

4.1 Evaluation Methodology and Results

The INOGATE experts were not able to meet with any of the vendors during the site visit, and hence there is no
particular information on actual implementation (e.g., testing and monitoring) for the evaluation. Hence, this
evaluation will only be a comparison of the meter and general communication and MDM specifications against
the requirements of Azerenerji, based upon the documentation provided.

4.1.1 Meter System

Based on a comparison of the technical specifications of the installed meters and the Azerenerji requirements
(see tables above), it is proved that the required specifications of the meters have been met by the three
vendors. However, it is unknown whether the installed meters have been functioning or if there are any
problems with them.

All of the single phase and three phase meters from the three vendors follow the required IEC62053-21
standards. The CT meters standards are slightly variant, but they do conform to the requirements.

It is not known where these meters will be installed nor which facilities will have the three-phase meters
installed. It is also not known whether the PLC system has been tested or how well PLC based meters are
running.

28
Short Message Peer-to-Peer (SMPP) telecommunications is an open, industry standard protocol to send short messages
between message centres.

55
The INOGATE experts have not received any information on the success or failure rates for the customers of the
three smart grid vendors, in terms of their payment. It has not been reported if there were any problems faced
by them and how they were (or are being) resolved.

It is not known whether the remote charging aspect of the meters has been tested or not. Azerenerji wanted the
option of converting the prepaid meters to post-paid over time, and as such it is not known whether this
conversion has been tested or not.

There is no information on testing that has been conducted on meter clock synchronization, remote switch
on/off or load management scheduling. All of the meters have these capabilities, but it is not known how
functional they are. All of the meters do have the required alarms.

According to the Hexing January 17th weekly report, there have been network outages in Azerfon and data from
meters have not been provided to the vendors. Some of the meters have been offline due to low GSM coverage.
Azerfon has been requested to add a network tower. A significant proportion (50%) of the meters was offline for
nearly a month. Given that the meters are currently not operating in prepaid mode, this has presumably not
caused any power outages to the customer itself, although the meter data transmission is not functioning.
However, when the system goes into prepaid mode, these network problems could result in consumers not
receiving electricity (e.g. if the meters were to cut off power). This could be a serious problem for Azerenerji.
Therefore, it is critical to ensure that there is always sufficient network coverage, and that problems are solved
quickly.

Furthermore, the functioning of meters (from all three vendors) in low voltage conditions need to be assessed.
Realistically, the Azerenerji distribution system will not be overhauled soon which means that laboratory and in-
field tests of the meters need to be conducted to assess how they behave under low voltage, and to evaluate
options for improving the meter performance under these conditions.

Inhemeter, in its November 26, 2013 report, indicated that there is a need to build transformers in the Qobu
region, as the line voltage there has fallen below the operating voltage of the meters (150-264V). Therefore, the
meters have shut off, and the meters can then cut the power off to consumers. Inhemeter suggested that the
meters be configured so that the limit of low voltage of meter is 100 V. Additional information is needed to
consider the implication of such changes. Furthermore, they note that in some cases, the line voltages are less
than 100 V, which implies that measurements from the meters cannot be guaranteed, and consumers will not
receive power. This is another important issue indicating that installation of smart meters on a distribution
system that is not upgraded can result in more problems, not less.

Therefore, Azerenerji needs to conduct tests of the distribution system, to ensure that consumers, who are
getting relatively poor power service, will not see their service cut completely due to the meter installations.

4.1.2 MDMS
As noted previously, the MDMS has not been set up for each pilot project. It is expected that Azerenerji will
request, before finalising the pilot period, that the vendors set up MDM systems. At that stage a better analysis
could be undertaken of how the vendor system adds specific value to Azerenerji’s goals.

56
At this stage, the INOGATE team can only compare how the information submitted by the vendors, matches up
with what Azerenerji has requested of them, as in the technical annexes. Table 1- below shows how the AMI
requirements compare with information from the three vendors. The red highlights show areas where we were
unable to find the relevant information in the submitted materials. In some cases, we have included information
provided by the vendors. Additional information and clarifications from the vendors are necessary to judge
whether these are truly limitations or not.

Table 10: Meter evaluation

Evaluation criteria Hexing Star Inhemeter

AMI system functional requirements

Prepayment / post payment Y Y Y

Hexing Billing aims to

provide for the utility
and users set of Y
software and hardware
Multi-method
infrastructure,
Billing that can be
Accurate information to the billing standards, guidelines,
compatible with
system models, services and Y
various billing
processes in delivering
solutions through
an environment that is
Inhemeter
robust, scalable and
billing module.
reliable in delivering
current and future
prepaid services
requirement..

Not explicitly
mentioned in
Applying Flexible tariff plans Y Y
submitted
documents

Y - Energy report
Not explicitly
module is used
mentioned in
Monitoring energy quality Y to check the
submitted
information of
documents
electric energy.

57
Evaluation criteria Hexing Star Inhemeter

Event logs and remote management Y Y Y

Not explicitly Not explicitly

User friendly interface and support of Y - Also includes English mentioned in mentioned in
Azerbaijani language and Russian submitted submitted
documents documents

Detailed ER diagram of meter’s data base Y Y Y

Data transmission interval management Not explicitly Not explicitly

from meter by software. Data storage mentioned in mentioned in
Y
interval management in the internal submitted submitted
memory of meter by server. documents documents

Not explicitly
To develop new data groups classify the
mentioned in
information within the groups as per Y Y
submitted
each feeder.
documents

Assign ID code for each meter or other

Y Y Y
device

Y - Database automatic
clustering technology
Create a new cluster in information
can dynamically deploy
within the meter data base and entry of Y Y
data to new servers, and
new information.
realize the scalability of
data amount.

Y - The MDM has the Y - All the data

Not explicitly
capability to generate by
Store all the information regarding the mentioned in
automatically store and system shall be
seal in the memory of meter submitted
retrieve meter data by gathered to
documents
specific data versions. Database.

Y
Changes of meters and installation of
new meters The management of the Y Y
whole meter
management system is

58
Evaluation criteria Hexing Star Inhemeter

completed in MDM
system and data is
synchronized to other
systems through
interface.

Y - Register
Customer
Y - MDM identifies module is used
meter reading requests for registration
Not explicitly
for smart meter of base
mentioned in
Detailed information about customers customers and sends the information and
submitted
meter reading request meter
documents
file to MDC for smart information of
meter customers only. electricity
purchasing
customer.

This process does not

include debt
management or the Not explicitly Not explicitly
Transferring of subscriber’s debt to new assessment of the mentioned in mentioned in
meter and track debt’s payment process outstanding income. It is submitted submitted
assumed that business documents documents
processes to manage
this are completed prior
to logging of the
request.

Not explicitly
Detailed breakdown of the reports on mentioned in
Y Y
the feeder and transformers submitted
documents

Y - Different workflows Not explicitly Not explicitly

Possibility of reading selected meters can be executed mentioned in mentioned in
simultaneously at the same time simultaneously. State of submitted submitted
each workflow can be documents documents

59
Evaluation criteria Hexing Star Inhemeter

monitored in user
interface.

Not explicitly Not explicitly

In case of network disconnection, meter
Not explicitly mentioned mentioned in mentioned in
memory should memorize the time of
in submitted documents submitted submitted
any intrusion to electronic stamp
documents documents

Basic principles

Openness based on standard data model

Y Y Y
and protocols used

Y -- Inhemeter
SMART vend
Not explicitly supports second
Modularity which allows seamless
Not explicitly mentioned mentioned in data exchange
integration of other manufactures
in submitted documents submitted interface, because
solutions
documents they are the
software
developers.

Y - Good scalability with

the growth of data
amount. Database
automatic clustering
Easy scalable architecture of the system technology can Y Y
dynamically deploy data
to new servers, and
realize the scalability of
data amount.

Y - WINDOWS XP Y - Operating
Popular platforms (MS Windows, Net) Not explicitly mentioned
SP2 and above system: Windows
used in submitted documents
versions. 2000/XP/Vista/7

Event logs and remote management Y Y Y

60
Evaluation criteria Hexing Star Inhemeter

System is flexible to
adapt to business
requirement and future
development of State
Grid; System’s
System enables continuous expandability should Not explicitly Not explicitly
development by keeping the same basic adapt to various access mentioned in mentioned in
principles through different versions and methods, and reserve submitted submitted
downwards/upwards compatibility interfaces for future documents documents
applications; System can
support different level
expanding (horizontal
expanding, lengthways
expanding, mixed
expanding) and load
balancing mechanism.

Supports every
type of
Single phase and
Three phase
Compatibility with keypad meters (split Not explicitly mentioned keypad meters,
or embedded) in submitted documents including of Y
amount
settlement GPRS
module
keypad meter,
PLC keypad
meter, etc.

Key functions

Prepayment

Remotely charging meters by GPRS or

Y Y Y
PLC

61
Evaluation criteria Hexing Star Inhemeter

Not explicitly Not explicitly

mentioned in mentioned in
Remotely change prepaid to post-paid Y
submitted submitted
documents documents

Remote reading

Actual meter reading Y Y Y

Y - Energy report
Not explicitly
module is used
mentioned in
Energy quality data Y to check the
submitted
information of
documents
electric energy.

Interval data (meters programmed in 15

Not explicitly Not explicitly
minute intervals data storage, whereas
Not explicitly mentioned mentioned in mentioned in
Meter Data Management System
in submitted documents submitted submitted
(MDMS) inquires all meters in 24 hour
documents documents
intervals)

Remote parameterization, configuring

and upgrade

Remote parameterization of the meters

and data concentrators, such as tariff Y Y Y
structures

Not explicitly Not explicitly

mentioned in mentioned in
Remote meter clock synchronization Y
submitted submitted
documents documents

Not explicitly Not explicitly

Remote firmware upgrade for meters mentioned in mentioned in
Y
and concentrators/routers submitted submitted
documents documents

Measuring data management

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Evaluation criteria Hexing Star Inhemeter

Not explicitly Not explicitly

Data collection on schedule or on- mentioned in mentioned in
Y
demand submitted submitted
documents documents

Y - The storage Y - Database

of meter in the Server: used for
Data storage Y
system is seen as storage of business
the warehouse. data.

Remote control

Not explicitly
mentioned in
Remote meter control (switching on/off) Y Y
submitted
documents

Not explicitly Not explicitly

Remote management of unauthorized
Not explicitly mentioned mentioned in mentioned in
access and intervention attempts to
in submitted documents submitted submitted
system
documents documents

Not explicitly Not explicitly

Remote control of unauthorized network Not explicitly mentioned mentioned in mentioned in
access and tampering attempts in submitted documents submitted submitted
documents documents

Not explicitly Not explicitly

mentioned in mentioned in
Scheduling Y
submitted submitted
documents documents

Alarms and events

Event logging Y Y Y

Y - The Alarm Y - Event report

Event module is automatically, and
Alarming on event Y used to check real-time
the alarm event displaying the
record. alarm information.

63
Evaluation criteria Hexing Star Inhemeter

Not explicitly Not explicitly

“Last-Gasp” Outage Detection – (the
Not explicitly mentioned mentioned in mentioned in
meter sending the message on power off
in submitted documents submitted submitted
event to master station.
documents documents

Reporting

Customizable reporting per collected

Y Y Y
data

Not explicitly
Remotely calculation feeder or network mentioned in
Y Y
losses submitted
documents

Not explicitly Not explicitly

Calculation of international reliability
mentioned in mentioned in
indices like SAIFI, SAIDI, CAIDI etc. for a Y
submitted submitted
network
documents documents

Communication network and system

management

Y - Automatic time-
Maintains accurate system time in
synchronize, list meters Y Y
meters and data concentrators/routers
out of synchronization.

Y - monitor and
Y - System’s flexibility upgrade SMART
Not explicitly
should adapt to business vend system
mentioned in
Implements network state monitoring requirement and future running state until
submitted
development of State the system
documents
Grid. stable and
efficient.

Not explicitly
Y - Data centre
Manages information about the grid mentioned in
Y hardware
topology submitted
topological graph
documents

64
Evaluation criteria Hexing Star Inhemeter

Not explicitly Not explicitly

Supports connection scheduling to
mentioned in mentioned in
automate data collection from data Y
submitted submitted
concentrators/routers
documents documents

Manages and supports network

communication channels such as GSM,
Y Y Y
PLC, GPRS, RF ZigBee, PL LV, (S-FSK,
OFDM), PSTN

Applications

Data management system must be Y - GIS application: By

Not explicitly Not explicitly
Integra table with third parties’ Outage using GIS, the
mentioned in mentioned in
Management System (OMS) and transformers with PF
submitted submitted
Geographic Information System (GIS) if under min-limit will be
documents documents
needed. displayed at map.

