2017 Utility Fee Survey Results – Part II

For the past few months, I’ve been conducting the 2017 Utility Fee Survey. This is an update to the original Utility Fee Survey in 2012 and the 2015 Utility Fee Survey. The survey was designed to research what fees utilities charge, how much they charge for each fee, and to see what changes have taken place in the last two years.

This is the second of three consecutive Utility Information Pipelines reporting the results of the 2017 Utility Fee Survey. 118 utilities, representing 19 states, ranging in size from 88 to 75,000 active accounts participated in the survey.

The Utility Fee Survey has become a biennial survey, alternating years with the Utility Staffing Survey.

As was the case in each of the previous surveys, the results include too much information for a single issue. If you’re interested, here are the results from the 2012 and 2015 Utility Fee Surveys:

 

2012 Utility Fee Survey Results – Part I

2012 Utility Fee Survey Results – Part II

2012 Utility Fee Survey Results – Part III

 

2015 Utility Fee Survey Results – Part I

2015 Utility Fee Survey Results – Part II

2015 Utility Fee Survey Results – Part III

 

The last 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. The next issue will be the third and final survey results issue and will recap all remaining fees.

Late fees

Of the 118 participating utilities, 115 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):

Compared to the 2015 Utility Fee Survey, utilities charging a percentage is up 2.4% (60.1% vs. 57.7%), while those charging a flat amount is down 6.6% (26.1% vs. 32.7%).

Utilities that assess the late fee as a percentage charge from 1% to 20%, with 10% again being by far the most popular, as this graph depicts:

Late fees range from $5.00 to $50.00 for utilities that charge a flat amount. (The utility that charges $50.00 does so in lieu of charging a reconnect fee.) This graph illustrates the late fee flat amounts:
 

Ten 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:

While not technically dealing with fees, this year’s survey asked how, other than the utility bill, each utility notifies customers that a late fee or penalty has been applied. Here are the responses to that question (the total of all responses is greater than the number of participating utilities because some utilities use multiple methods of contact):

Cut-off fees

Three of the 118 utilities do not cut off for non-payment. All of the 115 that do cut off for non-payment charge a cut-off or reconnect fee as a flat amount. Two of the responding utilities charge an escalating cut-off fee whereby the more times a customer is on the cut-off list, the higher the fee becomes. In those cases, the amount shown in the graph is for first offenders. Additionally, four of the utilities charge a separate disconnect fee and reconnect fee. In those cases, the graph represents the combined total of both fees. Finally, three utilities charge a cut-off fee per service. In those cases, the graph assumes all services are being disconnected.

Cut-off or reconnect fees charged by the 115 utilities range from $15.00 to $150.00 as shown below:

Of the 115 utilities that cut off for non-payment, 85 of them (representing 73.9%) assess the cut-off fee as soon as the cut-off list leaves the office. This percentage of utilities charging the cut-off fee immediately is up 2% from the 2015 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:

For the number of responses, including the 17 terms included in the “other” category, please click here.

As you can see, again this year, 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 “non-payment fee” or “service 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.

As with late fees, the survey also asked how, other than the utility bill, customers are notified that they are about to be cut off for non-payment. The responses are shown below (again, the total of all responses is greater than the number of participating utilities because some utilities use multiple methods of contact):

This year’s survey also asked how utilities notify customers after they have been disconnected for non-payment. The responses are shown below (again, a few of the participating utilities employ multiple methods of contact):

After hours reconnect fees

Of the 115 utilities that cut off for non-payment, 49 of them (representing 42.6%) will reconnect after hours and charge a fee for this service. This is down from 51.5% of responding utilities in the 2015 Utility Fee Survey. 39 of the 49 utilities (or 79.6%) will reconnect anytime after regular office hours. The remaining 10 utilities will only reconnect during selected time periods as shown below:

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

Next issue

Part III – August 15, 2015

The final survey results issue showcases 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.

