Leak adjustments poll results

As the result of several listserv questions, the previous Utility Information Pipeline included a poll asking which services utilities offer leak adjustments for.

If you missed it, you can still participate in the poll by clicking here.

Poll results

Overwhelmingly, the poll results indicate that most of the utilities who responded offer leak adjustments for both water and sewer.

Here are the results of the poll (clicking on the chart will open a larger image in a new window):

Leak adjustments poll results

Water only

Initially, the eight responses of water only seemed surprising. However, when I looked into who clicked on the poll link in the last newsletter (I can see who clicked the link, but I can’t tell what their response was to the poll, or if they even took the poll), several of those people work for water only utilities. So I have a strong suspicion that most, if not all, of the water only responses don’t mean they offer water, but not sewer, leak adjustments – rather they don’t provide sewer, therefore they offer leak adjustments for water only.

Sewer only

I was rather surprised that only three (less than 10 percent) of the responses only offer sewer adjustments. I honestly expected this number to be much larger.

As discussed in the previous newsletter, water leak adjustments directly impact the utility’s bottom line, whereas sewer adjustments for leaks that do not enter the sewer system do not. For this reason I anticipated more sewer only responses.

No leak adjustments

The three responses here was not a surprise. Some utilities take the hard line approach that all water that passes through the meter is the customer’s responsibility, regardless if there was a leak or not.

Comments

Three people who participated in the poll left comments describing their leak adjustment policies. If you are interested in seeing these comments, please click here.

Follow-up poll

My curiosity was piqued with so many utilities offering water leak adjustments, so I’ve created another poll to see if the credit is calculated at full retail price or some lesser rate, such as wholesale cost.

If you offer water leak adjustments, please take this quick poll.


 

Are you considering adopting or updating your leak adjustment policy?

Are you considering adopting a leak adjustment policy or updating an existing one? If you have questions about leak adjustment policies, or any other policies, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com to learn how a business review could benefit your utility.

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© 2015 Gary Sanders

What is your leak adjustment policy?

Several questions have been posed in the last few months on listservs I subscribe to regarding leak adjustments. Does your utility have a leak adjustment policy? Here are some things to consider when establishing or reviewing a leak adjustment policy.

Water leak adjustments

The biggest question with a leak adjustment policy is whether to offer an adjustment for the excess water usage.

Since all water delivered through the meter costs the utility something, either in treatment costs or purchase price, simply forgiving the amount of a water leak isn’t financially feasible.

Some utilities do have adjustment policies whereby the customer only pays the wholesale price for the excess water used. Others take a more hard line approach and do not offer any leak adjustment for water.

Sewer leak adjustments

Most utilities will provide a leak adjustment if the water was lost due to a leak that did not enter the sewer system (for example, a leak in the supply line between the meter and the house).

Leaks that did enter the sewer system, such as a continually running toilet, pose the same issue as water leaks. The utility had to pay to treat the wastewater, so can they afford to offer an adjustment?

Considerations for a Leak Adjustment Policy

If you’re considering adopting a leak adjustment policy or thinking about revising an existing policy, here are some criteria commonly found in leak adjustment policies:

  • The customer must make a formal request (usually using a leak request form)
  • Proof that the leak was repaired (copy of plumber’s repair bill or a sales receipt from a plumbing supply store)
  • Excess amount of water usage to qualify for a leak adjustment (for example, the water usage must exceed twice the monthly average)
  • Limitation on the frequency of leak adjustments (for example, one adjustment in any 12 month period)
  • Maximum number of billing periods that may be adjusted due to the leak (for example, if the customer ignores the leak for three months, will you give credit for all three months?)
  • Calculation method for determining the amount of the adjustment

Quick poll

What services do you offer leak adjustments for? Please take this quick poll.

Are you considering adopting a leak adjustment policy?

Are you considering adopting a leak adjustment policy or updating an existing one? If you have questions about leak adjustment policies, or any other policies, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com to learn how a business review could benefit your utility.

Click here to subscribe to my free e-mail newsletter...

© 2015 Gary Sanders

How is your general ledger reconciliation going…?

Some utilities wait for their annual audit to be complete and then adjust their accounts receivable based on the auditor’s adjusting entries. Their general ledger accounts receivable balances then remain static for the next twelve months until they repeat the process.

Does this describe your utility? Or have you tried and not succeeded at reconciling with the general ledger? In either case, this issue should prove helpful as we examine how to reconcile with the general ledger.

Does your billing software interface with your general ledger?

If the answer to this first question is “No”, it might be time for you to consider new billing software. In today’s market, any reputable billing software should be capable of interfacing to a general ledger system, regardless of whether the general ledger software is from the same vendor or a third party system.

How often are you updating the general ledger?

Assuming that your billing system does interface with your general ledger, are you updating the general ledger daily? If not, then you are not taking full advantage of the general ledger interface and you can’t rely on your account balances to be correct. Cash and accounts receivable accounts will have incorrect balances if payments are not updated to the general ledger daily.

