Continuing with the theme of examining trends over the four years of the Utility Fee Survey – 2012, 2015, 2017, and 2019, this installment looks at application fees.
An application fee, or service initiation fee, is charged to new accounts when applying for service. The purpose of the fee, as described in this blog post, is to recoup the cost of taking an application and starting service for a new customer.
Surprisingly, the percentage of utilities charging an application fee has remained virtually flat over the four years of the Utility Fee Survey. Application fees peaked at 53.3% in 2012, the first year of the survey, then declined in 2015 and 2017 before rebounding slightly to 50.4% last year, as shown in the graph below (clicking on any of the graphs will open a larger image in a new window):
Average fee amounts
Interestingly, as shown in the graph below, the median (an equal number of smaller and larger values) application fee has remained $25.00, while the average (the arithmetic mean) application fee has steadily increased from $31.74 in 2012 to $44.81 last year:
Why the disparity?
It’s valid to ask “why has the average application fee increased while the median fee has remained the same?”. This is because the number of utilities charging a $25.00 application fee has increased from 14 in 2012 to 17 in 2015 to 21 in both 2017 and 2019. This increase, coupled with a rising number of application fees of $100.00 or more (2 in 2012, 3 in 2015, 6 in 2015, and 7 in 2019) contributes to a larger average while keeping the median value the same.
Another contributing factor is the increase in the maximum fee each year. For the first two years, the highest application fee was $100.00, increasing to $150.00 for 2017 and maxing out at $250.00 for 2019. It’s worth noting that some of these large application fees are charged in lieu of a refundable security deposit.
This graph shows the distribution of fees by dollar amount over the four Utility Fee Surveys:
The first, and most obvious, takeaway from this analysis is, if you’re not charging an application fee, you should consider doing so!
Secondly, those utilities charging an application fee have been steadily increasing their fees. Similar to your reconnect fee, the application fee should take into consideration all of the labor, materials, and vehicle usage to process an application. If you haven’t reviewed your application fee recently, now might be a good time to do so!
Is it time to evaluate your fees?
If you’re not currently charging an application fee, or if you want to review all your fees, please give me a call at 919-673-4050, or email me at firstname.lastname@example.org to see how a business review could help find new sources of revenue.
I recently received an email from a newsletter subscriber asking if I had any information about the GDPR and compliance by local governments. This newsletter is a more in-depth response to what I replied to her.
DISCLAIMER: I am not an attorney and the information here is not intended to serve as legal advice. If you have legal questions concerning compliance with the GDPR, please consult with your attorney. This also is targeted at utilities outside the European Union, specifically in the United States. If your utility is located within the European Union, this may not apply.
What is the GDPR?
GDPR is an acronym for General Data Protection Regulation. The GDPR was passed by the European Union (EU) on April 14, 2016 with an implementation date of May 25, 2018, after which organizations found to be out of compliance can be fined.
The GDPR deals with safeguarding personally identifiable information (PII) and applies to organizations inside and outside the EU. According to the official GDPR website, it applies to “a company established outside the EU offering goods/services (paid or for free) or monitoring the behaviour of individuals in the EU.”
Do we need to worry about the GDPR?
The above cited website goes on to explain that the GDPR does not apply if “your company doesn’t specifically target its services at individuals in the EU, it is not subject to the rules of the GDPR.” Clearly, utilities target their services at customers who live or own property within their service area, not based on where the customer resides.
Of course, this doesn’t mean you have no responsibility for safeguarding personal information of your customers, only that, if my interpretation is correct, you aren’t subject to fines for violating the GDPR.
If you aren’t sure if you are adequately safeguarding your customer’s personal data, please give me a call at 919-232-2320 or e-mail me at email@example.com to learn how a business review could help you determine this.
The last Utility Information Pipeline included a poll asking how utilities handle allowing customers to apply for service online. Here are the results of that poll (clicking on the chart will open a larger image in a new window):
Completing the process in the office
Based on the poll results, most utilities still require the application process to be completed in their office. This is in spite of the fact that a majority of those utilities have an application form which can be downloaded or completed online.
The only poll choice with no votes was “Applicants can complete the application process online, but must come to our office to show ID.”
Three of the responding utilities allow the entire application process to be completed online without requiring the customer to show ID.
Red Flags Rule policy compliance
As we explored in a previous Utility Information Pipeline, guarding against fraud in the application process is one of the key components of a Red Flags Rule policy. In order to verify the customer’s identity, most utilities require applicants to show photo ID and proof of residency (lease agreement or closing documents) for the address at which they are applying for service.
