Around the world, utilities are transitioning from being monopolistic ‘price setting’ suppliers to market driven service providers – what does this entail for the billing systems they use?
Historically, utility supplies (gas, water, electricity and arguably telecommunications) have been viewed as a public service provision. In most countries the economic need for a consistent and high quality utility supply has resulted in heavy state control and ownership.
As a consequence, the information systems used by utilities have tended to focus on the maintenance of the network assets, with billing often being an after-thought. Billing for consumption tended to be simple – either charged at a flat rate or (as is still the case in many water and waste water networks) charged according to property size.
During the late 1980s many governments sought to re-regulate or privatise the provision of utility services. This led to the realisation that the utility connections could be seen as individual assets and traded as market commodities. Further developments in the markets have seen the evolution of multi-utility vendors able to bundle utility supply under a single customer agreement. In many regimes, customers are now being seen as ‘assets’ that have to be won and can be lost or traded between utilities. In Canada, Centrica acquired 1.2 million customers at a unit price of US$361; in the UK, British Gas acquired 160,000 customers for US$261. Analysts CE Turn estimate that the cost of acquiring a new customer in the US is around $150.
MARKET DIFFERENTIATION AND DM
As the value of the customer has been realised, so too has the need to create innovative pricing and billing models. There have been two drivers for this.
1. The need to provide market differentiation and contract lock-in
Typically this need has arisen in deregulated markets, where organisations can sell energy or services independently of the underlying network service. Customers, although being naturally locked in to the network provider, are then able to select a retailer of the supply or service. Retailers therefore need to come up with pricing plans, contracts and branding differentiation that will attract and retain consumers who are free to choose.
2. The need to educate consumers and manage demand
Typically this requirement exists where the utility provider is unable to meet consumer demand, or needs to sell off excess capacity. For example, many electricity markets need to limit peak demand to avoid bringing expensive generation on-line; conversely, some networks need to dump load to keep slow start-up generation on-line.
The complexities in pricing and billing processes have had consequential changes in the business view of the role of Customer Information & Billing (CI&B) Systems. The last ten years have seen a shift from asset-based billing, through account-based billing to finally focus on the customer as an individual. As one water utility chairman said: “It’s not enough to know where you’re supplying water, you need to know to whom you’re providing it and why”.
The doubling of oil prices over the past couple of years, and the adoption of the Kyoto protocols by many nations, has added yet another dimension to the demands of billing systems as utilities strive to offer conservation incentives. Many energy utilities now offer subsidies on energy conservation programmes (such as roof insulation, solar heaters, heat exchangers). Water utilities have similar demands for conservation programmes, with many offering subsidies on flow restrictors and recycling schemes.
Utilities need to be able to support pricing programmes and payment plans, and they need to keep track of customers’ eligibility for these programmes.
A NEW POSITION FOR CI&B SYSTEMS
Utility information systems architectures have naturally followed suit. Typically, the CI&B system now sits at the hub of a series of interfaces between other operational and control systems.
In addition to providing reliability and quality of service, utilities now face the challenge of meeting customer service goals. Analysis by Pratts of the reasons for customers to make contact with utilities has shown that over 50% of all calls are billing, payment or consumption related – information that a comprehensive CI&B system has at its fingertips.
The customer information system is at the core of the CI&B system. The consolidation of this data has allowed utilities to create call centres to provide a single point of contact, simultaneously improving customer service and staff effectiveness and reducing the cost of customer service.
A key aspect of many CI&B systems that underpins their capability to support call centres is the provision of workflow and process flow functionality. Such functionality allows the utility to build the knowledge of the procedures to handle customer’s requests for service within the fabric of the CI&B system. This provides multiple benefits.
Figure 1 – The CI&B system interfaces with many other utility systems
- Ensures consistency of service.
- Offers the ability to automate and monitor customer-facing processes.
- Reduces the skills required of customer-facing staff.
- Allows new processes, policies and procedures to be rapidly implemented throughout the utility service area.
- Allows scalability and growth.
Sufficiently automated CI&B software has in turn facilitated the move to automated telephone and web-based self-service. The economics and benefits of customer self-service are impressive.
- 13¢ per self-service transaction vs. $7-$10 for a call centre transaction.
- Typically 15-20 self-serves can be accommodated per CSR channel.
- Customers perceive immediate gratification.
- Customers feel in control.
Web self-service is also allowing utilities to move to electronic billing. Statistics show that customers using these channels have significantly lower rates of overdue payment and are more likely to take up new offers and service pricing.
DOES YOUR CI&B SYSTEM HAVE WHAT IT TAKES?
Utilities wanting to operate effectively in the 21st century need to deploy functionally rich CI&B systems. A ‘top 15’ of CI&B features would include:
- Customer centricity – maintain a history of customers’ service use, connections and meters.
- Support customer relationship management with full contact history, from prospect acquisition on.
- Offer work and process flow scripting tools.
- Facilitate demand management (or conservation) incentive programmes through pricing and payment plans.
- Provide credit control and collections management.
- Enable service requests and field service automation.
- Manage meters and inventory.
- Allow flexible pricing and contracts management.
- Track and analyse consumption and demand patterns.
- Allow billing to be cycle, date or event driven.
- Offer adaptable bill and statement presentation.
- Facilitate meter reading and data management.
- Handle payment processing via cash, credit card, electronic banking and payment agencies.
- Provide easy-to-use data interrogation and reporting.
- Have high levels of interface capability.
Utility CI&B systems have made great strides in the last decade, and progress continues to be made – is your system keeping up?