2015 Utility Fee Survey Results – Part III

This is the last of three consecutive Utility Information Pipelines reporting the results of the 2015 Utility Fee Survey, an update to the original Utility Fee Survey I conducted in 2012. 106 utilities, representing 19 states, ranging in size from 83 to 90,000 active accounts participated in the survey.

The first issue summarized the demographics of the survey respondents as well as water and sewer tap and impact fees. The last issue dealt with delinquent fees and policies. Today’s issue explores the 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

Clicking on any of the graphs will open a larger image in a new window.

Returned check fees

Of the 106 participating utilities, 105 charge a returned check fee. Returned check fees range from $6.00 to $50.00, as this graph illustrates:

Returned Check Fees

Application fees

In Utility Information Pipeline #10, I wrote about application for service best practices. One of my recommendations was to charge a non-refundable application fee, in addition to any security deposit, to all new accounts. I’m pleased to report that 55 of the 106 utilities (representing 51.9%) responding to the survey charge such an application or administrative fee. This is down slightly from the 52.3% reported in the 2012 Utility Fee Survey. These application fees range from $5.00 to $100.00 as shown below:

Application Fees

Meter reread fees

25 of the 106 utilities (or 23.6%) charge a meter reread fee if the customer requests their meter be reread. This is up from the 18.2% charging a meter reread fee in 2012. In many cases, this fee is waived if it turns out the customer was correct and the utility misread the meter. Of the utilities that charge a meter reread fee, the fee ranges from $5.00 to $50.00 as this graph shows:

Meter Reread Fees

Meter tampering fees

78 of the 106 utilities (or 73.6%) charge a meter tampering fee. This is up from 60.2% charging a meter tampering fee in 2012. Nine utilities charge the actual cost of repairs or cost plus an administrative fee. Four more utilities recover their costs through the judicial system. The remaining 65 utilities charge a flat fee ranging from $15.00 to $1000.00 as shown below:

Meter Tampering Fees

Convenience fees

One of my earliest issues explained why I believe utilities should accept credit cards. Of the 106 utilities responding to the survey, 86 of them (or 81.1%) accept credit cards. I’m pleased to report that this is an increase from 62.5% three years ago. Of the 86 that do accept credit cards, 40 of these charge a convenience fee on at least one form of credit card payments as shown below:

Convenience Fees

The convenience fees charged by these utilities are too diverse in how they are assessed to be graphed, so they are presented here in a table.

Other fees

In addition to the fees that have been described in the three results issues, the survey asked what other fees utilities charge. Below I’ve listed a few of the more creative fees that were reported:

Meter test fee

A number of utilities charge a fee if the customer requests that their meter be tested. The survey didn’t specifically ask about meter test fees, however one utility volunteered that they only charge the fee if test determines the meter is registering correctly. Hopefully all utilities follow this policy because the customer is probably doing you a favor if the meter test reveals the meter is registering incorrectly.

Return trip fee

When turning a meter on, most utilities will not leave the water on if the meter indicates water is running inside the house and no one is home. This requires the utility to make a return trip when the customer is home to turn the meter on again. Several utilities charge a return trip fee to cover the time and expenses involved in returning to the customer’s home.

Same day connection fee

A number of utilities routinely provide next day service for activating new accounts. A few of these utilities charge an additional fee for providing same day service.

Field collection fee

Most utilities have adopted the best practice of not collecting money in the field on cut-off day. At least one utility still allows customers to pay the field technician to avoid being cut off and they charge an additional $25.00 to provide that service.

A special offer

I still have a couple slots left for the special offer I’m offering 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 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. An on-site presentation of the report can also be arranged for an additional fee, plus travel expenses.

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

Are you charging an application fee?

Recently, I’ve done sales presentations for several utilities that don’t charge a fee for initiating service.

Excellent source of revenue

Many utilities try to keep rate increases that impact all customers to a minimum, but need to find additional sources of revenue. Charging an application fee is a great example of a fee that can generate additional revenue without impacting your entire customer base.