As shown in Table 10, Hexing and Star have provided more information than Inhemeter regarding their AMI and
MDMS. Some of the potential issues are:

 Availability of user interfaces in Azerbaijan language. Only Hexing seems to have this capability
according to the documents.
 Hexing has noted that debt management and transfer of subscriber’s debt to a new meter is not a
capability that they have currently. Other meter vendors have not provided information on this issue. It
is suggested that Vendors should provide their plans for replacing non-working parameters. Special
attention is required for the transferring of subscriber’s data (debts or credits) to the new meter.)
 Additional information from Star and Inhemeter is needed on reading of multiple meters at the same
time.
 The available information does not discuss whether or not the meter memory will record the time of any
intrusion to electronic stamp, in case of network disconnection.
 Additional information is needed to truly verify whether the MDMS software is able to integrate with
meters from other manufacturers.
 Hexing does not seem to have provided information on the kinds of platforms its software can be used
on.
 It is not clear whether the meters and the associated MDMS is able to get 15 min interval data.
Furthermore, Azerfon has not provided the network capability for 15 min interval data collection.
 The information provided does not seem to discuss remote management of unauthorised access and
intervention attempts to system. Additional clarification is necessary.

65
  Similarly, it is not clear whether the vendor’s AMI system allows for “Last-Gasp” outage detection.
Additional clarification is necessary.
 For Star and Inhemeter, it is not clear whether their data management system can be integrated with
third parties’ Outage Management System (OMS) and Geographic Information System (GIS).

4.1.3 Billing System and IT infrastructure

As noted previously, the Billing and IT infrastructure has not been adapted for any of the pilot projects at this
phase, as the MDMS has not been installed. It is expected that before the finalisation of pilot period, the
vendors will set up MDM systems and at that stage a better analysis could be conducted on how the vendor
system adds specific value to Azerenerji’s goals.

4.2 Proposals and Further Actions

4.2.1 Meter System

Additional information on the actual performance of the meters is required to make meaningful suggestions, as
there is not much data at this stage. The INOGATE experts were not able to interview the smart meter vendors
directly to get additional information. Therefore, INOGATE suggests that a specific workplan for data collection,
analysis, and resulting action plan be formulated to ensure that all of the necessary data will be collected by the
vendors, and that they can be usefully analysed for the purpose for scaling up of the smart meter deployment.

These are a number of reports from the UK smart meter rollout that are likely to be useful for Azerenerji to
consider adapting to meet their requirements.

It is important that the AMI vendors conduct specific laboratory tests of the meters before installation in
residential properties.

An evaluation of the 2006-2008 Australian AMI pilot project by Energy Australia indicated that repeated cycles
of testing were needed due to defects and non-conforming products.29 The three vendors who are part of the
pilot projects have noted that their meters do meet the required IEC standards, and as such Azerenerji could
request testing of a representative sample of meters, with a report being produced to Azerenerji. Furthermore,
it is important to have the vendors be responsible for fixing any meters that fail to work as expected.

Under low voltage conditions, some of the meters may not perform to specifications, and additional testing and
changes may be necessary to assess meter performance under these conditions.

In general, low voltage and poor distribution infrastructure is a key problem for meters. During the INOGATE
visit, the team noted that the rehabilitation of the distribution system is necessary in parallel with the
installation of Advanced Metering System; otherwise the AMI system will fail at meeting the business objectives.

In the case of power outages, the recovery appears to be not very smooth. Azerenerji, Azerfon and the vendors
need to assess the problems and fix them rapidly. When the system goes into prepaid mode, consumers could
be left without power, if meters do not function properly.

29
Energy Australia Phase 1 Report.

66
Azerenerji needs to conduct tests of the distribution system before installing smart meters to ensure that
consumers who are getting relatively poor power service will get no service at all due to the meter installations.
Feasibility studies need to be conducted upfront before additional pilots and larger smart meter deployments
are set up. These studies can provide recommendations on the upgrades that are necessary, and can help in
selecting areas for deployment based on their infrastructure status.

There already have been problems with the GSM network, as noted in the weekly reports by the vendors.
Therefore, it is essential that Azerfon, Azerenerji, and the vendors monitor the progress and resolve problems as
soon as possible.

Our current understanding is that the SIM cards have not yet been activated and Azerfon has not yet been
involved in conducting the tests for the first 100 meters, as per their plan. It is critical that there is sufficient
communication amongst all of the actors. INOGATE suggests that all of the meters be tested during the
activation period, so that customers do not lose power accidently.

It is also essential that there is sufficient customer education and information dissemination about Azerenerji
activities and upcoming changes. INOGATE has not been provided with any information on consumer marketing
and education. Azerenerji needs to conduct surveys in the pilot areas to assess how the consumers are being
affected and what their level of knowledge is about the new meters. The success of the prepayment scheme and
other changes planned by Azerenerji will only succeed if consumers are active participants in the pilots. Their
behaviour will affect the success of the programme.

Continuous network coverage is critical to ensure that all of the meter data is being collected. Azerfon and
Azerenerji needs to work quickly to ensure that when the network is down, it is brought back up quickly.

4.2.2 MDMS
A first and very important recommendation is that Azerenerji set out more clear specifications for MDMS in
order to allow them to be “supplier-neutral”. The suppliers of the smart meters are also supplying the MDMS,
as part of their overall AMI offering. This poses a problem in that the MDMS is customised to the particular
readings of their smart meters. As Azerenerji wants to use a number of vendors for the smart meters, there are
two options for changing the specifications:

1. It should be a requirement that any specific vendor MDMS chosen must be willing to integrate with
other smart meters selected by Azerenerji; thereby, passing the integration requirement to the selected
vendor to provide a “supplier-neutral” MDMS.
2. The MDMS component should be separated from the smart meter vendors’ specifications and define its
own “open-protocol” for information interchange regarding meter reading and meter provisioning /
commissioning.

In the Australian pilot project, software and firmware deficiencies caused problems during the MDM testing.
Hence, it is critical for both laboratory and field testing of the meters and the MDMS be conducted by
Azerenerji. INOGATE does not have any information of whether such tests have been conducted so far.

67
Based on the weekly reports submitted by Hexing and Inhemeter, INOGATE understands that the prepayment
system has not yet been set up, although the SIM cards have been provided by Azerfon. Therefore, we cannot
evaluate how the prepayment system has been working.

Eventually the meters will mostly be used in the keypad-based prepayment configuration, field testing of the
data collection system is important to understand how Azerenerji can eventually use these meters to collect
load information and be able to control the meters remotely. The entire communication system must be field
tested. As noted above, this has not been done. Therefore, such a field testing must be conducted for each
vendor. Field testing on how the data concentrators will work is also important for the similar reason. Without
further testing, full-scale deployment might be risky.

It is important for Azerfon and the vendors to collect data on the communications payload (i.e., how much kB of
data was being transmitted by the GPRS or PLC systems per meter per month).

Another key issue that Azerenerji needs to consider how it wants to use the information collected from the
deployment of PLC and GPRS/GSM communication systems for the smart meters. The choice of communication
medium (PLC or GPRS) is an important one, and analysis and implications of the two options from the pilot
projects is very relevant.

PLC is increasing becoming a dominant communication technology in Europe,30 driven by lower operational
costs, not needing a separate technology provider, and using the existing distribution system. However, in rural
areas where the distribution system is not yet modernised, such as in Azerbaijan, PLC may not function as
effectively. With costs of communication networks reducing significantly in the recent years and the availability
of network coverage across a large area, GPRS-based meters can be quite effective in Azerbaijan. As long as the
communication systems on the meters are modular and they can be upgraded without replacing meter, the
costs can be low.31 GPRS system can allow for better interoperability (although PLCs are interoperable as well).

Azerenerji has already made the inclusion of Azerfon as part of the pilot projects, and it has ordered more GPRS
systems. Therefore, there is already an implicit selection by Azerenerji. Nonetheless, it is important to keep track
of lessons-learned from the PLC vs GPRS system that has been installed in the pilot projects to further evaluate
these options.

Regarding the MDMS software from the different vendors, additional clarification and information is needed
from the vendors to establish whether their hardware and software solutions meet Azerenerji requirements, as
noted above. There are specific issues that need to be clarified.

Furthermore, none of the vendors have actually tested or implemented their systems yet, as the INOGATE
experts assume that these tests and implementation are planned for Phase 2. It is important to note that this is
an assumption - during the visit of the INOGATE experts, no information was presented by stakeholders on
proposals for MDMS integration. As part of Phase 2, Azerenerji needs to ensure that its requirements are met
and that the systems can be integrated with each other effectively. These tests must be undertaken and provide

30
http://www.landisgyr.com/webfoo/wp-content/uploads/2012/11/LG_White_Paper_PLC.pdf
31
http://www.sierrawireless.com/smartmetering

68
positive results before the purchase of the main bulk of the meters and installation of the MDMS and billing
systems at full scale, otherwise the risk of failure is high.

4.2.3 Billing System and IT infrastructure

As discussed above, currently Azerenerji has no unified billing structure. Therefore, a first step is to redesign the
whole concept of the billing system to accommodate a unified structure of the billing records. A vision
document to this effect has been developed and is included in Appendix 7.8.

69
5 Project Implementation
The three pilot projects currently in progress are meant to be a stepping stone for further smart meter
deployment by Azerenerji in all of the area under its control. The goal of the pilot projects was to learn sufficient
information about the meters and their deployment, so that Azerenerji would be ready to purchase and deploy
smart meters covering the rest of its customer base. The pilot projects aimed to test the new AMI system to
handle prepaid customers, and enable data gathering from >1.5 million customers. The hardware was to be
tested against the specifications, and at the end two vendors would be chosen based on the performance of
both the smart meter and accompanying MDMS. Following the pilot projects, Azerenerji has plans to use a
contractor for the installation of the hardware (with the software being developed in-house).

Based on INOGATE’s analysis, it is clear that the assessment of the pilot projects is not yet complete and
significant review and analysis of the pilot projects need to be conducted before Azerenerji takes the next steps
towards the larger deployment.

In the next sections, we briefly describe some of the key steps that Azerenerji needs to undertake in order to
prepare itself for the larger deployment. Following the discussion, we present some of the key lessons from
smart meter deployment approaches undertaken by other countries.

5.1 Project Organisation for the Future Deployment

In order to organise itself for the future deployment of smart meters, there are four main steps that Azerenerji
need to undertake.

1. Ensure that pilot projects are successful by conducting sufficient analysis to draw the key lessons for
future deployment.

Azerenerji needs first to make sure that its pilot projects are successful, and that the expected benefits are
indeed coming to fruition. Understanding the challenges associated with the pilot projects and the ways in
which these challenges were addressed is critical for the larger deployment. INOGATE has so far been unable to
verify that the meters are indeed working as planned in the field – i.e. in practice rather than in theory.
Independent testing of vendor meters needs to be conducted to ensure that the actual meters in residential and
commercial buildings are meeting the technical specifications, and are functioning as planned. Similar testing
needs to occur in the field, especially because under low voltage conditions, some of the meters may not
perform to specifications.

All of the vendors need to provide monthly reports in the specified format. INOGATE was shown some of the
monthly reports, but they were in different formats and hence could not be compared. Records of MDMS/MMS
need to be collected and analysed to make sure they are implementing their workplans. Furthermore, it is
important to verify and test if pilot project meters can communicate using an open protocol with MDMS other
than the manufacturer’s proprietary systems. This is essential to build a robust system, which is not tied to one
manufacturer. According to INOGATE’s current knowledge, such testing has not yet taken place.

70
While these kinds of testing will ensure that the meters are working well physically, an assessment of the pilot
projects need to go beyond the physical layer. At the consumer level, Azerenerji needs to understand how well
its customers are interacting with the new system. Customer understanding and satisfaction is critical for the
future deployment. As such, Azerenerji needs to conduct surveys in the pilot areas to assess how the consumers
are being affected by the pilot installations and to test their attitudes towards, and level of knowledge about,
the new meters. Broader assessments need to be conducted by Azerenerji to assess how the value chain of the
smart meters is being played out in reality. Azerenerji’s goals for smart meter deployment are to reduce
technical and commercial losses (thefts), improve receivables and operational performance; and manage
demand side consumption. At this stage, INOGATE does not have any information to make the assessments of
how well the pilot projects have met these goals. Hence there is a need for specific data collection activities to
evaluate how the pilot projects are achieving these broader goals.

2. Evaluate lessons learned from the pilot projects.

After conducting a full assessment of the pilot projects, Azerenerji needs to develop a full list of “lessons
learned” from the pilot projects. These lessons need to be developed with input from various stakeholders: the
smart meter vendors; the communication system operators; the bank that will organise and operate the billing
system; the Ministry of Energy; Azerenerji staff; and end-customers. Stakeholders need to provide both the
challenges and opportunities experienced during the pilot deployment. A review of all of the monthly reports of
the vendors needs to be conducted in order to develop a history of the pilot project deployment from the
concept development to the current state. All of the problems, small and large, need to be documented. All of
these inputs will then need to be reviewed by Azerenerji to understand the true challenges, actual problems
faced, and approaches taken to solve them. Such a review will also help Azerenerji identify other potential
solutions that could be considered for future deployment.