NRWA WaterPro Conference

Will you be attending the National Rural Water Association WaterPro Conference in Reno? If you will, or know someone who will be, please make plans to attend my presentation Improving Revenue Collections for Utilities at 4:00 pm on Monday, September 18.

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© 2017 Gary Sanders

3 ways to assist customers who can’t pay on time

Unless your utility is an anomaly, each month you have customers who, for a variety of reasons, can’t pay their bill on time.

But, before we get to that, here are the results of last issue’s poll regarding a loose coin policy:

accepting-coins

Payment Plans

The usual scenarios for customers having difficulty paying their bill range from wanting to extend their due date a few additional days to requesting a payment plan for repaying a very large bill over time.

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Let’s look at the three most common forms of payment plans utilities offer customers for additional time to pay their bills.

Extensions

Extensions are generally used to give customers a few additional days to pay after the due date. Some utilities will defer the late fee when granting an extension, but most use extensions to delay the cut-off process. Some utilities will still assess the cut-off fee (or whatever you call it), but not terminate service, while others will waive the fee provided the extension is paid on time.

Most utilities limit the number of extensions a customer may have in a given period of time (for example two in any year) and some will only grant extensions to customers with a good payment history. The results of the 2012 Utility Fee Survey revealed one utility charges a $5.00 payment extension fee.

Installment Service

Installment services allow you to divide a large outstanding balance into manageable amounts which are billed each month as part of the utility bill. This requires temporarily adjusting the outstanding balance off the account. As each monthly installment is billed, the outstanding balance is gradually added back to the account until it is fully repaid.

With an installment service, the account still qualifies for the cut-off list if the total bill, including regular monthly charges and the installment amount, is not paid on time.

If your billing software supports installment services, the service will be automatically deactivated once the final monthly installment is billed. Should the customer close the account prior to all of the installments being billed, the outstanding balance will be added to their final bill.

Payment Arrangements

Payment arrangements differ from installment services in that they are used when a customer wants to make multiple, prescheduled payments between billings rather than a single payment due with each bill.

Payment arrangements are a little more work to manage than installment services, but they provide your customers with more flexibility. If your billing software supports payment arrangements, it should allow you to schedule each promised payment date and amount. If your customer misses a scheduled payment, the software should detect this and notify you so you can take whatever action your policy dictates.

Are you offering payment plans?

If your utility doesn’t offer payment plans, or if the way you administer them seems awkward and time consuming, 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 improve your operation.

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© 2016 Gary Sanders

Reader Spotlight – City of Graham

This is the first in what I hope becomes a regular feature of the Utility Information Pipeline that I’m calling “Reader Spotlights”. In each Reader Spotlight issue I will highlight an initiative undertaken by a reader of the Utility Information Pipeline.

Effective July 1 of last year, at the start of the current fiscal year, the City of Graham North Carolina changed the way they assess late fees and the amount they charge as a cut-off fee for non-payment. They also implemented, for the first time, a fee for initiating service.

Frankie Maness, Graham City Manager, said “Delinquent accounts have been a longstanding problem for the City and we have debated many times on methods to mitigate the costs. During this past budget season I ran across a Utility Information Pipeline from 2012 that indicated our fees, when compared to our peers, were way overdue for an update. With Gary’s assistance, we have now implemented changes and the results are starting to show increased revenue and a reduced burden from these accounts. At the same time, we implemented a Service Initiation Fee which has also generated additional revenue.”

With Gary’s assistance, we have now implemented changes and the results are starting to show increased revenue and a reduced burden from these accounts.

If you’re interested, here’s a link to the 2015 Utility Fee Survey results issue with more current data than the issue Frankie referenced above.

Let’s take a look at the changes they implemented…

Change in how late fees are calculated

Prior to July 1, Graham charged a flat $5.00 late fee to all customers, regardless of the amount of the past due bill. Effective July 1, they implemented a hybrid late fee of 2% of the outstanding balance with a minimum of $5.00.