User fees

An application (or connection) fee is a prime example of the concept of user fees, whereby customers using a service are charged a fee for providing the service. A fair and equitable application fee should recoup the cost of initiating service for a new account.

A fair and equitable application fee should recoup the cost of initiating service for a new account.

 
 
 
 
Past Utility Information Pipeline issues have referenced the Government Finance Officers Association’s (GFOA) Committee on Governmental Budgeting and Fiscal Policy’s Best Practice for Measuring the Full Cost of Government Service. That policy states “The full cost of a service encompasses all direct and indirect costs related to that service. Direct costs include the salaries, wages, and benefits of employees while they are exclusively working on the delivery of the service, as well as the materials and supplies, and other associated operating costs such as utilities and rent, training and travel. Likewise, they include costs that may not be fully funded in the current period such as compensated absences, interest expense, depreciation or a use allowance, and pensions. Indirect costs include shared administrative expenses within the work unit and in one or more support functions outside the work unit (e.g., legal, finance, human resources, facilities, maintenance, technology).”

Costs associated with initiating service

Have you stopped to calculate the cost of initiating service for a new account? Here are some of the obvious direct and indirect costs:

  • Office staff salary and benefits to enter the application in the system
  • Cost of a credit check, if you perform one
  • Field staff salary and benefits to drive to the location and take the initial meter reading
  • Gas and maintenance expenses for the vehicle used by the field staff
  • Updating the turn-on service order and activating the account for billing

If you don’t charge an application fee, your entire customer base ends up paying for the costs associated with activating a new account through your rates. Is that fair to all the rest of your customers?

Is it time to consider an application fee?

If you’re not currently charging an application fee (or if you haven’t reviewed your existing fee in a while) and would like assistance establishing a connection fee, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com.

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© 2014 Gary Sanders

Do you have a formal customer service policy?

Does your utility have a formal customer service policy? If you do, how recently have you reviewed it? Not just read through it, but reviewed it with an eye for revisions that reflect updated policies and procedures?

A formal customer service policy outlines the rights and responsibilities of both your utility and your customers. It describes what is expected of your customers and what actions you will take if they don’t comply. It should also define what your customer’s remedies are if they are billed incorrectly or treated unfairly.

If you don’t have a formal, published customer service policy, you have no way of insuring that all customers are treated fairly. Your customers, in turn, have no way of knowing what to expect from your utility.

Let’s look at a few key elements of an effective customer service policy…

Application for service requirements

When applying for service, do you require new customers to present photo identification or a lease agreement? If so, this should be stated in your customer service policy.

Will you activate service for a new customer the same day if the application is made before a certain time? Or will the customer have to wait until the next day to be turned on? Is there a fee for same day service?

Answers to these questions regarding initiating service should be listed clearly in your customer service policy.

Security deposit policies

Likewise, security deposit policies should be clearly defined. This is especially important if you don’t require the same deposit amount from every customer. For example, if you offer variable deposits based on a customer’s credit rating this should be clearly defined in your policy.

Policies regarding refunding deposits should also be included. Do you refund deposits after two years of good payment history? Or do you hold all deposits until the account is closed? Either way, your customers should be able to find this information in your policy.

Fee schedule

Similarly, your fee schedule should be clearly defined in your customer service policy. Customers should have no doubt how much you will charge if they bounce a check or are cut off for non-payment.

If you revise your fee schedule regularly, your customer service policy should be updated at the same time to reflect the revised fees.

Payment options

While it isn’t necessarily important to list all the different ways customers can pay their bills, many customer service policies include these. What is important, however, is to describe any expectations of your customers if they choose a particular payment option.

For example, if, after a certain number of returned checks in a specified period of time, you will no longer accept checks from a customer, this should be clearly noted in your policy.

Likewise, if you charge a convenience fee for certain types of credit card payments or require good payment history to sign up for bank drafts, these should also be included.

Delinquency and cut-off policies

One of the most important topics to be addressed in a customer service policy is your delinquency and cut-off policy.

How many days from the date of the bill does your customer have to pay before a late payment penalty is applied? How many days after that do you disconnect for non-payment? Will they receive a second notice? How much is the reconnect fee if an account is cut off for non-payment? Is this fee assessed to all accounts or only to accounts that are cut off? Will you make payment arrangements to allow customers to continue to receive service while paying off large bills?