3. Assess what needs to be done, as part of the planning for future deployment.

Each vendor should be asked to provide their own views on what are the next steps for expanding deployment.
Having deployed the meters in the pilot projects, these vendors will be in a good position to contribute views on
the challenges to be faced in expanding the meter deployment. These inputs from the vendors should
contribute to a larger planning exercise that Azerenerji should conduct to identify all of the areas/issues that
need to be considered for the larger deployment. For example, it is important to identify the specific distribution
systems that need to be enhanced to support smart meter deployment. New cell phone towers and other
communication systems need to be deployed in specific areas in order to make sure that the meters are working
properly. Plans for such distribution and communication improvements need to be developed. Such upfront
planning is important, as it will help Azerenerji consider what is needed for the future deployment

4. Hire a contractor/consultant who can manage the deployment and procurement process

INOGATE believes that a single contractor needs to be hired to manage the deployment and procurement
process. This contractor should conduct the necessary studies to further develop the initial plans for deployment
to make sure that all of the potential obstacles are addressed. The contractor can also work with Azerenerji to
develop the procurement process for the smart meters.

71
The contractor should be hired during the final stage of pilot project to participate in the selection of the
vendors and prepare the detailed enquiry documents for the purchasing of the AMI system and the necessary
software. In effect, the contractor may need to become part of Azerenerji’s project management group.

A detailed description of the contractor/consultant’s scope of work is presented in section 5.4 Organization
Structure to Implement the Project.

5.2 Smart Meters Deployment Examples

In addition to the experience gained during the installation and operation of pilot projects, Azerenerji should
study and utilise the experience of other countries that have recently deployed AMI systems or are currently
engaged in a smart meter roll-out programme. INOGATE experts analysed smart meter deployment in five
countries, and the implementation approach in each is described in this section.

5.2.1 United Kingdom

The UK distribution electricity sector is the most deregulated in Europe with many power producers, system
operators and electricity suppliers (distributors). The UK government (in consultation with the industry and the
regulatory authority) has decided to roll out 54 million smart meters to 30 million households and small business
premises. The anticipated benefits that smart meters will give consumers are:

 near real-time information on energy use, expressed in monetary terms, so consumers can see what
their energy is costing them
 the ability to manage their energy use, save money and reduce emissions
 an end to estimated billing – people will only be billed for the energy they actually use, helping them to
budget better
 easier switching – it will be smoother and faster to switch suppliers to get the best deals

Smart meters will also give suppliers access to accurate data for billing, removing the need to manually read
meters.

The regulators authority is making sure that consumers will be protected when smart meters are installed in
properties. Relevant provisions to ensure this mean:

 there will be no sales during the installation visit

 installers must provide energy efficiency advice as part of their visit and they will need permission
before the visit if they will want to discuss their own products
 consumers’ privacy will be protected and they will have control over their smart meter data
 a programme is in place to build confidence in the system and improve consumers’ understanding of
how smart meters work

The smart meters will work in pre-payment or credit mode. Pre-payment customers will see some particular
benefits from having a smart meter. For example:

 energy suppliers may offer new and more flexible ways of topping up their meter including the ability to
top up over the phone or online

72
  the smart meter can be set so that consumers do not run out of credit at night and won’t be left without
power when the shops shut

The implementation is scheduled to take place between 2015 and 2020, in two phases.

During the Foundation Stage, which began in March 2011, and was intended to last until 2015, the Government
has worked with the energy industry, consumer groups and other interested parties to ensure that all of the
necessary groundwork is completed before energy suppliers start the process of providing smart meters to their
customers. This work involved the Government working with the energy suppliers to prepare the specifications
for the new smart meters, whilst manufacturers prepared their production lines to comply with the
specifications. Some customers have received smart meters before 2015, as power suppliers begin their own
pilot roll-out programmes.

The second phase will start when infrastructure is ready, scheduled for Autumn 2015. Then, energy suppliers will
start installing the smart meters and the new operation will commence.

The Government designed the framework of the infrastructure and signed agreements with five service
providers that will have responsibility for the overall administration and monitoring of the system. Within the
limits of this system the suppliers will organise the installation of the smart meters to their customers
independently each other.

The contracts with service providers include the framework of the Infrastructure, and the provision of
communications, data management and governance services. All of the contracts were signed in 2013.

 The first contract was signed with the Data and Communications Company, which is responsible for
operating the data and communications hub at the heart of the smart meter system.
 The second contract was signed with the Data Service Provider which is responsible for developing and
operating the system that controls messaging between smart meters.

 Two contracts have been signed with Communication Service Providers which will manage the smart
meter communications in each region (North and South).

 The fifth contract was signed with the Smart Energy Code Administrator and Secretariat, which provides
day-to-day governance activities in relation to the Smart Energy Code. This Code is decided upon by an
elected panel of government, industry and consumer stakeholders, which establishes the rules on smart
metering practice, to which market participants (such as energy suppliers, IT companies and third party
service providers) must adhere.

Suppliers are currently upgrading their internal IT systems to be able to handle smart meter data.
• They are also working with external companies to procure services and hardware including smart
metering equipment and smart metering installations.
• Suppliers have set up new contracts for the delivery of smart prepayment, so that systems can be
established and fully tested in time.

73
The two Communication Service Providers will use different Communication Technologies, considering the
different geomorphology of the two areas, along with cost optimisation:
• In Scotland and North England, the communication will be based on long range radio communications
• For the rest of England and Wales, the cellular radio communications will be used plus “mesh” radio
technology to supplement connectivity in a small number of hard to reach locations
The half-hourly meter data that will be collected will (if consumer permission is granted) be made available both
to the utility and to third parties. It is hoped that this will encourage the development of innovative services.

The selected model of implementation corresponds to the characteristics of the country. Having many power
suppliers and over 50 million meters to replace, the chosen way was to prepare a central group of companies to
deal with the heart of the system and then allow participation of market actors under a general code of conduct
governed by a decision-making body composed of stakeholders.32

5.2.2 Uzbekistan
Uzbekenergo, the state-owned electricity company of Uzbekistan, with the support of Asian Development Bank
(ADB) has organised the implementation of an ambitious project installing smart meters to all regions of the
country.

The project goal is the installation and operation of 3.6 million smart electrical meters in two phases in the
period of 2011 to 2022. The total amounts of customers are estimated to 5.8 million, but for the time being the
third phase has not defined yet.

The first phase, scheduled to be from 2011 to 2018, foresees the purchase and installation of 1.0 million
electricity smart meters in the regions of Bukhara, Jizzakh and Sarmakand, and the operation of the MDM
System as well as the development and connection to the billing system. The project value is 207 million USD
and the ADB provided a loan of 105 million USD (50%), the rest will be paid by the company.

The second phase, scheduled to start in 2015 and to finish in 2022, foresees the purchase and installation of 2.6
million smart meters in five regions: Andijan, Namangan and Ferghana in the east and Kashkadarya and
Surkandarya on south of the country. The value of the second phase project has been estimated to 218 million
USD and ADB decided to finance this project also by a 50% loan.
Uzbekenergo, following the advice of ADB, has decided to employ a single contractor, who will supply:
(i) The MDM and billing systems for the regional offices and district service centres, and

32
https://www.gov.uk/government/consultations/smart-metering-system-and-equipment-testing
https://www.gov.uk/government/consultations/information-requirements-for-monitoring-and-evaluation-of-smart-meters
https://www.gov.uk/government/groups/foundation-testing-and-trialling-strategy-group
https://www.gov.uk/government/publications/smart-metering-implementation-programme-draft-technical-specifications
https://www.gov.uk/government/publications/smart-metering-implementation-programme-licence-conditions-for-operational-
requirements-and-accession-to-and-compliance-with-the-smart-energy-code
https://www.gov.uk/government/publications/smart-metering-implementation-programme
https://www.gov.uk/government/publications/smart-meters-programme-plan
https://www.gov.uk/government/publications/smart-meter-research

74
(ii) The advanced electricity meters and associated communication system.
The contractor will provide other related services to Uzbekenergo such as training, trouble-shooting, and the
customisation and installation of the MDM and billing systems.
Additionally, Uzbekenergo decided to hire a consultant for the project management and supervision, who is
experienced in the field, with knowledge of local conditions.
In February 2013, a consulting services contract (1.9 m USD) was awarded to the consortium of CESI S.p.A (Italy),
AF Mercados Energy Markets International S.A. (Spain) and Sharifa.com (Uzbekistan) for the management and
supervision of the project. The presence of the local firm, requested by Uzbekenergo, aims to increase the local
added value to the project and the transfer of technology to a local company that can support Uzbekenergo in
the future.

In November 2013, bids were opened for the 1st phase with the scope for Supply of Goods and related services
for AEM meters and associated communication system, and meter data management and billing system.33 34

5.2.3 Australia
In Australia, each power supplier deploys its own AMI system. For the purpose of this report the case of “Energy
Australia” has been considered. “Energy Australia” is one of the biggest energy retailers in South-Eastern
Australia with 2.8 million customers and its own power supply plants. The programme started in 2006 and the
target completion date is the end of 2014. By the end of 2013, more than 2 million smart meters were reported
to have been installed. From 2006 up to 2011, the company applied pilot installations and testing in order to
design and prepare for installation, and following this completed the whole installation in four years (2011-
2014). The system was in operation from the end of 2011 when the roll-out began.

The preparatory pilot period included three stages:

 1st stage: 2006-08 Technology trial
 2nd stage: 2009-11 AMI data and system integration for market Settlement and Billing
 3rd stage: Customer services research.

The pilot project started with four vendors, but in the 2nd stage, during the testing of transmission data to the
MDMS of the Company, two of the vendors withdrew.

For the data communication, PLC (power line communication) technology was used for the majority of
installations (70%), using concentrators to accumulate data from meters. For rural and remote installations,
GPRS technology was used (20%), with the remaining 10% based on RS485.

The Company developed separately the central MDM System and the Billing system. The vendors’ responsibility
was to install their smart meters; to collect data and retrieve it to their own MDM Systems; to cover the
extraction of meter data from their MDMS; and to communicate with the Company’s software for validation and
reconciliation analysis of meter data collected using alternative processes.

33
http://www.adb.org/projects/41340-014/main
34
Republic of Uzbekistan: Advanced Electricity Metering Project Project Administration Manual

75
It was found that the most difficult step was the automated communication of the vendor’s MDMS with
Company’s central MDMS. This was the reason that two vendors withdrew when these systems failed to
communicate.

The last test for the pilot project was a check on the end-to-end process – AMI reading to billing invoice. This
testing covered the whole process from remotely reading the meter, through to generating the bill for the
customer and preparing the data for submission to the market operator. In this test, it was found that, since the
vendor was managing to transmit its data to the central MDMS, the transmission to the billing system had not
faced any problem.35,36

5.2.4 Japan
TEPCO (Tokyo Electric Power Company) produces and supplies electric power to the Tokyo metropolitan area. It
has developed a programme to install 27 million smart meters by 2020.

TEPCO has assured a single point of responsibility, by contracting a group that includes experienced worldwide
companies in all basic elements of the AMI Technology. In 2013, TOSHIBA was selected as the General
Contractor for the implementation of the Project.

TOSHIBA will supply the Head-End-System (HES) — a management system for smart meter data
communications, as well as concentrators.

In building the system, the company will incorporate global standards together with the world’s leading smart
meter technology of Zug, that developed by the Swiss Company Landis & Gyr, an affiliate of Toshiba.

TOSHIBA will develop the Meter Data Management System through “Ecologic Analytics”, a US supplier of
software for meter data management, which also joined Toshiba Group as a wholly owned subsidiary of Landis+
Gyr.

TEPCO in 2012 evaluated the existing communication technologies and concluded to install three systems
tailored to the local characteristics:
 RF mesh, in common residential areas
 PLC in high-rise buildings and underground urban areas
 Wireless Star network where the population is sparse, such as in rural or mountainous areas

TEPCO intends to install mainly the RF mesh system, which is the most cost effective. A concentrator for RF
mesh can accommodate a lot of meters, which leads to reduction of the initial cost compared to PLC. In
addition, RF mesh has an advantage in running costs, since it does not require a communication fee for each
meter.37

35
EnergyAustralia AMI Pilot Project Phase 1 | AMI Data and Systems Integration for Market Settlement and Billing
36
EnergyAustralia AMI Pilot Project Phase 1 | Technology Report
37
TEPCO-Basic Specifications for Smart Meter Communication

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5.2.5 Italy
ENEL, the main Electricity Distributor in Italy, started the installation of smart meters on its grid in 2001. ENEL
was a pioneer in the new technology and developed its own hardware and software (MDMS package).