For the period of July through December, this minor change in the way late fees are calculated impacted only 2.85% of the customers who were charged a late fee. However, it resulted in a 16.97% increase in revenue from those customers!

Here is a graph of the late fee amounts over the $5.00 minimum that were charged (clicking on the any of the graphics will open a larger image in a new window):

Graham Late Fees in Excess of Minimum

As you can see, nearly half of the customers who were impacted still paid $10.00 or less in late fees. However, the top 15 customers accounted for nearly $3,000.00 in increased revenue. In fact, in spite of the increased late fees, one account in the top 15 was still late every month! Your utility doesn’t have any customers like this, does it?

A month-by-month comparison of the same period from the previous year shows the number of accounts charged a late fee didn’t change appreciably:

Graham Number of Accounts Charged Late Fee

In fact, over the same period, 95 more customers were charged a late fee in 2015 than 2014.

Increased cut-off fees

At the same time, Graham increased their cut-off fee (they wisely call it a Nonpayment Fee) from $15.00 to $40.00. This higher fee resulted in 24.33% fewer customers on the cut-off list generating 101.79% more revenue! The details are shown below:

Graham Cut-Off Fee Comparison

Unlike the change in late payment penalty, this increase in the nonpayment fee did have a significant impact on the number of customers on the cut-off list, as compared to the same period the year before:

Graham Number of Accounts Cut-Off

Interestingly, the increased cut-off fee reduced the number of accounts on the cut-off list from 3.20% to 2.42% of Graham’s customer base. This moved them from the “room for improvement” to “normal range” on my acceptable range scale for accounts on the cut-off list.

New service initiation fee

The third initiative in the FY 2015-2016 budget for the City of Graham was the establishment of a Service Initiation Fee. This is an administrative fee charged to each new customer applying for utility service and is designed to recoup the cost of initiating service.

For the period of July through December 2015, this new fee generated $3,720.00 in additional revenue.

How up-to-date are your fees?

If, like the City of Graham, you think your fees may be outdated or in need of review, 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.

A special offer

To celebrate the inaugural Reader Spotlight issue, 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.

Would you like to be featured in a Reader Spotlight?

Has your utility adopted new policies or streamlined procedures as a result of something I’ve written here or presented at a speaking engagement?

If so, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com to discuss including your initiative in a future Utility Information Pipeline.

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© 2016 Gary Sanders

Do you honor postmarks for late payments…?

Quite the surprise to me, two different utilities I visited in the past month both honor payments postmarked by the due date as on-time payments, even if the payment isn’t received in the utility office until days after the due date.

Lots of additional work

In a time when most utility offices are trying to find ways to be more efficient (think automated meter reading , outsource bill printing, and online bill pay), honoring postmarks increases your workload twofold:

  • The person opening the mail must examine the postmark of every mail payment received after the penalty is applied.
  • For any payments that were postmarked before the due date, an adjustment must be entered to remove the penalty from the affected account.

In what for many utilities may simply be a case of the TTWWADI syndrome, honoring postmarks continues because no one has questioned the practice.

Are you legally required to do it?

From my research, the best I can tell, this is modeled after the way taxes are collected. Statutorily, some taxing entities (does April 15 come to mind?) are required to honor payments postmarked by the due date as being paid on time.

Do you think your customer’s credit card or mortgage companies check the postmarks of every payment they receive?

If you still aren’t convinced, please take a minute to Google “utility bill payments postmark” and see how many utilities do and do not honor postmarks.

If you aren’t legally required to honor postmarks and you still do, I encourage you to stop. If this is part of an ordinance or a rate tariff, take it up with the governing body or utility commission and revise your ordinance or tariff. If it is simply a policy, alert your customers and change your policy.

Do you have antiquated processes?

If you think the way you process payments (or do anything else in your office, for that matter) is outdated, 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

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