The answers to all these questions should be clearly answered in your customer service policy.

Adjustment policies

If you offer leak adjustments for water leaks, the terms of such adjustments should be stated in your customer service policy. Likewise, if you offer summer sewer adjustments, these should also be addressed.

What if a customer is underbilled due to an error on your part? How far back will bill them and over how many months do they have to pay the difference. On the other hand, if a customer is overbilled, what will you do to correct the overbilling?

Again, the answer to all these questions should be addressed in your customer service policy.

Make your customer service policy available

In an effort to be customer friendly, I encourage you to make your customer service policy available to all customers, especially new customers.

Provide a copy to all new customers as part of a new customer packet. If it is a lengthy document, consider publishing a pamphlet with a synopsis of the key elements and give this to new customers.

And, of course, post it on your website, preferably as a downloadable link so your customers can print the full document if they so desire.

Do you have a formal customer service policy?

Does your utility have a formal customer service policy? Is it up-to-date? Please take a minute to respond to this quick survey on my Facebook page.

Is it time to review your customer service policy?

Is it time to review your customer service policy (or to develop one if you don’t have one)?

If so, please contact me by calling 919-232-2320 or e-mailing me at gsanders@logicssolutions.com to see how I can assist you.

© 2012 Gary Sanders

8 common website mistakes to avoid

The inaugural issue of Utility Information Pipeline (you can read it here if you missed it) pointed out several key pieces of information I think a good utility website should include. I still encounter utility websites that have incomplete information or are not as easy to navigate as they could be, so this issue highlights eight common mistakes to avoid.

This, of course, assumes your utility has a website. If you don’t, my first question is “why not…?” This is 2012 and a business without a website is like an individual without a cell phone – out of touch.

If the cost of developing a website is holding you back, consider checking with a local community college that offers a web design course. Inquire if the instructor would be interested in developing your website as a class project. If not, consider hiring one of the better students in the class to design your website.

Let’s take a look at some common mistakes to avoid…

1. Make your office address difficult to find

Your office address should be prominently displayed on your home page. If it isn’t on the home page, there should be a clear link such as “Directions to our office” or “Find our office” to the page that does include your address.

If your office isn’t extremely easy to find from all directions, it might be helpful to include driving directions to your office. Or consider linking to a mapping site that will allow the user to enter their address to get turn-by-turn directions to your office.

2. Fail to include your office hours

Are your office hours clearly posted on your website? This is especially important if your office closes for lunch or if your hours aren’t the same each day.

3. Hinder your customers from contacting your staff

Does your website include a “contact us” page that includes phone numbers (with direct extensions) and e-mail addresses of your key staff? Why burden your customer service staff with having to transfer calls or provide e-mail address for your staff when your website can easily provide that information?

4. Neglect to let your customers know how they can pay their bill

Do you accept credit cards? Can your customers pay online or call an automated phone payment line? Do you have an after hours drop box? Do local banks accept payments for you? Can your customers learn about these various payment options from your website?

5. Keep your customers from accessing needed forms

Do you have certain forms that your customers must complete? For example, bank draft sign-up forms or your application for service? Are downloadable versions of these forms available on your website? If not, they should be.

6. Hide your rates from your customers

Are your rates clearly posted on your website? Do your customers complain about your rates being high? I know… what customers don’t complain about what they perceive to be high rates?

If, in reality, your rates are comparable to, or lower than, the rates of neighboring utilities, why not post this on your website to inform your customers?

However, on the other hand, if your rates are indeed higher than other nearby utilities, have you thought about using your website to explain the reasons why your rates are what they are?

7. Avoid explaining your policies

Can your customers turn to your website to learn what your policies are? For example, if you require new customers applying for service to provide photo identification or their lease agreement, is this clearly stated on your website? Are your late payment penalty and cut-off policies explained?

8. Ignore commonly asked questions

Does your website include a frequently asked questions (FAQ) page with answers to the most commonly asked questions? For example, if your bills include additional charges besides the primary utilities you provide, are they explained on your website?