Today, ENEL has the largest number of installed smart meters in Europe. By the end of 2013, 37 million
customers were connected to the system.

Following years of experimentation, ENEL concluded to use mainly PLC technology in concentrators and the
public GPRS/GSM infrastructure for connection to the control center.

ENEL, in order to be able to use alternative manufacturers of smart meters, developed an Open Protocol based
on operability. Any meters that have embedded this communication protocol can communicate directly with the
installed MDMS without any additional software or programming.

ENEL, along with other interested companies (power suppliers, manufacturers, contractors etc.), founded an
international non-profit association to maintain and support the open communication protocol for Smart
Metering solutions, “Meters and More”. As of May 15th 2012: 30 members among world leading companies and
institutions, from different business sectors, have already joined the Association. These include SIEMENS, E-ON,
Landis & Gyr, GE, Endesa, ST, IBM, Accenture, etc.38

5.2.6 Conclusions
The examples that have been reviewed come from several countries, with different prevailing technology levels,
different needs covered by the AMI, and different systems of electricity deregulation.

The expert team concludes that Azerenerji should take into consideration the following points for the planning
of its own organisational approach.

1) Preparing the project implementation

• Smart meter deployment takes time and planning
• Time must be spent up-front to prepare for smart meter deployment.
• Just replacing current meters with smart meters will not solve all problems.
• To take advantage of smart meter benefits, other infrastructure must be in place.
• Pilot projects need to focus on the future and are not activities on their own. All activities must be
oriented toward what it means for the future deployment.
• Utilities can contract the deployment out, but such contracting need to be properly planned and be
realistic.
• Sufficient support and guidance needs to be provided to contractors to make sure they are
proceeding appropriately and meeting all requirements.
• If the utility is not experienced and capable to monitor and control the contractor(s) a specialised
consultant should be hired to support and educate the in house personnel.

2) Smart Meters
38
ENEL Presentation 2013.

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 • No special problem, as far as they comply with the general specifications.
• Recently big manufacturers have developed an Open Protocol to enable their meters to
communicate with each other.
• When there is no common protocol, for the data management, every vendor should provide his own
Meter Data Collection and Management System and assure the communication (both directions)
with the Company’s MDMS.
• For the data communication, owners should consider different types of communication, evaluating
technical and economic criteria to help decision-making.

3) Pilot Project Implementation

• Pilot projects should be extended to all levels, meters, communication, MDMS, Billing
• Problems that have occurred during implementation need to be documented and lessons need to
be transferred to the larger implementation.

5.3 Implementation risks and mitigation measures

At this stage, there are several potential risks that could affect the way in which Azerenerji will deploy the smart
meters. Some of these risks and mitigation measures are discussed below.

1. Pilot projects do not meet the expected goals. INOGATE has not received all of the information that it
requested from the pilot projects. The expert team was unable to meet with the vendors during the site
visit. As such, there is a concern that the pilot projects may not show the expected benefits that
Azerenerji had initially hoped. This can result in delays with future deployment. In addition, new pilot
projects may have to be considered to ensure that the model works.

Mitigation: One way to reduce this risk is for Azerenerji to be more pro-active in supervising the pilot
projects and to ensure that the required data from the pilots are provided. Azerenerji may need
additional supervisory services to make this happen.

2. Timing slippage for pilot project completion. If it takes additional time for the pilot projects to be
completed then that may slow down the overall deployment plan, as well as have impacts on the
financing for the deployment. On the other hand, poor pilot projects will not help the larger deployment
plans.

Mitigation: Azerenerji needs to be in constant communication to make sure that the pilot project vendors
are following the specified requirements and are meeting their deliverables on time.

3. Lessons learned may not be complete due to lack of participation or lack of records. This is a big
challenge for Azernenerji in that, if appropriate records are not being kept, then valuable inputs to the
assessment process may be lost.

Mitigation: Azerenerji needs to be vigilant in collecting information from the vendors. If there are
problems, they need to be corrected immediately. Furthermore, it will be important to make sure that

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 those implementing the pilot project can provide their inputs to the lessons-learned, even if the records
may not be available.

4. Operation of the pilot projects independent of the old system. When Inogate experts visited the sites
the installed smart meters were operating in parallel with the existing meters. As long as meters are
working in parallel, the safe and secure operation of the AMI cannot be verified.

Mitigation: Azerenerji to install MDMS and billing systems and each vendor to run the end-to- end
process, (AMI read to billing invoice). In pilot areas, the old meters need to interrupt their operations
before Azerenerji proceeds to the next stage.

5. Communication MDMS with smart meters. Smart meters are not communicating with the MDMS that
Azerenerji plans to install.

Mitigation: Each pilot vendor can install his own MDMS in Azerenerji’s centre to collect and retrieve data
of his smart meters, tests simulating the final load to be considered. Azerenerji can install the central
MDMS and each vendor can communicate their databases with the central one. Communication
protocols “from the shelf” are preferable than prepared by the vendors for the specific communication.

6. Operation and Troubleshooting by Azerenerji personnel. Azerenerji is not ready to operate and repair
faults

Mitigation: Azerenerji personnel to be trained for operation and troubleshooting during the pilot project
implementation. Azerenerji to sign contracts with vendors for providing maintenance services with local
qualified personnel, available 24 hours, 7 days per week. This to include making available to Azerenerji
warehouse, an adequate number of spare parts and repair kits for the installed smart meters. Vendors to
assure online communication with their MDMS for maintenance and repair works to the database and
the smart meter software.

7. Current vendors are not interested in the larger deployment. It is possible that the current vendors may
not be interested in providing the new meters to the larger Azerenerji deployment. This risk may not be
very high because the vendors have already made the current commitment to Azerenerji. However, this
is a risk that Azerenerji may need to consider. It needs to at least have a contingency plan if this were to
be the case.

Mitigation: Azerenerji needs to have consistent and constant communication with the vendors,
particularly with their management to ensure continued interest in this project and the future
deployment

8. Technology Risk. At the moment, INOGATE has not been able to verify that the pilots have made a
conclusion on what is the most appropriate setup in terms of communications, data integration and

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 interoperability. In addition, INOGATE has not received any information on the costs for installing,
operating and maintaining the system over its useful equipment life (life-cycle ownership cost).

Mitigation: Azerenerji intends to seek finance for the roll-out and therefore has to approach lending
institutions with a comprehensive business case for the AMI project. In order to do that, not only do the
costs and benefits have to be clear, but also the overall system performance has to have a successful
period of performance testing completed and verified. Data integration with the existing and future IT
infrastructure of Azerenerji should be part of these tests and interoperability should be ensured between
two metering equipment vendors.

9. Distribution Network Conditions. At the moment it is difficult to align the AMI project implementation
schedule with the distribution network rehabilitation plan. For the sake of financing both activities, it is
admittedly positive that Azerenerji considers the AMI project and the distribution network rehabilitation
plan as interrelated tasks that ultimately coincide in the area of reduction of losses and improvement of
service quality. It is imperative that the distribution rehabilitation plan should precede the smart meter
deployment in order to avoid any compromises in the development of the AMI project.

Mitigation: Azerenerji has sufficient time to develop the business case for AMI and in parallel complete
the necessary performance tests. In the meantime, the focus should be on finalising an agreement at a
national level on the distribution network rehabilitation plan. The plan needs to have a high priority for
the complete rehabilitation of the AMI pilot areas so that the quantification of smart meter benefits
becomes realistic.

10. Hiring the contractor may take a long time. It is important to make sure that the single contractor who
will manage the larger deployment has all of the necessary skill-sets, including local expertise, to ensure
that the project will be successful. This may end up taking a long time and delay the deployment
timeframe.

Mitigation: Azerenerji needs to consider the overall time frame needed to deploy smart meters in its
region. It needs to make a realistic assessment. At the same time, it should consider putting out a call for
such a single point contractor sooner than later.

5.4 Selection and Prioritisation of Distribution Networks

Selection and prioritisation of the areas/segments/parts of the networks on which an AMI project is envisaged
to be rolled-out, comprises an integral part of the roll-out strategy. Setting priorities in delivering and setting-up
commercial operation of an AMI system is necessary, primarily due to budgetary constraints i.e. it is usually
difficult to mobilise the required financial resources for a complete substitution of the metering infrastructure
for several hundreds of thousands of subscribers.

So far international experience concludes that AMI solutions are highly complex systems and there should not
be an expectation that they will work perfectly the first time a utility turns them on. Understanding this

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challenge, Azerenerji has started the AMI pilots with a set of different metering equipment vendors that
responded to the pilot projects RfP. Following the INOGATE experts’ assessment it can be noted that perhaps
the preliminary implementation schedule (i.e. to start the rollout right after the completion of pilots) as
communicated by Azerenerji has been found to be over-ambitious. At their current stage of testing, and as it has
been stressed earlier in this report, the pilots were not found to match the functionalities and level of
integration that complete AMI solutions would offer pursuant to the international experience. In particular, the
pilots as they stand now lack integration with the utility billing and ERP systems. The meters however have been
assessed as compliant to the requirements of the RfP and the generally applicable standards that are relevant to
AMI solutions. While this comprises an important first step in the process of deploying an AMI solution, there
are a few more that Azerenerji has to gradually move to in a timely and coordinated manner. As an overview, a
comprehensive AIM solution implementation plan may involve the following steps:

 Pilot installation;
 Pilot testing and performance assessment;
 Selection of vendor(s);
 Definition of an implementation schedule particularly in regards to financial and human resources
requirements as well as the time dimension of committing these resources;
 Selection and/or mobilisation of the necessary installation partners;
 Raise awareness of all interested parties with a priority to the end-users and ensure public acceptance;
 Commence installation of metering equipment as per the implementation schedule ensuring that for
each completed section a period of acceptance testing and integration with the overall data repository
and billing system will be required prior to commercial operation;
 Perform an integrity test and arrange for periodical validation and performance tests in a cyclic mode
across the segments of the system;
 Report lessons learnt to national competent authorities (i.e. Ministries, National Regulatory Authority) in
order for the national energy strategy objectives that relate to the AMI system to be updated.

The present chapter concentrates on the definition of the implementation schedule and more specifically
addresses the issues identified in this assessment as driving factors and important elements that need to be
taken into account for the definition of the plan. In principle, selecting and consequently prioritising the areas
that may in sequence (or in parallel, or an optimal combination of both) be the subject of installation and set-up
of the AMI system depends on availability of the necessary infrastructure, equipment and resources (human and
financial).

5.4.1 Infrastructure and Equipment considerations

In cases where AMI system is going to be deployed in a relatively static condition (of the subject distribution
network) then the implementation schedule also appears relatively straightforward, in that it needs primarily to
deal with future extensions and perhaps with just some temporary/operational reconfigurations. The most
frequent factors determining the selection and prioritisation of the network segments (based on international
experience to date) are:

• Density and Geomorphology of meter population

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  High Density Residential Areas

 Underground Urban Areas

 High-rise Apartment Buildings

 Suburban Areas

 Rural Areas

 Mountainous Areas

• Quality of Network Infrastructure

• Quality of Power Supply

• Quality of GPRS

The above list of criteria can be radically altered however in cases where the AMI solution has to fulfill several
purposes. In such cases the above factors can be competitive depending on the specific requirements of the
exact case. For example, quality of communication infrastructure (e.g. GPRS, or other means of communication)
may be not a decisive factor in an urban area, but on the contrary it may challenge the applicability of the
solution in rural and/or islanded areas.

A significant attribute of the planned Azerenerji AMI project concerns the fact that it has to coordinate with the
distribution rehabilitation plan. Otherwise, the reduction of non-technical losses (at least, illegal offtakes) will
not be as effective as expected, since it is not within the capabilities of the AMI system alone to prevent
electricity theft.

As is also mentioned in section 2.1 of this report, the current condition of the distribution network comprises a
serious challenge for the respective RENs to control and administer network operations in a manner that
ensures that both the quality of service but also the collection rate is comparable to the international applicable
practice and standards. It is understood that the AMI project is in some respect prone to uncontrollable external
challenges – owing to the dynamic topology of the network which either is underway or is planned to be
rehabilitated.

Based on these grounds it would be advisable –at least for the purposes of initial consideration of the
implementation schedule – to simplify the criteria related to infrastructure readiness. More specifically, for the
purposes of this preliminary implementation schedule the following indicators may be used:

 Energy density: which represents the ratio of energy consumed as per 2012 forecasts over the
respective number of customers in each region;
 The current electronic meters penetration in each region

Since the expert team is currently unable to make a firm judgment on the efficacy of the network and the quality
of supply (cf. discussion on indices for measuring continuity sometime in the future in section 2.1) the quality of

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the network infrastructure is implicitly addressed through examining costs, which in turn relate to the level of
investment required in order to bring the distribution system of each region to an acceptable (according to
international practices/standards) level of service.

