Are 100 percent of your utility customer bills correct?

During my presentations on billing, accounting, customer service, and other topics, I will frequently poll the group to see how many of them believe they are billing 100 percent of their customers correctly, 100 percent of the time. If you are in the very limited minority who could proudly and truthfully raise your hand, well done. On the other hand, let’s just say that the very limited number of raised hands tells me that we have a real opportunity to do better. However, before moving forward with improvement measures, utilities may want to consider the following:

  • How much time should be dedicated to perfecting billing and what is the estimated cost (factor in staff hours and delays or cancellation of other activities)?
  • What are the expectations of your customers and how does your governing board feel about the accuracy of your billings? When billing errors are detected, what is the “cost” of lower customer and governing board confidence in your utility?
  • Are there limitations on retroactive billing corrections when a customer has been under-billed for an extended period of time?

Where to begin

When embarking on improvement efforts, one strategy to consider is a walk-through of the entire process, from meter to cash register, to help identify what the typical risks of billing errors are in each segment and the control you have over those risks. When Baker Tilly conducts annual financial audits, we request billing, accounting, and collection process documentation, as well as input on risks you have identified. These records are an excellent starting point for systems analysis.

Creating a taskforce

Convening a series of face-to-face discussions with key members of your utility is important for addressing issues and brainstorming about effective solutions and ideas. Below are key points and guiding questions that your taskforce may want to address:

Metering. The start of accurate billing is ensuring that the right meters are providing the right information.

  • Are meters accurate, properly sized for customers’ usage, tested regularly, using appropriate multipliers, etc.?
  • Are all customers metered and billed, and is there a systematic and well-documented process for adding new customers?
  • Is there a system in place to check for unusual usage levels and theft of services? Do you periodically review customers who fall outside of a reasonable usage range, even though it may be typical for them to do so?
  • Are large and complex customers with multiple metering sites/buildings/additions carefully analyzed and is the billing system handling these unique situations accurately and efficiently?

Meter reading and billing. Metering and meter reading processes and technologies are continually evolving. Conversion to a new system often helps utilities identify inconsistencies in data and serves as an opportunity to pinpoint which system contains the proper information.

  • What is your process for establishing new accounts in your billing system? How do you verify that customer classifications are correct, especially when you have different rates for each class?
  • How do you monitor usage to identify customers that have changed consumption at a level warranting classification to a new rate class (e.g., electric small power to large power)?
  • Do you fully understand the intricacies of your various rate schedules? Many utilities are implementing increasingly complex rate schedules that factor in multiple times of use periods, seasonal and conservation rates, and other structures. Billing systems should be tested extensively when implementing changes to rate schedules.
  • When implementing new rates, how do you ensure that special rates (e.g., unmetered yard lighting, private fire protection, second meter charges, etc.) are updated?
  • Have you established a process for systematically checking a sample of customer billings, being careful to include both large and small, and simple and complex customers in the sample? For a fresh perspective, have someone other than the billing staff perform this review.
  • Where have you detected billing errors in the past? Talk to other utilities similar to yours to see what problems they face and what they are doing to improve their overall accuracy.

Cash collections. Most utilities have done a good job of establishing systems for properly handling customer payments. Nonetheless, failures in this segment continue to occur, and when it happens, it is never a pleasant situation. Additionally, as payment alternatives multiply (e.g., credit cards, automatic clearing houses, gift cards, etc.), evaluation of risks and control changes are necessary.

The massive volume of utility billing transactions and all the intricacies of metering systems and rate schedules, paired with human nature make it a safe bet that at least some utilities will have occasional billing errors. Despite the odds, the ability to say that you believe your system is 100 percent correct, 100 percent of the time is a worthy goal.

For more information on this topic, or to learn how Baker Tilly energy and utility specialists can help, contact our team.