Third-party billing: Having it the customer's way
Sep 26 - Electric Perspectives -
Multisite customers have always looked for ways to handle their complicated billing issues. Over the last 10 years, their interest has tended to the third-party biller-an entity that can deal with all the issues that multisite customers have when they receive bills from several different utilities. In the deregulated energy industry, where contracts commit companies for millions of dollars annually, timely and accurate information is the difference between winning and losing. For the average commercial end-user, the energy industry has grown complex, demanding a level of sophistication and standardization of energy data greater than previously required. Some multisite customers have sites serviced by hundreds of utility companies with many different types of billing systems-and that makes a third-party utility bill payment company (which can do the legwork to resolve those inconsistencies) an attractive option. National account customers at a recent national accounts workshop at the Edison Electric Institute showed a strong preference for third-party billers: * 56 percent had outsourced their utility bill payment functions to a third party; * 13 percent were considering doing so; * 28 percent had not outsourced and had no definitive plans in that area; and * just 3 percent who had outsourced the billing function had switched back to inhouse processing. Fast food chains and other national accounts strive to lower their energy costs. That means tracking multiple sites' billing. This activity has required shareholder-owned utilities to adjust their systems and processes, especially in the area of billing and support, though (in the eyes of many customers) some have been slow to do so. Needs Customers need a strong foundation of timely and accurate energy information that is delivered in an easy-to-understand and -use manner. The last 10 years have seen many changes in the energy billing and information industry, as well as a major shift in the way companies are addressing their need to acquire, store, and access energy consumption and expense information. Utility costs are typically among the top four expenditures for a multisite customer; energy managers must reduce those costs. To accomplish this, they must know how much energy they use, when they use it, and how they use it. They also need to reduce utility bill late fees. Utility companies are shortening their bill payment times, which means customers must learn to manage the on-time payment of bills nationwide, as well as the collection of pertinent energy data such as usage, demand, account numbers, rate classes, and meter numbers. They are also challenged with increased billing errors due to erroneous meter reads or estimated bills. Many third party billing companies offer all or partial services to assist customers in meeting these needs. For a variety of reasons, some regulated utility companies are unable to answer the billing inquiry needs of multisite customers. For example, if a customer wants a rate review on all its accounts within a utility company territory, many times the customer has to provide all the account numbers and site addresses to the utility. These customers wind up asking why a utility company can't look up customer accounts by customer name. It is difficult and time- consuming for each customer to have to provide this basic information. Simple Premise So what's the problem? How difficult can it be for the average company to gather and maintain actionable energy information? On the face of it, the solution for a customer doesn't seem to require rocket science, but there are times when it feels that way, say some customers. Think of a brand-name place to shop or eat. The store or restaurant probably has a host of characteristics that affect energy use: * locations in multiple states; * corporate and regional offices; * retail locations, warehouses, and training centers; * property ownership or lease; * electricity, natural gas, and propane usage; and * different energy service packages according to kind of building, equipment, and their age and location. * Now let's add the utility companies' profiles to the equation. Some utility companies provide only single fuel. Some provide multiple fuels. Some municipalities bill for energy and nonenergy- related services on the same invoice. Different types of locations may be on different tariffs. The energy bill may represent usage from a single meter, and each meter may be on a different tariff. Each bill may contain multiple detailed components. Some utility companies offer summary billing, and some offer electronic transfer options such as electronic data interchange (EDI) or its brother, extensible markup language. Let's add deregulation and free-market issues to the mix. Retail deregulation is being implemented at the state level with interpretations and latitudes allowed within each host utility company. The telephone bills we receive today are similar to our electric bills in that they are much more complicated than before the break-up of the AT&T network in the early 1980s. The invoices that are being "unbundled" to allow for various market options have an impact specifically on the payables processes. The rapid pace at which changes are implemented further complicates this issue. In today's accounts payable environment, each utility company has a unique invoice and line item format. Identifying and validating correct invoices now requires a strong knowledge of the electricity industry and an understanding of the particular market which the invoice represents. There are other variables: Multiple energy entities may service one location (local utility company and energy supplier) requiring reconciliation of usage and other line items, or receive single or multiple bills per location; and multiple energy prices may cover a single utility company's billing cycle. And Each Customer Is Unique On the customer side, several variables further complicate things. A multisite customer may use the information for different functions: * forecasting and budgeting; * procurement and tariff analysis; * operations; * architecture and design; * capital equipment replacement and remodeling; and * safety, security, and auditing. The energy usage and cost information for a multisite company comes from hundreds of providers with different billing systems, controlled by various government agencies, sent at different times, containing different information, and needed by different parts of their organization. Add in other items such as special one-time charges, regulatory billing reguirements, and true billing errors, and you can see the magnitude of the problem. A third-party billing or information supplier