Furthermore the availability of GPRS is at the moment deliberately neglected. The reason is that the present
evaluation concluded that the AMI system is not fully integrated and there is still a decision to be made on the
communications (i.e. PLC vs GPRS) on the basis of a technical and economic evaluation.

5.4.2 Resource-related considerations

5.4.2.1 Human capital

Azerenerji presents an almost even allocation of personnel among the RENs. Perhaps Ganja and Mingechevir
appear to be slightly above the average with a small number of additional personnel compared to the rest of the
RENs. Since the energy densities are rather diversified across the RENs, this surely helps to make the
implementation schedule equitable in terms of workforce availability. RENs will need to ensure that there are
teams assigned with the management of the respective RENs rehabilitation plan and that they can gradually
move from that to the AMI project.

Figure 13: Allocation of Azerenerji distribution personnel per REN

12%
18% Ganja
Mingechevir
14% Shirvan
Imishli
16%
Sheki
12% Sumgait
Xachmaz
15%
13%

Source: JICA, 2012: Study for Electric Power Sector in Azerbaijan: Final Report

On the other hand, it is not clear that Azerenerji will be able to assign the necessary staff profiles involving skills
related to metering, communications, IT and databases, billing, etc.). The solution of outsourcing project
management and supervision services to the local services market does not appear particularly attractive
considering the size and level of experience in that market. It will be advisable that the Human Resources
Department in collaboration with the planning segments of the RENs measure the typical times and frequency
of specific tasks in a new pilot or ask the pilot installers to report on lessons learnt in due course of the

83
installation and verification of the existing pilots. This experience can be used in preparation of a ToR for the
Project Management contract. It is understood Azerenerji is affiliated to a construction company which will
probably undertake the installation. In addition, the staff assigned to the manual collection of metering data
might also prove an important workforce which could be engaged by Azerenerji in the implementation of the
AMI project.

5.4.2.2 Precedence of network rehabilitation actions to AMI roll out

Moving away from the human resources requirements and looking in the area of financial resources, it can be
stressed that the infrastructure-related considerations presented in the preceding paragraph appear to be
closely interrelated with the financial performance of the project.

First of all, it is imperative that any AMI roll-out deploys on a rehabilitated segment of the distribution network.
There are multiple reasons supporting this, which coincide to create the need to have the network infrastructure
elements “fixed” in terms of their characteristics e.g. feeders, cross sections, transformer number and type,
reactive compensation, etc. Moreover, verification of energy consumption data, which are the basis for the
billing information, has to take into account:

 The short-term network reconfiguration

Figure 13 below presents a distribution network segment which is likely to be in service in an urban area. The
latter is assumed by the fact that the network develops in a quasi-radial arrangement (as opposed to the radial
usually employed in rural distribution networks) with open loops which can be used for alternative supply of the
customers. AMI concentrators and/or verification meters should be installed in each LV distribution panel (LV-
DP) in order to match the meter readings provided by the customer premises and thereby verify the energy
balances. At a higher level, verification meters should also be present at MV source bus bars for the same
purposes of verifying energy balances at primary distribution level.

In the event of a fault or a period of out-for-maintenance of a specific section of the network segment below,
concentrators/verification meters should be able to reflect on the new network topology by “knowing” the
number of customer meters they are “responsible” for at any given period.

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Figure 14: Open loop distribution network (example)

Source: Electric Distribution Systems A.A. Sallam/IEEE, 2011

 The long-term network reconfiguration/expansion

Similarly, Figure 13 above presents the case of an alternative supply of the secondary circuits though MV source
2 (see right hand side with a dotted line). In practice, there could be several vertical branches (secondary
circuits) existing between MV source 1 on the left hand side and the MV source 2 on the right hand side in order
to match the load increase and consequently the distribution network expansion. In short,
concentrators/verification meters should be able to “recognise” the changes in the network topology and adapt
accordingly into the future modification of the number of meters they are assigned to for verification purposes.

The INOGATE team has not been able to witness such a network level verification practice in the pilot projects
since the only case where concentrators (which we assume could play also the role of a verification meter) were
present, comprised the pilot deploying PLC communications.

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Moreover, in terms of appraising and planning the AMI investment, there is a substantial lack of knowledge in
the INOGATE experts’ team with regards to the CAPEX and OPEX of the AMI project. In addition the distribution
rehabilitation investment which was developed and proposed in the “Azerenerji Distribution System Master Plan
2010-2025” appears to be not endorsed by Azerenerji and the Government of Azerbaijan. Last but not least, in
the discussion the INOGATE team has had during its visit to the pilot projects with Azerenerji, there was no clear
distinction on the benefits (reduction of technical and non-technical losses and improvement of quality of
service) that would arise from the network rehabilitation and the AMI project. The sum of the aforementioned
uncertainties does not really allow for a firm introduction of a cost-benefit analysis that would in turn present
the financial point of view (i.e. priorities) for the development of the implementation schedule.

5.4.3 Preliminary prioritisation

Taking into account the infrastructure, equipment and resource related considerations as presented in the
preceding paragraphs it is possible to derive a set of preliminary criteria for the prioritisation of the AMI rollout
across the 7 RENs of Azerenerji.

Table 11: Prioritisation criteria for the roll-out

REN Energy density Electronic meters Investment Technical losses

(MWh/cust.) penetration rate (%) requirements
REN Capital of (as a percentage of
Average REN total) in the period
2010-2015
Ganja 16.15 37% 96% 6% 10.2%
Mingechevir 42.89 32% 98% 15% 12.0%
Shirvan 75.41 22% 97% 29% 10.2%
Imishli 40.63 16% 31% 26% 11.7%
Sheki 13.46 10% 0% 10% 13.2%
Sumgait 3.93 3% 0% 6% 11.7%
Xachmaz 14.09 0% 0% 6% 11.7%
Source: own analysis on the basis of data provided by JICA, 2012: Study for Electric Power Sector in Azerbaijan: Final Report and
Azerenergy Distribution System Master Plan 2010-2025

Energy density as also described in section 5.4.1 above comprises the ratio between the forecasted electricity
consumption for 2012 in “Azerenerji Distribution System Master Plan 2010-2025” and the number of customers
in 2012 as reported by JICA, 2012: Study for Electric Power Sector in Azerbaijan: Final Report. The purpose of the
indicator is to relate the rollout to the areas where average consumption is higher, to reflect the need for
improved metering and likelihood of maximisation of expected benefits (i.e. reduction of losses, improvement of
supply quality).

Electronic meters penetration rate is reported by JICA, 2012: Study for Electric Power Sector in Azerbaijan: Final
Report as an average REN rate and also as a specific rate for urban territories (i.e. capital of REN). Since
substitution of electronic meters that have not yet reached their end of useful lifetime is considered as a
stranded cost for Azerenerji, the criterion should be regarded as giving priority to those areas where so far the
penetration of new meters is low.

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Investment requirements are based on the estimates presented in the Azerenerji Distribution System Master
Plan 2010-2025” and, for the purposes of this evaluation, relate to the period 2010-2015. Since Azerenerji
advised against the use of the absolute figures from that study, the allocation of investment requirements has
been used to reflect upon the condition of the network in each region. Of course, the allocation of rehabilitation
investments does not relate only to the condition of the infrastructure but also to the size i.e. larger segments of
the network that may require bigger amounts of investments for the same level of rehabilitation. However it
appears that quality is well represented from investment rates, e.g. in the case of Sumgait and Xachmaz which
represent clearly different energy densities (i.e. sizes) whereas the level of investment required appears to be
comparable. An opposite observation comes from the cases of Mingechevir and Imishli which, albeit similar in
energy intensity, require quite different levels of investment. Overall, the more investment a REN may require,
the lower it should rank in terms of priority for the AMI rollout, since the network rehabilitation has clear
precedence over the AMI rollout.

Technical losses are also included in these criteria as an additional measure of the expected benefits of the AMI
project. It should be noted that non-technical losses are considered most appropriate for this analysis. However
as it is also mentioned in the JICA, 2012: Study for Electric Power Sector in Azerbaijan: Final Report, these are
not reported by REN, due to the fact that they cannot be recovered through tariffs. The Expert team has
assumed that non-billed energy will roughly follow the patterns of technical losses per region, in order to have
an appreciation of the expected benefit from their reduction in each REN. In that sense we expect that the
benefit (and thus the ranking in terms of priority for the AMI project rollout) should be higher where the
respective loss rates are higher.

Based on the above description of key ranking criteria and particularly the interpretation of their ranking order
(i.e. positive/negative influence to the priority per each REN) it is possible to develop a score board (Table 12).

Table 12: Prioritisation of RENs in regard of the AMI rollout

REN Energy density Electronic meters Investment requirements Technical Total

(MWh/cust.) penetration rate (%) (as a percentage of total) in losses Score
REN Capital of the period 2010-2015
Average REN
Ganja 4.00 1.00 5.00 7.00 5.00 22.00
Mingechevir 6.00 2.00 3.00 5.00 6.00 22.00
Shirvan 7.00 3.00 4.00 3.00 5.00 22.00
Imishli 5.00 4.00 6.00 4.00 4.00 23.00
Sheki 2.00 5.00 7.00 6.00 7.00 27.00
Sumgait 1.00 6.00 7.00 7.00 4.00 25.00
Xachmaz 3.00 7.00 7.00 7.00 5.00 29.00
Source: own scoring

The REN’s scoring system involves scores from 1 to 7 points per criterion. Following the description of the
criteria above:

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  The higher score of energy density goes to the REN showing the highest value, as it is understood that
the benefits from it will be higher;
 The higher score of the electronic meters penetration rate goes to the REN presenting a current low
penetration rate, since this will help avoid stranded costs owed to the substitution of meters that have
not reached their useful service life;
 The higher score of investment requirements goes to the REN which investment requirements are low,
as this is regarded as a higher degree of readiness of the existing network infrastructure (i.e. clear
precedence of rehabilitation over AMI);
 The higher score of technical losses goes to the REN with the higher losses rate, as this is where the
impact of reducing is expected to be higher.
 Where ties appeared the relevant RENs have the same score.

Overall, the multi-criteria analysis for the prioritisation of the AMI rollout seems to favour Xachmaz followed by
Sheki and Sumgait, whereas it turns out to be relatively indifferent for the remainder of RENs. It should be noted
however that the exercise of prioritising the RENs has been performed with the purpose of illustrating the
criteria and the ranking logic, rather than to come up with a definite plan. The reasons that the approach cannot
be definitive at this stage are that the distribution rehabilitation plan is still not agreed among the stakeholders,
and that measures of the expected benefits (i.e. non-technical loss reduction) have only been indirectly
addressed in this analysis. Gradually, as the elements of this multi-criteria analysis solidify one after another,
Azerenerji may revert to this analysis, revise and re-apply it as appropriate, in order to develop their final
implementation schedule.

5.5 Organisation structure to implement the Project

5.5.1 Organisation of Owner’s Project Management Group

The organisation chart that INOGATE experts suggest (Figure 14) is based upon the following assumptions:

 The pilot projects with the additional works and tests recommended by this study will be completed in
the next 3-4 months.
 Azerenerji management decides to proceed to the next stage of AMI system deployment.
 The organisation of the full scale project will be, in general, as follows :
 Azerenerji will purchase the meters from two companies (70% from the first selected pilot
vendor and 30% from the second )
 Installation will be by the construction company that is affiliated to Azerenerji.
 Smart Meter Vendors’ contractual responsibility will be: to install laboratories to each region; to
check their meters are ready to work before installation; to supervise the technical aspects of
installation and connection to the network of each meter; to check performance and
communication with their MDMS and with the general one (if these will be different systems);
to supervise the removal of the existing meters; and to be responsible for the proper operation,
maintenance and replacement of faulty meters for the agreed warranty period.

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  GPR service providers will be responsible to verify, before smart meter installation begins in a
REN, that the communication service is adequate for the continuous communication of the
meters. If not they shall improve the network until it does meet the required standard for meter
communication.
 The contractors that will develop the MDMS and the Billing system should be selected before
the full scale implementation project begins. The contractors’ responsibility should be: to
develop the systems; to check their performance during the pilot period; and to organise the
gradual replacement of the existing system, assuring the uninterrupted flow of information and
payment of the bills.
 The majority of the meters will operate in pre-paid mode from the beginning of their
installation.
 The upgrade of electrical networks will be the responsibility of Azerenerji.
 The Owner’s Project Management Group (OPMG) will be a separate unit within Azerenerji with specific
responsibilities for the implementation of the project. Interfaces with other departments will be defined
and procedures of communication will be developed to avoid overlaps and gaps. The team will work
jointly with the personnel of the consultant. Indicative tasks of the OPMG will be:
 Prepare the tender documents for the consultant and participate in the selection and the
signing of the contract.
 Together with the consultant, evaluate the progress of the pilot projects; specify the extra works
and tests to be implemented.
 Specify the performance tests for the final evaluation of the pilot projects.
 Select the contractor(s) for the MDMS and Billing system. Test the compatibility with the
installed smart meters.
 Prepare the contractual documents for the full scale project.
 Prepare the budget and the schedule of the full scale deployment project.
 Participate in negotiations for the contracts with smart meters vendors, GPRS providers,
Installation Company, software contractor(s).
 During the project implementation, monitor and control all entities.
 Collaborate with other units of Azerenerji, toensure the uninterrupted electricity supply to all
customers, the reliability of the network and the payment of bills.
 Prepare and implement training of Azerenerji personnel from consultant, vendors and software
contractors for the operation and maintenance of the system.
 Prepare procedures for and conduct performance tests and commissioning of the system.
 Prepare procedures for the operational unit of Azerenerji.
 Provide customer service during the warranty period jointly with vendors
 Organise and implement a customer awareness programme.

