What are your repayment plan policies?

Once again, one of the listservs I subscribe to provided the subject matter for a newsletter. This time it was a town manager asking about policies allowing repayment plans.

Due Date

A previous Utility Information Pipeline described the distinctions between extensions, installment services, and payment arrangements. This issue will examine some of the requirements many utilities impose on customers requesting a repayment plan.

Limited number of repayment plans

Most utilities impose a limit on the number of repayment plans a customer may have within a given timeframe. For example, only allowing two extensions per calendar year or twelve month period.

The rationale for this is, under normal circumstances, your customers should be able to pay their bill by your established due date. Customers who habitually request additional time to pay are abusing the system.

No history of dishonored payment plans

For most utilities that offer repayment plans, failing to honor a previous payment plan automatically makes a customer ineligible for future payment plans. If your customer failed to live up to their agreement, why allow them to take advantage of you again?

Signed agreement

Perhaps the most important part is to require a signed agreement stating the repayment terms and consequences of failing to honor the agreement.

This signed agreement should include promised payment dates and amounts, along with any interest or finance charge to be assessed. As with any legal document, it’s always wise to consult with your attorney when drafting the document.

2017 Utility Fee Survey

The 2017 Utility Fee Survey is still open. If you haven’t already completed it, and would like to participate, please click here to complete the survey. It should take less than five minutes to complete. For an idea of what to expect from the survey, here are the results of the 2015 Utility Fee Survey:

If you have any questions, please feel free to e-mail me at gsanders@logicssolutions.com or call me at 919-232-2320.

I’m hoping for as much participation as possible in the survey, so please feel free to pass this on to your colleagues at other utilities.

Thank you in advance for your participation in the 2017 Utility Fee Survey.

North Carolina Rural Water Association presentation

If you or any of your co-workers or board members will be attending the North Carolina Rural Water Association Annual Conference, please be sure to attend my presentation on Improving Revenue Collections for Utilities this Thursday, May 18 at 8:30am.

If you or someone from your utility does attend, please be sure to introduce yourselves!

Need assistance?

If you’re considering offering payment plans or are unsure if your delinquent account policies are adequate, please give me a call at 919-232-2320, or email me at gsanders@logicssolutions.com for more information about how a business review could help you review your entire office operation.

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© 2017 Gary Sanders

Are you doing all you can to protect against fraud?

The last Utility Information Pipeline dealt with your Red Flags Rule policy and if it is up-to-date. Today, we’ll take a look at applying the Red Flags Rules at various phases of the account lifecycle.

The graphic below is from LexisNexis and identifies key areas in the life of a utility account where potential identity theft and fraud, two key areas addressed by the Red Flags Rule, can occur. If you’re not familiar with LexisNexis, many utilities use their services to research and validate social security numbers. Your utility may already use their services if you operate in a state with a debt set-off program and need to locate social security numbers for bad debt accounts.

For most utilities, the infographic below is primarily relevant for the Account Opening process, but can also apply to Account Management and Account Collections:

LexisNexis_Utility_AccountLifeCycle

Account opening

When a new customer applies for service, you should insure the applicant is who he or she claims to be. The two best ways to do this are to require photo ID and proof of residency (lease agreement or closing documents) for the address for which they are applying for service.

You should also perform a bad debt search using relevant identifying information (name, driver’s license number, social security number and date of birth) to see if the applicant is a previous customer with possible unpaid bills.

Finally, if you base your security deposit on the applicant’s credit rating, insuring the applicant is who they claim to be is vitally important.

Account management

Insuring the person you are talking with is indeed the account holder is important before divulging any financial information for an account. If the customer is in your office, their identity can easily be verified by comparing their face or current photo ID to the photo ID on file.

Customers on the phone aren’t as easily verified, so many utilities require the caller to provide either the last four numbers of their social security number or answer a security question.

If a customer who previously had no history of delinquencies suddenly appears on your cut-off list, do you have a policy in place to insure they have an adequate security deposit?

Account collections

The key to collecting final bills is to be diligent and have an aggressive program in place to follow up with unpaid final bills. Waiting until the end of your fiscal year, just before writing off bad debt accounts, is too late to follow up. You should actively pursue unpaid final bills after each billing.

Is it time to reexamine your processes?

If you aren’t doing all you can to protect against identity theft and fraud or to collect bad debt accounts, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com to learn how a business review could help you evaluate how to improve your effectiveness.

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© 2016 Gary Sanders

How do you handle bankruptcies?

What happens when one of your customers files for bankruptcy? Do you have a procedure in place to be sure you comply with the law? This issue takes a look at some best practices for dealing with bankruptcy accounts.

Automatic stay

When a customer files for bankruptcy, you will receive a Notice of Bankruptcy from the bankruptcy court. The Notice of Bankruptcy invokes an automatic stay, meaning you may not take any measures to collect any outstanding amounts owed by the customer. In fact, the Notice of Bankruptcy will state “If you attempt to collect a debt or take other action in violation of the Bankruptcy Code, you may be penalized.” or words to that effect.