makes it possible to gain the consistent data that the utility has been unable to provide. Once the information has been entered into their systems, information can be accessed and data viewed across all locations. And this is why the third-party billing industry continues to grow at a rapid pace as many customers move toward outsourcing their energy information and payables. A Popular Approach The energy manager is typically responsible for millions of dollars in energy spending. His bottom-line goal is to reduce his company's energy cost and usage while providing visibility of energy trends relative to their organizations. Accurate energy information is critical to his success regarding price risk management and realized savings. In many cases, the need for energy information at the touch of a keystroke is available with ease by enlisting the expertise of an outsourced third party. Meeting the informational needs of different departments and management levels usually requires slicing and dicing the data in a multitude of ways. The financial department may want to see budgeting and forecasting information by general ledger account using their fiscal calendar. A supplier may want to see usage by calendar month to purchase blocks of energy. The architectural department may want to compare usage by building types and geographic region to determine the efficiency of the building design. Most other aspects of a multisite customer's business can be sliced and diced with much greater ease than energy, and the customer is used to tracking and ordering inventory, data-mining payroll, and so on. Why not energy? The data depositories and reporting tools found in most third- party billing systems can make this process easier. Some third- party systems provide lower-level information-such as metering data- that can be used for more detailed analysis. Most third party systems offer standard or "canned" reports that provide usage and cost information. Online copies of the actual bills are also available, making auditing of the process very easy. Additionally, report writers, query tools, and data downloads are available for the client's use. Most systems provide these capabilities through webbased services, providing access from almost any computer. Getting the utility bills paid and collecting data is the first step toward a customer achieving its energy goals. In order to take advantage of this valuable data, it is important either to allocate a resource internally to evaluate it or outsource the function. The data has little value if you don't analyze it. In addition, when someone is regularly looking at and using the d\ata, he has a better chance of uncovering billing or data anomalies such as data entry errors, omission of pertinent data, and other errors that are can occur with a manual data entry system. Partner, Then System Unfortunately, no available system can do it all. The selection of the right third-party billing and information system requires that the customer perform proper due diligence. The most critical step is the needs assessment. The customer must determine and clearly identify needs and expectations of a system, including sustainability. System capabilities from various suppliers have a tendency to leapfrog each other-for example, the release of a new version of software that has a capability not found in a competitor's system. The next release of the competitor's system usually addresses that need and adds some new capability. That's why selecting the right partner is as important as selecting the right system. Even with the right energy information system the customer may still need to choose multiple information partners to meet all requirements, such as the "slicing and dicing" of the data for interpretation, action, and implementation. Customers need to figure out their options. Different payables processing models exist in the third-party market. There are companies that * process and pay the energy bills; * process the bills while the end-user pays them; and * enter data for reporting and analysis purposes only, letting the customer pay the bills. Some systems provide for an interface with the customer's accounts payable/ general ledger system. Many third party energy- billing companies realize that their core competency is in the processing and information of utility type services. Many offer the same basic services for water, trash, and telephone. This provides the customer with a consistent processing and information base across their utility-based services. Customers must decide whether it's better to keep it in-house. Many customers continue to keep the billing process internal. Systems range from a customer designing its own utility databases to reviewing hard copy utility bills from a file drawer. Whether a customer uses a third-party provider or receives information directly from a utility company, changes in information and technology need to be actively monitored and managed. Changes to billing information and formats occur continuously and every change, even apparently simple ones, should be reviewed. For example, EDI invoices may not have the same information as its paper bill counterparts. In some cases, key information is missing. While critical information is provided for you to pay the bill, other information is omitted that is required for other energy activities such as commodity procurement. Information Interpreters The need for national, multisite customers to acquire high- quality, actionable data is crucial to managing utility costs. But what can seem so simple very quickly can become complex when you consider the variables involved. Gaining advantage from information requires a focused and systematic effort. Data consistency, integrity, and ease of acquisition are the key items energy consumers should search for when they analyze, interpret, and distribute their data. Those who manage, interpret, and act upon utility data will be the winners in protecting their corporation's profitability and margins. Identifying and validating correct invoices now requires a strong knowledge of the electricity industry and an understanding of the particular market which the invoice represents. In many cases, the need for energy information at the touch of a key-stroke is available with ease by enlisting the expertise of an outsourced third party. Determine and clearly identify your needs and expectations of a system, including sustainability. Gina Coleman, principal and chief operating officer and Howard Spellman, vice president of business development at Coleman Mines, work with customers and their third party billing vendors as a regular course of business in areas of utilities management and commodity procurement. Copyright Edison Electric Institute Sep/Oct 2003