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Figure 15: Organisation Chart of Owners' Project Management Group

PROJECT DIRECTOR

Deputy Project Director

Project
Management
Consulting Operation Departments of Power
Company Transmission and Power
Distribution
Project Manager

Procuremen AMI Expert Home Office SITE (1) SITE (2) Public Relation
t & Contract
Expert Expert Project Manager project manager project manager Manager

Budget & Communicat Smart Meter Home Office Deputy Smart Meter Smart Meter
Cost Control ion Project Manager
Expert Expert Engineer Engineer Engineer Assistant

Commission MDM/ Communication Procurement Electrical/Installation Electrical/Installation

ing Billing IT
Expert Engineer Engineer Engineer Engineer
Expert

Contract
IT Engineer Administration Communication Communication
(MDMS/ Biling) Engineer Engineer Engineer

Budget/Cost Control Contract Contract

Commissioning Administration/Cost Administration/Cost
Accounting and Schedule control and Schedule control

Schedule/Planning Customer Support Customer Support

Training Progress report Services Services

5.5.2 Project Management Consultant-Scope of Work

The consultant should be selected very carefully, taking account of experience not only in similar projects but
with the similar scope of work. It would make sense to require the involvement of a local company, to provide
knowledge of local conditions, increase local added value an enable the transfer of technology to a local
company that can continue providing consulting services to Azerenerji upon completion of the project and for
future developments.

The general outline of the consultant’s scope of work is suggested below:

• Evaluate the System Architecture options and support the Owner’s Project Management Group (OPMG)
to finalise its choice in this area.

• Participate in the evaluation of pilot vendors.

• Review the existing specification and help the OPMG to prepare the tender documents.

• Review existing data and prepare a detailed budget for the project.

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 • Develop a comprehensive project plan covering the project time schedule, payment procedures, and
quality assurance programme.

• Support OPMG during the procurement process, by reviewing technical specifications and evaluating
vendors and contractors.

• Prepare procedures for cost monitoring.

• Assist OPMG to prepare the new operating organisation and develop operating procedures.

• Prepare an “impact evaluation report” that will study the effects of the AMI on both consumer types:
households and business.

• Assist with the monitoring of costs, quality and schedule of Contractors’ works and deliverables.

• Prepare procedures for and assist the oversight of commissioning and testing / acceptance / payment of
vendors, contractors etc.

• Support OPMG in managing the vendor replationships through the warranty (defects liability) period.

• Support preparation of the Public Awareness Programme.

• Prepare a schedule of personnel training by vendors and contractors.

• Support OPMG during contract(s) finalisation

• Support OPMG in the preparation of the project close-out report.

One very important point for the successful utilisation of the consultant services is that these services should be
delivered mainly in Azerenerji’s offices. Hence the consultant’s personnel should stay for long periods in the
offices of Azerenerji, working jointly with the OPMG. The work will not be “submission of reports” but support
to the actual progress of the work.

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6 Study Tour
ITS experts arranged the requested by Azerenerji study tour to be contacted in the installations of the Italian
largest power distribution company ENEL. ENEL has the most expanded network of smart meters in Europe. In
appendixe 7.7 there is the presentation of ENEL’s system and in Appendix 7.6 the letter that ITS addressed to
the General Manager of Azerenerji with the proposed schedule of the visit.

Azerenerji decided to withhold the progress of the smart meters installation and to proceed first to the
renovation of the powerlines network, concequently postponed also the study tour. However Azerenerji has all
contact data of the organization and can arrange any time in future this visit.

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7 Appendices

7.1 List of Documents received by Azerenerji

List of documents received by Azerenerji can be seen in the following link:
http://www.inogate.org/activities/435?lang=en

7.2 AMI Presentations during the kick-off meeting

Ami presentations during the kick-off meeting can be seen in the following link:

http://www.inogate.org/activities/435?lang=en

7.3 Minutes of Kick-off meeting

1st Visit Report- MoM, 10-12 December 2013

1. Meeting with Azerenerji Team 10-December -2013, Tuesday Morning

Participants

Azerenerji -Investment & Strategic Development Department

Rafael Abassov, Head of Investment & Strategic Development Department
Fariz Mammadov, Deputy Head of Investment & Strategic Development Department
Nigar Haciyeva, Head of Project Appraisal and Analysis Division
Toghrul Rahimli, Head of Division of Automation of Management System
Fizuli Nagiyev, Head of Division of Data Collection and Analysis
INOGATE
Achilleas Gekas
Saleh Nasir
Petros Papadimitriou
Nick Tourlis

Points of discussion

 Azerenerji is a state controlled vertically integrated electrcity company responsible for:

 Power generation, except of the renewable sources (wind, solar, biomass) that belong to
the state controlled company Renewables.
 The transmission network , and
 50% (in terms of demand) of the distribution network
 Azerenerji’s distribution network covers the whole country exluding the city of Baku. Power
distribution and supply in Baku is the responsibility of the private owned company
Bakielektriksebeke.
 Pilot projects:

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  There are three vendors active at the moment (out of the 4 that originally responded to the
call for pilot projects), and all of them are of Chinese origin:
 Star
 Hexing, and
 Inhemeter
 The three vendors will install 7,500 smart meters in three areas.
 3,000 already installed and they collect one measurement per day.
 They apply two methods of communication, GPRS and PLCs.
 The vendors do not feed the central data management and billing system. The “pilot”
meters are working in paralel with the existing ones which they then feed the billing system.
Vendors are collecting their data to their own data basis in order to present to Azerenerji for
their evaluation.

 The present system is Manual Reading (AMR): 300-500 readings per month per person in residential
areas and 100-200 in rural areas
 Important milestone is the end of the March 2014. Azerenerji should finish the evaluation and
concludes to a decision on how to proceed.
 For the consideration of the electrical sector in Azerbaijan there are three studies:
 Update Power Sector of Azerbaijan 2013-2025, by Fichtner, October 2013
 Study of Power Sector in Azerbaijan, by Tepsco, February 2013, and
 Master Plan of Power sector in Azerbaijan, By Mercados, 2010.
 Customer growth is projected at 3% annually (23.000 new meters per year)
 Present power rate is 0.06 manat (AZN) per kWh.
 Most of the project will be implemented by outsourcing:
 Communication and collection of meter data to cellular operators.
 Data management, billing, revenue collection to Export Bank
 For interoperability and independency Azerenerji will select two smart meter vendors. From the first
they will get the majority of the meters (approximately 70%) and the second will be “present” as an
alternative source. Azerenerji intends to use the same vendors for both residential and
industrial/commercial/government customerss.

 The objectives of the smart metering programme are incorportated within wider the business
objectives of Azerenerji, inlcuding:

 An increase in operational efficiency

 Enable benchmarking for Regional Distribution Areas in the country
 Work towards the increase of sustainablity of the company with a concurrent gradual
removal of subsidies.

2. Meeting with Azerfon Azeri mobile company, 10-12-2013, Tuesday Afternoon

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 Participants

Azerenerji -Investment & Strategic Development Department

Toghrul Rahimli, Head of Division of Automation of Management System
Fizuli Nagiyev, Head of Division of Data Collection and Analysis

Azerfon LLC

Nabat Mursaqulova

Vusal Shahbazov

Mehman Zakirli

Abbass Ahmadov

INOGATE
Achilleas Gekas
Saleh Nasir
Petros Papadimitriou
Nick Tourlis

Points of discussion

 Connectivity to smart meters with GPRS connection to the central databases of Azerenrji.
 The communication sequence involves a “wake-up” SMS to the meter and after that the
transmission of the meter log can be transferred through GPRS.
 Youngest operator in Azerbaijan. This is their first experience with M2M, though they see
this market as a future growth prospect.
 Have approximately 2 million customers, out of a market of 9m.
 80% coverage in Azerbaijan (excluding occupied territories).
 Azerfone started working with the pilot projects since September 2013 (the original plan
was to start in June), and up to date they have installed 5000 SIM cards.
 Fees have not yet been decided, and neither has the modus operandi of the offered
solution (what will be the final implementation i.e. how many concurrent GPRS subscribers,
rolling or simulatenous meter interrogation, etc)
 Azerfone has developed fixed tariffs for 50 MB and 50 SMS, per month and meter.
 Azerphone has prepared and submittted a “High Level Design Document” in Engish (dated
12/10/2013)

3. Meeting with Backcell Azeri mobile company, 10-12-2013, Tuesday Afternoon

Participants

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 Azerenerji -Investment & Strategic Development Department
Toghrul Rahimli, Head of Division of Automation of Management System
Fizuli Nagiyev, Head of Division of Data Collection and Analysis

Bakcell LLC

Khurram Jawed

Zaur Boglirov

Gaukhar Kuzika

Roman Ignatenko

INOGATE
Achilleas Gekas
Saleh Nasir
Petros Papadimitriou
Nick Tourlis

Points of discussion

 They participate to the pilot projects providing SIM cards to the smart meter vendors. 1500
cards have been installed so far.
 They tested concentrators with Power Line Carriers (PLCs) with success, but the decision
was to proceed with SIM card to every meter.
 Supplying to all three vendors – 2 are only data, one has SMS as well.
 No. 1 in data usage for GSM in Azerbaijan.
 Microwave communication between Bakcell and Azerenerji with 100Mb capacity.
 Dedicated SMPP gateway for Azerenerji.
 Over 3 months of operation at time of meeting.
 Providing Azerenerji 100MB and 30 SMS per month per meter.
 There will be a status review meeting on the week of December 15 INOGATE has requested
the “review report” after the meeting.

4. Meeting with Express Bank, 10-12-1-2013, Tuesday Evening

Participants

Azerenerji -Investment & Strategic Development Department

Toghrul Rahimli, Head of Division of Automation of Management System
Fizuli Nagiyev, Head of Division of Data Collection and Analysis

Express Bank

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 Teymur Aghakishieyev, Head of Bank Cards division

Etibar Shirinov

INOGATE
Achilleas Gekas
Saleh Nasir
Petros Papadimitriou
Nick Tourlis

Points of discussion

 The Bank will have a vis-à-vis access to the Meter Data Management and central metering
database and will be responsible for billling and payments collection.
 The concept of the project has been written by the Bank and agreed with Azerenerji.
 While the Standard Transfer Specification (including generation of unique code) was part of
Azerenerji’s scope, it was eventually assigned to the bank as part of the billing system.
 Initially the vendor was charged with performing all functions (hardware, MDM, billing), with
the winning supplier taking the risk of integrating the remaining pilots. It was finally decided that
the bank would take over the billing, which covers both pre- and post-paid customers.
 The billing system will eventually be handed over to Azerenerji for operation.
 While the current tariff structure is flat (0.06 AZN/kWh), the system should support any TOU-
based tariff.
 The added value of the bank is the development of all necessary infrastructures for the
collection of money (including payment terminal systems i.e. not just at bank branches).
 There is currently no deposit for pre- or post-paid service.
 The Bank will not interfere to the project of smart metering installation.
 Billing software has not been decided.
 Eventually the billing system will turn to a pre-paid type for all house-hold consumers and
consequently the banks billing interface will adapt accordingly.
 There is currently no thought on the Partner Bank on undertaking historic bad debts – the bank
will not assume any risks from revenue collection.
 It was understood by another meeting (IT Dept) that in priciple any bank wishing to undertake
an investment in order to connect with the AMI system and become a Partner Bank is able to do
so.
 A description of the concept for the contribution of the Partner Bank in the AMI project value
chain is in Russian and the Bank has offerred to translate it.

5. Visit pilot Projects, 11-12-2013, Wednesday morning

Participants

Azerenerji -Investment & Strategic Development Department

Toghrul Rahimli, Head of Division of Automation of Management System

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 Fizuli Nagiyev, Head of Division of Data Collection and Analysis
INOGATE
Achilleas Gekas
Saleh Nasir
Petros Papadimitriou
Nick Tourlis

Places visited

The team visited the areas that vendors have installed their meters. The villages were in
the vicinity of Baku, around twenty to thirty km from Baku center:

 Qobu, where INHEMETER has installed their meters

 Hokmeli, where STAR has installed their equipment, and
 Xirtalan, where HEXING has installed theirs.