Close the account and open a new one

The best way to handle the automatic stay is to immediately close the existing account and open a new one. Be sure not to send a final bill, as this would violate the automatic stay.

Any debts (in your case, any new utility bills) incurred after the bankruptcy filing are not subject to the bankruptcy protections. This means the new account can be billed, charged a late fee, or cut-off for non-payment just like any other account.

Flag the closed account to not be penalized

You will want take the necessary steps to insure no late notices are mailed or penalties are charged to the account in bankruptcy. Depending on how your billing system works, you may need to move the account to a different billing cycle or set flags so the account isn’t subject to delinquent notices or late fees.

Change the mailing address

This is a tip I picked up from a customer, and it’s a great idea. Change the mailing address for all bankruptcy accounts to be your office mailing address. That way, if you miss another step in the process and a late notice is mailed, it won’t be delivered to the customer. Likewise, if you use an automated, outbound IVR system for calling delinquent customers, changing the phone number to your office number may be a good idea as well.

Need assistance?

If you have questions about how you handle bankruptcy accounts or any other aspect of your office operation, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com to learn how a business review could help your utility.

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© 2015 Gary Sanders

2015 Utility Fee Survey Results – Part II

This is the second of three consecutive Utility Information Pipelines reporting the results of the 2015 Utility Fee Survey. 106 utilities, representing 19 states, ranging in size from 83 to 90,000 active accounts participated in the survey.

Last week’s issue summarized the demographics of the survey respondents as well as water and sewer tap and impact fees. Today’s issue deals with delinquent fees and policies. Next week the third and final survey results issue will recap all remaining fees.

If you’re interested, here are the results from the 2012 Utility Fee Survey:

2012 Utility Fee Survey Results – Part I

2012 Utility Fee Survey Results – Part II

2012 Utility Fee Survey Results – Part III

Late fees

Of the 106 participating utilities, 104 charge a late fee. As shown by this graph, charging a late fee as a percentage of the bill is the most popular method (clicking on the any of the graphics will open a larger image in a new window):

Type of Late Fee Charged

Surprisingly, compared to the 2012 Utility Fee Survey, utilities charging a percentage is down just over 10% (57.7% vs. 67.8%), while those charging a flat amount is up nearly 9% (32.7% vs. 24.1%).

Utilities that assess the late fee as a percentage charge from 1% to 10%, with 10% being by far the most popular, as this graph depicts:

Late Fees Percentage

Late fees range from $2.00 to $45.00 for utilities that charge a flat amount. (The utility that charges $45.00 does so in lieu of charging a reconnect fee.) This graph illustrates the late fee flat amounts:

Late Fees Flat Amount

Eight of the utilities charge a hybrid late fee – a combination of a percentage with a minimum amount. Here is a graph showing what they charge:

Late Fees Percentage with Minimum

Cut-off fees

Seven of the 106 utilities do not cut off for non-payment. All of the 99 that do cut off for non-payment charge a cut-off or reconnect fee as a flat amount, ranging from $10.00 to $150.00 as shown below:

Cut-Off Fee Amounts

Of the 99 utilities that cut off for non-payment, 71 of them (representing 71.9%) assess the cut-off fee as soon as the cut-off list leaves the office. I’m pleased to note that the percentage of utilities charging the cut-off fee immediately is up 10% from the 2012 Utility Fee Survey.

Cut-off fee terminology

As more utilities adopt this best practice of charging the cut-off fee as soon as the cut-off list leaves the office, many are finding that terms such as “cut-off fee”, “disconnect fee” or “reconnect fee” are becoming outdated. For that reason, the survey asked what each utility calls its cut-off fee. The results are displayed in the following chart:

Cut-off Fee Terminology

For the number of responses, including the 22 terms included in the “other” category, please click here.

As you can see, reconnect fee and cut-off fee are still the most popular terms, but many utilities have adopted terms that do not refer to cut-off or reconnection. Calling your cut-off fee “delinquent fee” or “non-payment fee” or any of the other terms that do not imply cut-off or reconnection helps to avoid the inevitable arguments with customers who must pay the fee but have not been cut off.

After hours reconnect fees

Of the 99 utilities that cut off for non-payment, 51 of them (representing 51.5%) will reconnect after hours and charge a fee for this service.  41 of the 51 utilities (or 82.4%) will reconnect anytime after regular office hours. The remaining 10 utilities will only reconnect during selected time periods as shown below:

After Hours Reconnect Times

After hours reconnect fee amounts range from $15.00 to $250.00 as shown by the following graph:

After Hours Reconnect Fees

Next week’s issue

Part III – August 18, 2015

Next week’s final survey results deal with any remaining fees, including application, returned check, meter reread, meter tampering and convenience fees.

A special offer

I’m offering a special offer to the first five Utility Information Pipeline readers who respond. If you are one of the first five to respond, I will conduct a personalized fee consultation for one-third off the regular price! That’s $1,000 rather than the usual $1,500 price for this service.

