Why aren’t deposits included in the Utility Fee Survey?

The 2017 Utility Fee Survey is a tool for researching what fees different utilities charge and how much they charge for each fee. I was asked why the survey doesn’t include a question about security deposits.

Questioning

Beyond the obvious

Obviously a security deposit isn’t a fee because fees, by definition, are non-refundable and security deposits are refundable.

Rate increases are never popular, and the best alternative to increasing rates (which impacts all customers) is to charge equitable fees. Fees, such as an administrative fee for activating new customers or a disconnection fee for non-payment, are assessed only to those customers using the service covered by the fee.

Comparing what fees your utility charges, and how much you charge for each, to what other utilities charge is a useful exercise. Such comparisons provide a benchmark for determining if your utility is charging all available fees and if the amount of those fees is fair.

Security deposits, on the other hand, are a function of each utility’s rates, business practices, and customer usage patterns. I’ve written previously about why comparing your security deposit to other utilities is pointless. A better exercise would be to review your own business practices to find ways to reduce your days of exposure.

Complete the 2017 Utility Fee Survey

If you haven’t already completed the 2017 Utility Fee Survey, and would like to, 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 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 at 8:30 am on Thursday, May 18.

Part of this presentation includes an exercise for calculating how much your security deposit should be, based on your days of exposure.

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

Aging workforce seminar

A major issue facing management of all utilities, large and small, is an aging workforce. As more key employees approach retirement age, utilities across the country are having to face the issue of replacing the loss of institutional and operational knowledge these long-time workers hold.

Does your utility have a plan in place to deal with the aging workforce?

Upcoming seminar

The Utility Management Committee of the NC AWWA-WEA, of which I am a member, is sponsoring an Aging Workforce Issues – Best Practices Panel & Luncheon seminar. This seminar, originally scheduled for last October, has been rescheduled to Thursday, May 4 from 11:30 am to 1:30 pm.

If you are located within driving distance of the University of North Carolina at Chapel Hill, I encourage you to join us. If not, you can still participate in a live webcast of the seminar.

The seminar moderator is J.D. Solomon, PE, CRE, CMRP; Vice President of CH2M. The panelists are:

  • Rod Dones, Organizational Development & Learning Specialist, Charlotte Water
  • Tamara Byers, Human Resources Manager, Charlotte Water
  • Ed Kerwin, PE, Executive Director, Orange Water & Sewer Authority
  • Matt Bernhardt, Director of Public Works and Utilities, City of Gastonia
  • Courtney Driver, PE, Utilities Director, City of Winston-Salem

For more information, or to register for the seminar, please click here.

Need assistance?

If, after completing the 2017 Utility Fee Survey, you’re wondering if your fee schedule is up-to-date, or if you need to find ways to reduce your days of exposure, 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 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

Surprising poll results

If you read the last Utility Information Pipeline, you know it included a poll asking how many days after cut-off you wait before closing accounts that haven’t paid. Based on the results of that poll, it was clear the choices way underestimated how long most utilities waited. As a result, I sent an e-mail last week with a revised poll that increased the maximum choice from 10 days or more to 21 days or more.

Revised poll results

Thank you to those of you who participated in the revised poll. The new poll had more than twice as many responses as the first version. If you missed it, you can still participate in the poll by clicking here.

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

Still surprised

I’m very surprised that two-thirds of the responses wait three weeks (or more) to finalize an account that is off for non-payment and hasn’t paid. Understandably, some utilities have policies where there always has to be an active account receiving a bill – even if the property is vacant. For these utilities, and those where only property owners are billed, accounts are never closed until the property is sold.

Why wait?

For utilities without such a policy or that bill tenants, why wait so long? By final billing the account, you are able to apply the customer’s deposit and offset any potential bad debt. The sooner you do so, the sooner the customer’s deposit becomes an asset for you, rather than a liability. If you represent one of the utilities responding with 21 days or more, I would be interested in hearing why you wait that long. Have you seen cases where customers show up more than three weeks after being cut off and finally pay? Or is this just something that isn’t a priority? Please feel free to send me an e-mail or comment on this post to explain why you don’t close cut-off accounts sooner.

Is it time to review your cut-off policy?

Has it been a while since you’ve reviewed your cut-off policy? Please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com to learn more about how a business review could assist with reviewing your policies and procedures.

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© 2014 Gary Sanders

How long before you close a cut-off account?

Recently, I was surprised to learn of a customer with accounts that had been cut off for non-payment who were still off for non-payment when the cut-off list for the following month was being prepared.

How long do you wait before closing cut-off accounts?

Have they skipped out?

Experience shows that customers who don’t pay (or try to make arrangements) within the first day or two of being cut-off generally aren’t going to pay and probably are no longer living there. If your customer has skipped out on you, why wait to close the account and apply their deposit?

Waiting a few days to close the account, in case your customer is out of town, makes sense. But certainly a month is much too long to wait.

Code violations

In some localities, a residence without running water is considered uninhabitable and poses a building code violation. If this is the case in your jurisdiction, be sure you follow all local ordinances concerning cut-offs and reporting requirements if it appears someone is still living there after being cut off.

Charge a higher deposit

If they do come back to have their service restored after you’ve closed their account, be sure to charge an adequate security deposit. If you have a variable deposit policy, based on the customer’s credit, they should pay your maximum deposit after being cut off for non-payment.

Quick poll

How many days after cut-off do you wait before closing accounts that haven’t paid? Take this quick poll and see how your utility compares to others.

Is it time to review your cut-off policy?

Has it been a while since you’ve reviewed your cut-off policy? Please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com to learn more about how a business review could assist with reviewing your policies and procedures.

Click here to subscribe to my free, bi-weekly e-mail newsletter...

© 2014 Gary Sanders

Did you catch this in the news?

If you’re not from North Carolina, chances are you may have missed this story in the news last week…

TV investigative report

A recent news segment by a Raleigh television station’s investigative reporter cast a negative light on our local investor owned electric utility.

It seems the electric utility surprised some of their customers with additional security deposits on their monthly bill. Enough customers complained to the TV station to prompt an investigative report on their practices.

Early editions of the story claimed the electric utility periodically reviewed all customer deposits. This was later revised to say the utility only reviews deposits when one of three triggers takes place:

  • Two or more late payments
  • Cut-off notice for non-payment
  • Having a payment returned

However, the customer quoted in the story claims this was not the case.

Protect yourself

If you’ve been a reader of the Utility Information Pipeline for any length of time, you know I believe in maintaining adequate security deposits.

I’ve written in the past about requiring accounts on the cut-off list to pay an additional deposit if their deposit is less than your customer service policy would require of a new account.

What this electric utility requires goes even farther by including multiple late payments and returned payments.

Don’t go overboard

In spite of my strong opinions about maintaining sufficient security deposits, I do think routinely running credit checks for current customers without a triggering event is extreme.

The best indicator of how a customer is going to pay in the future is how they have paid in the past. If you have a good paying existing customer, just because their credit report indicates they missed a few payments to other creditors, this doesn’t mean they should be penalized by your utility.

Do you need to review your deposit policies?

Do you need to take a look at your security deposit policies? Please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com to learn more about how a business review could assist with reviewing your deposit policies and procedures.

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© 2014 Gary Sanders