Information collected

 No vendors present, therefore no verification of the compliance to the spec, nor

consideration of their data basis and data collection and management system.
 The architecture of the system is simple and followes the logic of the radial organisation
of feeders. There are concentrators in each MV/LV substation covered in the pilot
project despite the fact that the vast majority meters are individually equiped with a
SIM card and can therefore transmitt directly to the database. Should a universal GPRS
option prevail the concentrator will have a verification role in the AMI while for the
option involing PLC communication it is indispensable.
 Smart meters have also been installed in some substations – this allows for the
monitoring of distribution-level losses (and leaks).
 Smart gas meters have also been installed in the visited areas (a SOCAR project).
 Attached , Annex 1, photos of the various meters

6. Meeting with IT department of Azerenerji, 11-12-2013, Wednesday afternoon-evening and 12-12-2013,

Thursday Morning
Participants

Azerenerji -Investment & Strategic Development Department

Fariz Mammadov, Deputy Head of Investment & Strategic Development Department

Nigar Haciyeva, Head of Project Appraisal and Analysis Division
Telman Asadov, Deputy Head of Database Administrtion Service

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 Vussal Gurbanov.
Toghrul Rahimli, Head of Division of Automation of Management System
Fizuli Nagiyev, Head of Division of Data Collection and Analysis

INOGATE

Achilleas Gekas

Zaur Mammadov
Saleh Nasir
Petros Papadimitriou
Nick Tourlis

Points of discussion

 The meter storage capacity is desired to be able to be sufficient for one year and one
measurement per day. INOGATE requested the information to be verified (in terms of the
actual size of the output file). It is very small capacity if it is considered that in full operation
the measurements should be collected every 15 minutes! Currently 15-minute readings are
stored for only 3 months.
 Azerenerji is installing SAP modules for Finance, Accounting, HR, and Budgeting.
 The present billing system has been developed in house, and is working inefficiently due to
the small storage capacity.
 The problem of the existing system is the variety and incompatibility of data bases! This has
the consequent effect of not being able to produce a single aggregated report for all
metering and billing data.
 The different databases the smart meter vendors are using will create the same problem.
 Azerenerji is not yet firm on the MDM functionalities. On the discussion it was mentioned
that the major MDM features should include: energy profiling, meter data validation and
ability to change the data in the system.

7. Meeting with Country Coordinator of theMinisry of Energy and the Manager of Electicity department,
12-12-2013, Thursday morning
Participants:
Azerbaijan Republic, Ministry of Energy
Ramiz Rzayev, Head of department of investment and reconstruction of industrial
enerprices
Asaf Rzayev, Deputy head of the Energy Department
Zaur Mammadov, INOGATE country expert- Employee of Ministry of Energy
INOGATE
Achilleas Gekas

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 Nick Tourlis

Discussed items:

Mr Ramiz Rzayef referred the following regarding the Advanced Metering Installation:

 Today electricity sector (production, transmisssion, and distribution) is a monopoly of

Azerenerji, however Government’s strategy is in the next years to open the market, therefore
the installation of smart metering system is considered very important investment by the
ministry and will be used as a toool for the deregulation and the unbundling of the distribution
sector.
 Distribution network is not in a good level of operation, it is very old with a lot of obsolete
equipment and cables. It has been approved budget for the rehabilitation in near future.
 Government has decided to spent 8 billion Manats (~8 billlion euros) up to 2025 in electricity
sector mainly for the improvement of transmission and distribution networks.
 The ministry will follow the INOGATE project very close and will take into serious considerations
the conclusions of the study for their final decisions.

Mr Asaf Rzayef added that:
 The Baku Electric Distribution Company, Bakielektriksebeke, deploys a similar to Azerenerji
project , for installing smart meters. The project has been awarded to the English Company
(AMPY now trading as LANDIS & GYR)
 Already 10% of the existing meters have been replaced.
 The system is based on transfering data by mobile and are 100% prepaid.
 When deregulation and Tarrif systems will be applied in Azerbaijan the two systems should be
compatible for the control of the regulation authority.
 They will send to INOGATE report regarding the Bakielektriksebeke system and they requested
the compatibility of the two systems to be verified.

8. Meeting with Azerenerji Team (wrap up), 12-12-2013, Thursday afternoon

Participants

Azerenerji -Investment & Strategic Development Department

Rafael Abassov, Head of Investment & Strategic Development Department
Fariz Mammadov, Deputy Head of Investment & Strategic Development Department
Nigar Haciyeva, Head of Project Appraisal and Analysis Division
Toghrul Rahimli, Head of Division of Automation of Management System
Fizuli Nagiyev, Head of Division of Data Collection and Analysis
INOGATE
Achilleas Gekas
Zaur Mammadov
Saleh Nasir
Petros Papadimitriou

100
 Nick Tourlis

Points of discussion
 Confirmed that following documents have been received by INOGATE:
 Report on Update of Power Sector Master Plan of Azerbaijan for 2013-2025 prepared by
Fichtner .
 Study for Electric Power Sector in Azerbaijan by TEPSCO
 Generation, Trasmission and Distribution Master Plans prepared by Mercados
 Extract from Mobile Operator Agreement – extract from the Agreement signed with
Azerfon for provision of the connectivity for AMI infrastructure
 Extract from SLA – extract from the Service Level Agreement which is the integral part of
the above mentioned agreement
 Extract from PDP Agreement – extract from the agreement signed with one of our
vendors for supply of metering equipment and services
 Technical Annexes of the contracts with the three vendors.
 Agreed that the following documents will be sent by Azerenerji to INOGATEexperts:
 In electronic format the technical annexes of the contracts signed with the three
vendors,( hard copy already submitted during the meeting).
 Billing and Data Management Concept prepared by Export Bank (in Russian
immediately and later in English)
 Pricing Philosophy agreed with mobile companies.
 The technical specification of the installed equipment and software by the three
vendors.
 Azerphone document “High level Design Document,12 Oct 2013.
 Backcell document “Review report, Meeting December 15.
 INOGATE pointed out the following:
 The existing distribution network in the visited areas was found in bad conditions. The
rehabilitation of the system must take place in parallel with the installation of Advanced
Metering System, otherwise the AMI system will fail at meeting the business objectives.
 The absence of smart meter vendors did not allow the INOGATE experts to check if the
systems comply with the required specifications. There was no possibility to consider
the Data Collection and Data Management capabilities of the three vendors.
 The core of the project (and what is crucial to reach the company’s stated goals) is the
management of the data and not necessarily the hardware (i.e. smart meters). In a
customer-focused scenario, and one where the utility seeks to not only increase the
collection rate but to better understand the behavior of the customers, the
management and interpretation of data is critical in comparison to the selection of the
hardware vendor of a commoditized product (smart meters). Once the meters meet the
required specifications, the focus should be on leveraging the data gathered to inform
business processes and future business decisions.
 Azerenerji (Rafael Abasov)
 The biggest Integrity and Coherence of the project is the strategic plan. They need
INOGATE contribution to the verification and finalization
 INOGATE team to support Azerenerji to meet the developers requirements (ADB, EBRD)
and to assure the financing of the project.

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  The report to be dynamic and to identify the missing items of TOR. To give alternative
sources of supply and to indicate ways to avoid technological traps.
 Azerenerji needs assistance with the rollout strategy – this is a key component of the
deployment process.
 There is a workshop to be held this week where stakeholders will clarify issues around
the project and make descisions
 Study Tour
 Azerenerji accepted to visit ENEL smart meter installations in Rome and Milan.
 Azerenerji plans to have the study tour in middle of February.
 Azerenerji will submit number of participants and specialities of each one.

9. Meeting with Investment and Strategic Development Department of Azerenerji, 12-12-2013, Thursday
late afternoon
Participants
Azerenerji
Fariz Mammadov, Deputy Head of Investment & Strategic Development Department
Nigar Haciyeva, Head of Project Appraisal and Analysis Division
Farid Babayev, Deputy head of Regional Power Markets Analysis Division
Hafiz Mehdiyev, Deputy Head of regional Power Markets Analysis Division
Toghrul Rahimli, Head of Division of Automation of Management System
Fizuli Nagiyev, Head of Division of Data Collection and Analysis
INOGATE
Achilleas Gekas
Saleh Nasir
Petros Papadimitriou
Nick Tourlis

Points of discussion
 Azerenerji basis for Strategic Planning is the Presidential Decree “Look Future 2020”, which
refers to all state control companies.
Azerenerji has the following goals per division:
 Power genaration:
 Develop Renewable Energy, Hydropower-Small Hydroelectric plans. Target
in 2018 - 200MW
(It is clarified that the development of other sources of
renewable energy belongs to another state controlled
company)
 Increase efficiency of gas power production (currently 98% of total
generating capacity)
 Transmission

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  Install Scada System (already achieved by the installation of ALSTOM’s
SCADA System)
 Decrease of Transmission losses
In 2012 the losses were 3%, down from 4% in 2008. Their target is to reduce
it to below 3%.
 Distribution
 Limited the level of theft
o Replacement of cables
o Advanced Meter Infrastructure installation
 Decrease Distribution Losses
o More poles
o Smart Metering
In the area Ganza already installed prepaid meters (by card) 16.6%
of the existing meters.
 Corporate
 Financial strength. Recently S&P rated Azerenerji -BBB
 IT Security System
o IT general Audit to design and implement new software
o Develop Fiber Optic Network in parallel with power network

7.4 Photos of Pilot Smart meters

The photos of pilot smart meters can be seen in the following link:

http://www.inogate.org/activities/435?lang=en

7.5 AMS performance test

ADVANCED METERS INFRASTRUCTURE (AMI) AT AZERENERJI’S DISTRIBUTION NETWORK. PILOT PROJECTS
EVALUATION.

Guaranteed Level of System Performance – Acceptance Test

1. This document is a description of Performance Tests that shall be implemented at the end of the testing
period of the pilot projects The purpose of these tests are the evaluation of the installed equipment and
software for the metering of electrical consumption including the data storage facilities. The here below
definitions apply to the Performance Acceptance Tests.

2. The equipment shall be designed in order to maximize the successful communication and collection of
metering data from all low voltage metering points and concentrators that are subject to telemetering

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 as hereby described in detail. Such performance shall exceed the Guaranteed Level of System
Performance, which is set at 98% of all metering points integrated and available for data collection, as
further detailed in the following paragraph.

3. The Acceptance Test aims to verify whether the Guaranteed Level of System Performance has been
achieved and it shall be carried out as follows:
 The test period shall be a seven-day period of continuous unhindered operation. Such period shall
be determined by the Vendor following a written request by it. For each of the 7 days of the test
period, the system must, independently and without any intervention from the part of operators of
either the Vendor or Azerenerji, perform telemetering and collection of data from all metering
points integrated in the System.
 The telemetering shall be carried out daily from 00:01 to 08:00, It is assumed that the described
meter interrogation sequence involved in a ”wake-up” SMS and a subsequent GPRS transmission is
followed during no-peak hours of the GSM/GPRS network.
 Upon lapse of the aforementioned Telemetering Period, the System shall issue a report of the
telemetering results, demonstrating the percentage of successful communication and collection of
metering data from all metering points integrated in the System.
 To calculate the aforementioned percentage, the points where the failure to communicate and
collect data is due to an extended outage of the customer’s power supply shall not be taken into
account. To that end, the system shall issue a report, taking automatically into account, through
Azerenerji’s CRM system, the power supply points of customers that are “cut-out due to debt”.
 Similarly, it should take into account any “loss-of-mains” i.e. supply interruptions at LV substation
level by means of the relevant concentrators’ status. On the contrary, points, where the potential
failure is due to the equipment installed by the Vendor or to the mode of installation, shall be
calculated. The Vendor issues the Report and Azernerji accepts or rejects
 Moreover, metering points which have temporary communication difficulties due to the
telecommunication service provider, except for large-scale contingencies that may cause
communication failure in more than 5% of all integrated metering points, shall be calculated. The
Vendor shall be exclusively responsible for proving such events.
 The exception of metering points shall be performed by a relevant agreement of the Azerenerji
following a well-documented report by the Vendor.
 Pursuant to those mentioned above, the respective daily successful communication and
measurement rate, as well as the average of the 7 days of the test, shall be calculated and regarded
as the System’s Performance Rate.
4. The Acceptance Test shall be regarded as completed successfully upon lapse of the 7 consecutive days,
as long as no daily rate is lower than 94%. If such condition is not met, the test shall be performed all
over again in its entirety, within a period to be determined in writing by the Vendor, during the Trial
Operation Period.
5. Should the System’s Performance Rate be less than 94% or should the Test not be completed within the
Trial Operation Period of one month, the Project shall be rejected.
6. If a Performance Rate ranging between 94% and the 98% of the Guaranteed Level of System
Performance is achieved, then, the overall Technical Score of the proposed Vendor will be reduced by 5
points per 1% deviation
7. The Acceptance Test shall include inspection of the simultaneous communication with the WEB server
for at least 1% of the integrated customers, in order to draw data on the load line of each of them, as

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 well as voltage quality data. Such inspection process shall be proposed by the Vendor and be jointly
agreed with Azerenerji.