Which leads to the question – if the applicant isn’t required to show photo ID, how do these utilities confirm their identity?
If your utility is one of the three who responded, or if you allow online applications without requiring ID, I would be interested in learning how you comply with your Red Flags Rule policy. Feel free to comment below or send me an e-mail.
Could your office operate more efficiently?
Is your application for service process cumbersome and outdated? Are there other ways your office could become more efficient? If the answer to either question is “yes”, please give me a call at 919-232-2320 or e-mail me at firstname.lastname@example.org to learn how a business review could help you learn how your office could operate more efficiently.
Verifying that your customer really is who he or she claims to be is the best way to prevent fraudulent applications. Most utilities do this by requiring the applicant to show photo ID and proof of residency (lease agreement or closing documents) for the address at which they are applying for service.
Why is this important?
If you base the amount of a security deposit on the applicant’s credit score, using a stolen ID could allow a potential bad debt customer to establish service with no deposit.
Additionally, if the applicant is a previous bad debt customer, using a stolen identity allows them to avoid detection of the bad debt when you perform a bad debt search.
Many businesses allow a utility bill in the customer’s name as proof of ID. If someone is able to fraudulently establish an account, they could easily use their bill from your utility to defraud other businesses.
How does applying online change this?
If you allow customers to apply online (as opposed to merely downloading an application form), how do you confirm they are who they claim to be? Sure, they can take a picture of their driver’s license with their smartphone and upload it to your website. But without visually verifying their identity against the driver’s license, how do you know it’s not stolen?
Some utilities will allow customers to apply online, but require them to visit the office in person within the first week of establishing service. By doing so, the utility has the opportunity to scan the customer’s driver’s license and attach it to their customer record.
How do you handle online applications?
How does your utility deal with online applications? Please take this quick poll.
Once you’ve taken the poll, you can see the results to see how other utilities responded. I’ll publish the results in the next issue.
Does your application process need reevaluating?
Does your application for service process still involve handing a new applicant a clipboard to complete a paper application? If so, or if there are other ways you need to become more efficient, please give me a call at 919-232-2320 or e-mail me at email@example.com to learn how a business review could help you evaluate how your office can be more efficient.
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:
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.
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?
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 firstname.lastname@example.org to learn how a business review could help you evaluate how to improve your effectiveness.
The Red Flags Rule is designed to help prevent identity theft. There are four elements to a Red Flags Rule policy:
Identify relevant red flags
Detect red flags
Prevent and mitigate identity theft
Update the program
Let’s examine each of these elements in more detail…
Identify relevant red flags
In this phase of your Red Flags Rule policy, you should determine what types of suspicious activity might be relevant to your particular utility. For example, do you require photo ID and proof of residency when establishing a new account? If so, relevant red flags could be what appears to be an altered ID or the name on a lease agreement not matching the name of the applicant for service.
Detect red flags
Detection of red flags requires your customer service representatives to be vigilant when taking an application for service from a new customer. In this phase, your staff should be actively reviewing the possible red flags identified in the previous section each time they interact with a customer.
Prevent and mitigate identity theft
This phase of your policy documents what action to take when a red flag is detected. Depending on the severity of the red flag that was detected, the mitigation could range from contacting law enforcement to denying service to taking no action.
Update the program
The final phase of a Red Flags Rule policy is the requirement to update the policy as needed. Changes in technology and new schemes from identity thieves are two reasons you would want to update your policy.
Approval and training
Your Red Flags Rule policy must be approved by your board or governing body, or a committee appointed by your board. Each new hire should receive training about your Red Flags Rule policy as part of their initial orientation. It’s also not a bad idea to conduct periodic refresher reviews of the policy with current staff members.
Does your Red Flags Rule policy need updating?
If your Red Flags Rule policy hasn’t been reviewed since it went into effect or if you don’t have one, please give me a call at 919-232-2320 or email me at email@example.com to learn how a business review could help you update your policy.
I am the Senior Consultant with Edmunds GovTech | Logics in Raleigh, North Carolina. I have over 35 years experience developing and implementing utility billing and financial software and consulting with utilities and municipalities. My bi-weekly email newsletter draws from my experience in working with over 200 utilities and local governments to offer insight into how utilities can improve operations and better serve their customers. If you have a comment or a suggestion for a future email, please contact me by calling 919-673-4050 or sending an email to firstname.lastname@example.org