Utility Information Pipeline #20 dealt with meter reading best practices (you can read it here if you missed it). So what if your utility can’t afford the move to automated meter reading and you’re trying to cut costs?
Every now and again I encounter a utility that is considering switching from reading monthly to reading one month and estimating the next month, or they want an easy way to transition from bimonthly billing to monthly billing. Usually the rationale for this is to reduce the expense associated with reading meters. But is it worth it…?
At first glance, this seems to make sense – you still get to bill monthly but only incur the costs associated with reading meters every other month. However, upon further investigation, there are reasons why this isn’t such a good idea.
Leaks go undetected longer
If you discontinue reading meters each month and opt for the read one month, estimate one month model, you run the risk of leaks going undetected for up to two months. Currently, if a customer has a leak that starts just after you read their meter; the leak will be detected by an unusually high reading the next month.
However, if that reading is estimated, the leak will continue for another full month before it is discovered. This leads to an exceptionally high bill for your customer – or an exceptionally large leak adjustment if you offer leak adjustments. But that’s another topic for another day.
Erratic usage patterns can cause extremely high and low bills
In addition to hoping that your customers don’t have leaks, the estimating every other month model requires that your customers have relatively stable usage patterns. If a customer’s usage suddenly increases early in the estimated month, the next bill based on an actual reading will be very high.
The reverse situation – when a customer’s usage suddenly tapers off, for example due to being gone for long periods of time – can be worse. Especially if the usage was so low that the estimated month’s reading was higher than the following month’s actual reading. Not only does this require giving your customer a refund, you also have to correct the errant estimated reading in your billing system.
Valid reasons to estimate readings
There are valid cases where mass estimating of readings is the only way to get your billing finished. Here in the south, an unexpected snowfall can make reading water meters nearly impossible. If you don’t have time to wait for the snow to melt, estimating the remaining readings may be the only way to get your bills out on time.
In the final analysis, if you are looking for ways to cut costs, there are better ways than estimating readings every other month. If you are looking for ways to reduce expenses, please give me a call at 919-232-2320 or e-mail me at email@example.com to learn more about how a business review could help your utility.
© 2011 Gary Sanders
The next issue will mark the completion of one full year of publishing the Utility Information Pipeline. In looking back on the past year, and realizing that the last issue for the year won’t arrive until after Christmas, I decided to send a special issue with some reflections and acknowledgements.
I want to take a moment to thank all of my readers who have taken the time to comment on my blog, send me an e-mail or give me a call about something they read in my newsletter. I am especially grateful to those subscribers who let me know that something I wrote provided them with new information or caused them to reevaluate how they are doing things. I also want to thank those readers of my newsletter who felt that the content was valuable enough to pass along to co-workers and colleagues and encourage them to subscribe as well.
I also want to thank two organizations that have publicized my blog and, in turn, given me more exposure.
The first of these is SmallWaterSupply.org. I found this site through their Twitter feed at @help4smallwater and sent an e-mail introducing myself to Steve Wilson, the director of SmallWaterSupply.org. Much to my surprise, they featured my blog in their next weekly e-mail newsletter (you can read it here). Their newsletter is filled with good information and you can read past issues and subscribe to it here. If you aren’t already a subscriber to the SmallWaterSupply.org newsletter, I recommend it – especially if yours is a small water utility.
American Water Works Association
The American Water Works Association’s Customer Service Community site went live on Monday, December 12. I’m proud to say that my blog is listed as a Customer Service Organization on their Customer Service Resources page. The Customer Service Community, along with the Conservation Community, which is another great resource, can be found by clicking on the Professional and Technical Resources tab from the AWWA.org home page.
As I mentioned above, I’m now on Twitter, where I found SmallWaterSupply.org. You can follow me on Twitter at @GaryASanders.
If you’re an avid Facebook user, I now have a Facebook page for my blog at www.facebook.com/UtilityInformationPipeline. Please feel free to check it out and “like” my blog while you’re there.
I believe that social media can be a tool for utilities to communicate with their customers. As I become more familiar and comfortable using social media myself, I suspect that I will be writing a future newsletter about how it can benefit utilities.
Thank you again for taking the time to read my newsletter and for all the support and encouragement I have received this past year.
I want to wish each of my readers a joyous holiday season and health and prosperity in the new year.
I’m always looking for ideas to write about in this newsletter, so 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 firstname.lastname@example.org.
© 2011 Gary Sanders
In my experience, most utilities review their rates regularly – in many cases, every year. While they may not conduct a full rate study each year, utilities that review their rates annually are best prepared to insure that their revenue needs will be met every year. If your utility is one that reviews your rates each year, I congratulate you. If not, I strongly encourage you to do so.
Do you review your fees as frequently as you do rates?
Now that you are in the habit of reviewing your rates annually, how long has it been since you’ve revised your fees? So, it’s been a little longer, has it…? In my interactions with utilities, I find that many do not revise their fees nearly as often as they review their rates.
Fees provide most utilities with their second largest source of revenue, so why not review them frequently? When I ask that question, I often get an answer along the lines of “that’s what we’ve always charged” – a variation on what I call the TTWWADI (that’s the way we’ve always done it) syndrome. Look at it this way – if these utilities took the same approach to rates, they would be out of business!
User fees impact only users of the service
Rate increases impact all customers, but user fees, by definition, only affect the users of the service. Accordingly, fee increases usually don’t generate the negative publicity that often accompanies a rate increase.
For example, who, besides the individual being charged the fee, is going to get upset if you charge customers who write bad checks the maximum amount allowed by law in your state?
Does your cut-off or reconnect fee cover your costs?
In an earlier Utility Information Pipeline issue (you can read it here if you missed it) I wrote about cut-off fees and some factors to take into consideration when determining if your cut-off fee adequately recoups the cost of administering the cut-off and subsequent reconnection. If you haven’t analyzed your cut-off fee recently, I recommend that you do.
Are you missing out on additional sources of revenue?
Do you charge an application or connection fee when a new customer applies for service? If not, you are missing out on a potential source of revenue. You incur a cost for the time it takes to process a new customer’s application and to send a field technician out to read the meter, so why not recover that cost by charging the customer a fee?
Likewise, if you have customers who repeatedly complain about their bill and request that you re-read their meter, do you charge for this? Some utilities have a policy of one free re-read. After that, if the customer requests their meter be re-read and the original reading is determined to be correct, the customer is charged for the re-read.
What about security deposits…?
While you are looking at updating your fees, should you also take a look at how much you charge for a security deposit? As rates increase, security deposits must also increase accordingly to keep pace or else you risk incurring bad debt. I wrote in more detail about this in Issue #15 and you can read it here if you missed it.
Is it time to review your rates and fees…?
If you haven’t reviewed your rates and fees lately, it may be time to do so.
If you have any questions about fees, please give me a call at 919-232-2320 or e-mail me at email@example.com.
© 2011 Gary Sanders