Does your general ledger include multiple utility receivable accounts?

Does your general ledger contain more than one utility accounts receivable account? For example, do you track water and sewer receivables to different accounts? Or do you bill for services that are accounted for in different funds, such as water and electric? If you do, does your billing software provide a report that details how much is outstanding by service, corresponding to each receivable account? If the answer to this last question is “No”, please refer back to the first section above.

Are you reconciling on a regular basis?

For those who aren’t accountants, how about a brief review of Accounting 101? A subsidiary ledger contains detailed transactions that aren’t posted directly to the general ledger. A control account is a summary level account in the general ledger that contains totals for transactions that are stored in a subsidiary ledger. The individual customer balances in your utility billing system represent the subsidiary ledger, while the corresponding accounts receivable account in the general ledger serves as the control account.

Are you reconciling the balances in the utility billing system with the corresponding accounts receivable account in the general ledger, at least monthly? If not, I encourage you to start doing so and make the reconciliation part of your regular month-end process.

If you’re not reconciling, are you wondering how to get started?

To start the process of reconciling with the general ledger, you need to pick a starting point. The first of a month is an ideal time to start. You will need to establish the beginning balance by running an outstanding accounts receivable report from your billing software. If your billing system has an aged trial balance, this is an excellent report to use. If you will be reconciling to multiple accounts receivable accounts, you will need to run the report from your billing software that gives the total owed by service.

Once you establish the beginning balance, you will need to adjust the receivable account(s) in the general ledger so that they agree with the subsidiary ledger(s). I know – you don’t want to adjust the accounts receivable in the general ledger, especially if it has to be reduced, but this is the only way that you will be able to reconcile.

Generally, receivables are affected by three types of utility billing transactions:

  • Billings and charges increase receivables
  • Payments decrease receivables
  • Adjustments increase or decrease receivables, depending on the type of adjustment

Each time you update billings, payments, adjustments or any other type of transaction in your billing system that impacts accounts receivable, be sure that the corresponding journal entries are updated in the general ledger.

After all transactions for the day are updated in your billing system and in the general ledger, run the appropriate reports from your billing system and compare the outstanding balances with the corresponding accounts receivable accounts in the general ledger. If the amounts are in agreement, everything with your general ledger interface is set up correctly and your work for today is done. If the amounts do not agree, you will need to research the amount that is out of balance and determine which source transactions equal that amount. You will need to correct the general ledger interface setup, enter an adjusting journal entry and start the process over again tomorrow.

As you are getting started, why go through this process every day?

I realize that it probably seems excessive to start out doing this process daily, but it should take no more than 10 or 15 minutes, depending on the number of accounts and speed of your software. By reconciling daily, you restrict the potential out of balance transactions to one day’s activity, making it easier to find the amount that the reconciliation is out of balance. Continue repeating this process daily until you feel confident that you have all of your general ledger interfaces defined correctly. Over the course of a month you should have processed every type of transaction.

Once you have reached this level of confidence, you can discontinue the daily process and make the reconciliation part of your month-end routine.

If you have any questions about general ledger interfaces or reconciling with the general ledger, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com.

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© 2011 Gary Sanders

Summer sewer adjustment policies

As the weather gets warmer and summertime approaches, many utilities face the annual dilemma of how to fairly deal with customers who fill pools or have irrigation systems. Clearly, the customer is responsible for any water used to fill pools or irrigate lawns and gardens. Sewer, on the other hand, is viewed differently by various utilities. In today’s issue, let’s take a look at some ways that utilities deal with this….

The hard-line approach

Some utilities take the position that their sewer rates are based on the water consumption and therefore make no allowance for sewer adjustments, either for leaks, filling pools or irrigation. This hard-line approach seems a little harsh to me.

The once a year adjustment policy

Other utilities will grant a sewer adjustment for the volume of water required to fill the customer’s pool once each year, based on the customer providing proper documentation of the pool’s size and volume. A policy such as this is a fair way to deal with filling pools, but does nothing to address irrigation usage.

Sewer cap based on non-summer average usage

A few utilities will cap their customer’s sewer usage based on the customer’s average non-summer water usage. For example, the maximum sewer usage for the months of May through August might be based on the average usage for the other eight months of the year. Some utilities with a policy like this offer the sewer cap to all customers, while other utilities offer it only to customers who specifically request a sewer cap. A policy such as this can actually work to the utility’s disadvantage if the customer’s household water usage increases over the summer.

Separate irrigation meters

Another approach to dealing with irrigation usage is to require the customer to install a separate irrigation meter. In this case, the customer is charged only for water that passes through the irrigation meter. However, all usage for the home water is subject to both water and sewer charges. The customer is responsible for any costs associated with installing the irrigation meter and pays two monthly minimum charges, but this is the most equitable way, for both the customer and the utility, to determine irrigation usage that is exempt from sewer.

If you have any questions about your dealing with summer sewer adjustments or would like assistance implementing a summer sewer cap, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com.

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© 2011 Gary Sanders