I will review your utility’s current fee schedule and conduct an in-depth phone assessment to learn more about your fees. You will receive a presentation quality document illustrating how your fees compare with other utilities. Also included will be my recommendations for revising any existing fees and suggestions of new fees you should consider charging.

If you are interested in this special offer, please contact me by calling 919-232-2320 or e-mailing me at gsanders@logicssolutions.com. Remember, the discounted special offer is only available to the first five people who respond.

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© 2015 Gary Sanders

How does your security deposit compare?

In one of the listservs I subscribe to, a question was recently asked about what other utilities’ deposit policies are, including deposit amounts. While I think inquiring about other utilities’ policies is worthwhile, comparing the amount of their deposit without knowing their rates and business practices can be futile.

How much is an adequate deposit?

A sufficient deposit should protect your utility against bad debt customers who leave and never pay their final bill. How much that is depends on your average utility bill and your business practices.

Worst case scenario

The worst case scenario for a security deposit is that customer who ends up on the cut-off list and skips out without paying. Your utility is owed the original bill which caused the customer to be on the cut-off list, the next bill (if one has been issued) and any usage since the most recent bill. To illustrate this, let’s look at a hypothetical situation…

Days of exposure

I’ve written before about days of exposure, the total number of days of service you would be owed for by the worst case scenario customer described above. For our hypothetical customer, let’s assume:

  • meters are read on the 10th of the month
  • bills are mailed the last day of the month
  • bills are due on the 25th of the month
  • bills are considered delinquent 5 days after the due date
  • a final notice is mailed 5 days after the delinquent date
  • cut-off occurs 5 days after the final notice is mailed

Here is how that looks in a timeline (clicking on the graphic will open a larger image in a new window):

Days of Exposure Timeline

This adds up to 90 days of exposure (admittedly, this is a bit extreme, but it’s only for illustration purposes):

Assuming you bill each customer monthly, 90 days of exposure equates to three months of bills. You would then have to multiply your average monthly utility bill times three to determine how much an adequate deposit is.

If your deposit is less than this, then you are at risk for write-offs from bad debt customers.

Need assistance?

If your deposit policy needs updating or if you would like to explore ways to reduce your days of exposure, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com to learn how a business review could help your utility.

Last call for the 2015 Utility Fee Survey

I will be concluding the 2015 Utility Fee Survey soon, so if you haven’t yet participated, please take a few minutes to do so. Please click here to complete the survey. It should take less than five minutes to complete.

If you have any questions, please feel free to e-mail me at gsanders@logicssolutions.com or call me at 919-232-2320.

I’m looking for as much participation as possible in the survey, so please feel free to pass this on to your colleagues at other utilities.

Thank you in advance for your participation in the Utility Fee Survey.

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

© 2015 Gary Sanders

No surprises here…

As the result of a listserv question, the previous Utility Information Pipeline included a poll asking how utilities notify customers after they have been cut off for non-payment.

Poll results

The poll results overwhelmingly confirmed my observation that most utilities do one of two things to let a customer know they have been cut off – leave a door hangar or do nothing at all. If you missed it, you can still participate in the poll by clicking here.

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

Contact by phone or e-mail

Three responses indicated they contact customers by phone or e-mail. (Although, based on one of the comments, I suspect one of the phone call responses misunderstood the poll and indicated how they contact customers before being cut off).

I was initially surprised that some utilities take the time to phone or e-mail accounts that have been disconnected for non-payment. After discussing this with a customer, I realized some utilities have good reason to do so. Utilities that serve customers who aren’t year round residents (for example, beach communities) might want to let non-resident customers know their service has been terminated.

Another year is almost behind us

This issue marks the fourth anniversary of the Utility Information Pipeline. Subscribers continue to increase, by over 10% this year.

If you have co-workers or colleagues from other utilities who you feel would benefit from reading this newsletter, please take a minute and forward this to them.

This year also marked a milestone with the 100th issue!

If you haven’t checked out my blog recently, I encourage you to do so. Each Utility Information Pipeline newsletter article is also posted to my blog as an archive. So if you can’t find an old newsletter e-mail that you wish you still had, try searching for it on my blog.

April of this year was the busiest month ever for my blog with 894 page views and November 26 was the most active day ever with 235 hits.

Most popular blog posts

For the third year in a row, convenience fees was the most popular blog post topic. Here are the five most popular blog posts in terms of page views for the past year:

  1. Can we charge a convenience fee for credit card payments…?
  2. How much is your late fee?
  3. Do you have a cash handling policy?
  4. Are you following these meter reading best practices?
  5. Who trains your new hires…?

Ideas, anyone…?

After four years, topics to write about aren’t as easy to come up with as they were when I first started! If you have an idea or suggestion of a topic that you would like to learn more about, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com.

Happy New Year!

I wish you and yours all the best for a happy, healthy, and prosperous 2015!

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© 2014 Gary Sanders