Definitions:

Term Definition

Guaranteed Level of System The overall evaluation criteria based on the System’s
Performance overall availability.
System The metering and communication infrastructure including
the data storage facilities
Vendor The provider of metering and communication equipment (3
in this specific case)
Telemetering period The time period (set deliberately to night time) over which
the meters and/or concentrators transmit stored metering
data to the database(s)
Trial Operation Period A time interval set to 1 calendar month
System’s Performance Rate The daily successful communication and measurement rate,
as well as the average of the 7 days of the test
Project The project refers to the implementation of the System.
Any similar reference to the term should be construed
accordingly

7.6 Letter for study tour

Letter for study tour can be seen in the following link:

http://www.inogate.org/activities/435?lang=en

7.7 ENEL presentation

Enel presentation can be seen in the following link:

http://www.inogate.org/activities/435?lang=en

7.8 Strategic overview of a billing system for electricity grid suppliers

This Strategic overview of a billing system for electricity grid suppliers includes the following sections:

• Introduction
• EUDR generation & processing
• Tariffs
• Prepaid and Post-paid billing
• Smart Meters and associated deployment

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7.8.1 Introduction
Almost since their inception telecommunications networks have established a series of issues of significant
complexity to be addressed in order for them to work in a “professional manner”. As could be expected the
significant majority of the core issues revolved around billing or charging. That is how to be able efficiently to
calculate

• the type of,

• the extent of,
• the shape of
• and obviously the volume of

Telecommunications traffic, that was traversing a telecommunications network, so that:

 its customers could properly be demonstrated the usage (internal records management) for the type of
service they had requested;
 the load with the partner networks with which the specific telecommunications network was exchanging
traffic, could adequately and unambiguously be determined (external balance management);
 and finally, a suitable amount of money could be requested from the customers based on the properly
accounted for usage (stated above), together with a variety of applicable and quite often very
complicated tariffs, which are chosen according to various parameters of the service offered.

Over the years, a variety of terms (such as Call Detail Records (CDRs) used mostly in telephony, Remote
Authentication Dial-In User Service (RADIUS) used mostly in Internet Service Providers etc.) were introduced and
applied to signify the same thing: that defining, structuring and implementing an Authentication, Authorisation
and Accounting (AAA) management, together with its detailed usage records, is at the core of each such
endeavour.

Not surprisingly the electricity market and its core players (utilities) are gradually moving away from their
monolithic billing model of some decades ago and it might be straightforward to try to “copy” principles,
methodologies and established solutions from the telecommunications industry to their benefit, while
considering the particular industry's overall strategic objectives and rationale.

7.8.2 Electricity Usage Detail Record (EUDR) generation

Borrowing from the concepts introduced above, this document uses the term Electricity Usage Detail Record
(EUDR) and demonstrates how this:

 has existed (almost) since the inception of the utility

 was very static for a long time
 can without any loss of generality have a very elastic definition
 will inevitably lead to a coherent database for billing of any utility

While there are a few database fields that are obvious (Line_Id, date_time_stamp, usage in kWh etc.), it is
completely up to each utility to define precisely the extent of fields it wishes to keep for its records (losses, date

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from, date to...), their granularity and several other characteristics based exclusively on the degree and
variability of

 level of aggregation for the future and more elevated processing specifications
 reporting requirements as determined by management on the particular level

To establish these data requirements are very significant, internal thinking and design process that has to be
accomplished by a joint Task Force from IT and Business Intelligence units of the Utility. Obviously the current
“record structure” used for billing can be used as a starting point, but it has to acquire a much more abstract
level.

To give a very concrete example, while speaking with the IT Manager at Azerenerji it was admitted, that
currently there are two databases for billing for which the IT department is not able to produce coherent
integrated reports.... due to the file modalities. It is exactly those shortcomings that a well thought, unified
EUDR is trying to solve - that is we do not take data as “served” but we produce/adjust/elaborate on data the
way we want them.

Consider now if the definition of a proper EUDR offers any additional benefits on the whole process.

Right now the Utility has some usage records based on a previously defined structure and, perhaps after some
new developments (like adding Smart Meters) it will obtain some usage records of a different sort. Perhaps in
two or three years another “ground breaking” development or even a managerial “imposition” will force some
additional issues in the way those records are obtained.

In using this model the aim is to make a state-of-the-art structure, that is as solid as possible and as less
vulnerable as possible. In other words the process will introduce Data Stewardship into the utility system such
that the utility, as the Owners of the data, can solely determine their form.

This means directly, that:

 if today we are using an XYZ manufacturer of Smart Meters who is capable of delivering a “reading”
of some format, all we have to do is develop a plug in into our application, that converts the specific
manufacturer's readings into our EUDRs
 if anytime we introduced concepts like “accounts” (with multiple lines) and “customers” (with
multiple accounts) and any level of hierarchy or association all we have to do is group our EUDRs by
any criteria chosen to produce the desired results
 by the same token if the Utility decides to offer Customer Self Care systems with or without billing
info, then a customised application layer can be added, which will continue to work on exactly the
same EUDRs (or some derivative) without any major reengineering
 ...and finally if tomorrow's needs or technology allows us to change the granularity of our data or
any other parameter of our readings, we will still be working on the same EUDRs.

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Thus it is of paramount importance to gain a level of abstraction, that is completely vendor independent and
only tailored to the needs of the utility so that the core of our billing, our EUDRs, are as long as they can be.

7.8.3 Tariffs
Having addressed the issue of EUDR, it is time to consider the second component of the billing process, namely
tariffs.

Under tariffs, we understand the complete set of definitions of rates and of rate groups, which will be applied
towards one (or usually) more EUDRs. While it might be tempting to enforce a single tariff, it is the loss of
generality that warns against such a pitfall. A single tariff might present an easy solution for the prevailing
scenario of the Utility yet it would be strategically wrong and from a design point of view unacceptable to rely
on such a temporary condition.

Thus it makes sense to design tariffs taking into consideration both parameters that are needed now and those
that might be required in the future. To name a few and very simple points, tariffs might easily be split to
account for:

 residential vs. business customers

 geographical profiling
 date/time or seasonality patterns
 total or granular consumption/usage profiling

The list of categories can obviously become lengthy and it is not so easy to determine in advance any and all
parameters that a future system might need, since creating tariffs is much less an IT task than

 a managerial or sales/marketing tool, which might consider increased customer satisfaction, reward
schemes or even social needs on one side
 a strategic tool for the supply planning side of the Utility, which might in the future set preferences
in the consumption profiles based on geographical criteria, over or under supply, or similar criteria.

It is impossible to foresee exactly future business logic and its “twists” in order to try to have all possible
alternatives integrated into an a priori solid software solution. While a series of “off-the-self” vendors:

 http://www.navigantresearch.com/research/electric-utility-billing-and-customer-information-systems
 http://www.metrobilling.com/utilities/
 http://www.aclaratech.com/AclaraSoft/pages/AMIDeviceManagement.aspx,
 http://www.dwcorp.com/utility-bill-payment-services/

Would offer a very good starting point, possibly covering even more than what might be needed today, the
relevant requirements analysis might prove, that additional components might be needed.

As such the optimal strategy to tackle this kind of problem is within the realm of “Business Rules”, e.g. software
systems that allow for the business solution logic to be taken outside the core programming and transferred to a

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large extent to the Business Intelligence Community. A very good example for such a toolkit would be Drools
(https://www.jboss.org/drools/)

While any such system has a significant learning curve both for the IT department (that will be responsible to
implement the original concept) and for the business users (that should get acquainted with a more strict
formalisation of their strategy needs), it represents over the long run an optimal solution for a continuously
changing pricing scenario.

Alternatively “borrowing” existing features from an existing tariff editor (as described above) and integrating
them into a core application might represent a “good enough” alternative.

7.8.4 Pre-paid/Post-paid Billing and Smart Meters

Utilities, be it electricity, gas or otherwise, have a small yet essential systemic handicap versus
telecommunication networks in the sense that pre-paid billing is only semi-real time, and that the cut-off engine
is not monitored by the operator itself but by a device located at the customer's premise.

To explain this more clearly, there is almost no way a mobile subscriber can use more “minutes” on a telephone
call he is making than he is allowed to, unless major fraud is the case, because the call duration and its
respective cut-off are measured at the mobile carrier's facilities in real time. Opposite this, a utility subscriber is
only constrained by the capabilities of his Smart Meter and a near real time mechanism. This makes the whole
process significantly more prone to tampering and/or to device malfunction.

Additionally while someone might claim, that the above risks are within acceptable limits for regular operations,
an increasing difficulty becomes apparent when the concept of customer with multiple accounts, or accounts
with multiple meters, is introduced, in the sense that controlling consumption over multiple meters increases
the complexity of the single meter problem.

In this respect while Smart Meters obviously represent a reasonable (if not the single) alternative to the pre-paid
problem, they cannot be simply taken as a panacea for the overall problem and thus from a strategic point of
view additional measures have to be considered.

RADIUS (http://en.wikipedia.org/wiki/RADIUS) or any similar mechanism is probably among the best

alternatives for an organisation, which would inevitably have to continue operating in a mixed pre-paid and
post-paid environment. It is sufficiently abstract to be combined with a “general purpose consumption packet”
(such as the EUDR) and has all necessary facilities to seamlessly implement AAA for any type of service.

The core requirement for a successful RADIUS implementation is the capability to centrally enforce disruption of
service, be it precisely on time or even in the case(s) of overruns.

Given the introductory remark on enforcement of such a policy it becomes clear that one of the most significant
capabilities of any Smart Meter in use, would be to accept centrally sent messages to disrupt the service.

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7.8.5 Smart Meters and associated deployment
As previous sections have shown, the introduction of Smart Meters (and the possibly associated future Smart
Grid) is significantly less important for the billing itself than for numerous other aspects, which were completely
underutilised before and which offer totally new facilities for the Utility. These can be summarised under two
keywords: Statistics and Efficiency.

It is due to the introduction of Smart Meters, that nowadays a utility can

 dramatically reduce its workforce assigned to obtaining consumption readings from any type of
consumer and thus reallocate this workforce to other tasks
 obtain consumption data, that possess any desired degree of granularity
 design network demand and thus optimise production planning, cost and profitability based on
historic data and current patterns
 adjust for seasonal peculiarities
 obtain near real time capability of measuring real, systemic or other losses on its network and thus
detect and remedy failures even ahead of their occurrence.

Thus, while billing is very well “fed” by Smart Meters, their core strengths can be utilised in many more ways
from several departments of a utility than just from accounting. It is those departments that have to contribute
in the form, structure and frequency of data collected, if their utilisation has to become a strategic tool overall.

In this respect the collection, storage and management of Smart Meter readings introduces an aspect by itself.
The data produced by Smart Meters are very well structured, small chunks of data, which can be transmitted
using low(er) level networks.

At time of writing, market vendors produce different types of meters depending on their customer's needs. It is
very common that the communication circuits are built inside a box/chassis which is called a module and can be
added to a compartment inside the smart meter. Two technologies dominate the market at present. One is
based on using the Radio Frequency (RF) domain to transmit data. The other one transmits data through the
Power Line Carrier (PLC), in other words it uses the network of the power gird to transmit data, by impressing
that data signal on the power lines. Since only a small amount of data is transmitted during the communication
of the smart reader and the core, we will present the differences and the factors that may affect the choice of
the module that can be installed on the smart readers.

Depending of the topology of deployment, area of deployment, or cost of data, current technology offers two
different connectivity methods for deploying the smart meters. In areas that there is existing infrastructure
providing towers and wired connections, PLC wins over RF technologies when it is used in rough terrain and over
long distances. Especially when the above conditions are met, PLC reduces costs for rural areas. However, PLC
has a limited bandwidth and introduces end to end delays. It also introduces higher cost when it is used in urban
and suburban locations. RF does not travel well over distance and is not recommended for rural areas. RF wins
when used in dense areas and provides large bandwidth, better delay values and multiple collection points. It
can be used in mesh networks, as many smart readers communicate with a collector and many collectors with
the core.

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Especially referring to http://www.tepco.co.jp/en/corpinfo/procure/invited/pdf/c1_basic.pdf it is clear that
good practice calls for the usage of data concentrators (usually placed in the next available transformer
housing), which reduce data collection and forwarding costs by about 1-2 orders of magnitude.

Thus any alternative network (GPRS, fibre or otherwise) is only recommended for backbone operations.

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