If you don’t know what to include on an FAQ page, have your customer service staff track the most commonly asked questions for a month. Once you have an idea what kinds of questions your customers are asking, you will know what to post on your FAQ page.

Ask an independent observer to review your website

If you haven’t taken a look at your website lately from the perspective of someone who knows nothing about your operation, I encourage you to do so. Better yet, invite someone whose opinion you value, but who is not affiliated with your utility, to take an objective look at your website.

If you have questions about your website or how you can make it more informative, please contact me by calling 919-232-2320or e-mailing me at gsanders@logicssolutions.com.

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© 2012 Gary Sanders

How often do you review your rates and fees…?

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 gsanders@logicssolutions.com.

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© 2011 Gary Sanders

Application for service best practices

In this issue let’s take a look at some best practices associated with the application for service process.

Require a copy of rental agreement or closing documents

Have you ever been faced with a new customer wanting to initiate service at an address where the service has been disconnected for non-payment and were pretty sure that the new applicant had been living there all along but you couldn’t prove it?

One way to avoid this predicament is to require a copy of the rental agreement (or closing documents when the customer is purchasing the property). If the customer who is applying for service can’t provide a new rental agreement, then most likely your suspicions are accurate and this person has been living there all along.

List all names on the rental agreement on the service application

A best practice is to include the names of everyone on the rental agreement as co-applicants for service in your billing system. This serves as an additional precaution to insure that you don’t find yourself in the situation described in the previous section. In the event that the account ends up with an unpaid final bill, it also provides additional individuals for you to try to collect from.

Require a photo ID for each applicant

Red flag rules require that you verify that an applicant for service is who they claim to be. The best way to accomplish this is to require that each applicant provide a photo ID. A best practice is to retain a copy of the photo ID, preferably a color scanned image rather than a black and white photocopy.

Perform a bad debt search for each applicant

Another best practice is to perform a bad debt search of closed accounts for each new applicant. Many times a previous customer who left and never paid their final bill will try to move back to your service area and apply for service using a different name. Retaining the applicant’s social security number, driver’s license number and date of birth that can be searched in the future is the best way to catch deadbeats that try to reapply for service from your utility.

Hopefully, your software does this search automatically as you process each application for service. However, if your software isn’t this sophisticated, it is still worth the time to manually perform the search multiple times, using the applicant’s name, social security number, driver’s license number and date of birth.

Charge an application fee

In my issue #3 dealing with cut-off policies (if you missed it, you can read it here), I referenced the Government Finance Officers Association’s (GFOA) Committee on Governmental Budgeting and Fiscal Policy’s Best Practice for Measuring the Cost of Government Service that states “The full cost of a service encompasses all direct and indirect costs related to that service. Direct costs include the salaries, wages, and benefits of employees while they are exclusively working on the delivery of the service, as well as the materials and supplies, and other associated operating costs such as utilities and rent, training and travel. Likewise, they include costs that may not be fully funded in the current period such as compensated absences, interest expense, depreciation or a use allowance, and pensions. Indirect costs include shared administrative expenses within the work unit and in one or more support functions outside the work unit (e.g., legal, finance, human resources, facilities, maintenance, technology).”

There are costs associated with processing an application for service and collecting the initial reading for the new account. In keeping with the GFOA policy, a best practice is to charge a non-refundable application fee, over and above any security deposit, to recover these costs.

Print an application form that the applicant(s) sign

As the last step in the application process, you should print an application form that includes all of the customer’s relevant information and a paragraph, or paragraphs, outlining your policies that the new customer is agreeing to. In some states there are few state laws defining the relationship between utility and customer. Absent state laws to the contrary, the signed service agreement forms the legal basis that governs your relationship with your customers. Having the customer sign an application form that includes their personal information and your terms and conditions insures that your utility is protected in the event of a lawsuit.

If you have any questions about your application for service process or would like assistance assessing your application policies and procedures, please give me a call at 919-232-2320or e-mail me at gsanders@logicssolutions.com.

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© 2011 Gary Sanders