An interesting rate application…

Recently, during a sales presentation, I was presented with a rate scenario I’ve not encountered in my 35 plus years of working with utilities. Rather than billing new accounts activated in the same billing period starting at zero, this utility bills the new account by resuming where the old account maxed out in the rate table. For lack of a better term, I’ve decided to call this a block continuation rate.

For example, consider a hypothetical rate structure with three blocks – the first 3,000 gallons, next 7,000 gallons, and all over 10,000 gallons. If the customer who moved out used 4,000 gallons, and the new customer used 2,000 gallons, the new customer would be billed for their usage at the second tier, not the first tier, as is the practice for most utilities.

Rationale for the rate structure

In the 35 plus years I’ve been involved with utility billing, this is the first case I’ve experienced like this. Admittedly, this utility is a little unique. To provide some background, they only bill semi-annually (that’s every six months) and their rate structure is an increasing block rate as shown below:

They bill using this block continuation methodology so as not to lose revenue, given the length of time between billings and the number of potential new customers each billing period.

Revenue comparison

Below is a chart of the actual charges for two hypothetical customers at the same address, both with identical usage within the six month billing period, billed using both block continuation rates and traditional rates:

This revenue comparison is also plotted in the graph at the top of this newsletter. Up until 3,000 gallons, the two methodologies generate the same revenue, because the usage is all within the first tier. From 4,000 to 7,000 gallons, the rate structures start to diverge, maxing out with a revenue difference of $38.00 (the first 20,000 gallons for the new customer being billed at $1.90 more per thousand gallons using the block continuation rate). From 7,000 to 33,000 gallons, the difference remains $38.00.

I didn’t include it for illustration purposes, but the same thing occurs again with the second block at 34,000 gallons per month for each account, maxing out at 67,000 gallons for an increase in revenue of $248.00.

Multiply these differences by a few hundred new customers in a semi-annual billing period, and this begins to make a difference in revenue for the utility! This utility experiences a significant increase in revenue from using block continuation rates for two reasons – the length of time between billings and the large increases from one rate tier to the next. Billing more frequently with smaller increases between rate tiers wouldn’t have nearly the impact it does in this case.

Do you have unique or creative rates?

If you have seen similar rates, or other unique rate structures, please leave a comment at the end of this post. If you’re wondering how you effective your rates are, 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.

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© 2018 Gary Sanders

What should a loose coin policy entail?

After the last Utility Information Pipeline issue dealing with a customer paying her entire $493 water bill in pennies as a “peaceful protest”, where I advocated for having a loose coin policy, a few readers inquired as to what a loose coin policy should entail.

Loose coin policy

At the very least, any loose coin policy should require that coins exceeding the amount required for a coin roll of that denomination be rolled. Standard coin roll denominations are:

  • pennies – $0.50
  • nickels – $2.00
  • dimes – $5.00
  • quarters – $10.00
  • half dollars – $10.00

It is also advisable to require your customer to write their name and phone number on each roll of coins in case there is a discrepancy in the amount of coins in the wrapper.

Obviously, you can use some discretion in enforcing the policy. If a customer showed up with 52 pennies to pay the exact change portion of their bill, it doesn’t make sense to require them to roll 50 of the pennies.

Benefits of a policy

With a loose coin policy in place, your office would be able to refuse to accept a wagon load of coins from an irate customer, such as the protest in the above story, unless the customer first wrapped the loose coins. This would save considerable time in counting the coins when they are presented for payment.

Have you completed the Utility Staffing Survey?

Just a reminder, if you haven’t yet participated in the 2018 Utility Staffing Survey, please click here to complete the survey. This should take less than five minutes to complete. The results will be published in a future Utility Information Pipeline.

Please feel free to share this survey with your peers at other utilities.

Thank you in advance for taking the time to complete the survey and for sharing it with other utilities.

Are your policies up-to-date?

If you don’t have a policy regarding loose coins, or feel like other policies may not be up-to-date, 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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© 2018 Gary Sanders

Could your office avoid a protest like this?

Could your office avoid a protest such as the one in the news last week at the Deltona, Florida water department? A customer, upset by what she claims were extraordinarily high bills, chose to pay her $493 water bill in pennies as a “peaceful protest.”

Are you like most utilities?

If your utility is like most that responded to a short poll regarding accepting loose coins in a previous Utility Information Pipeline, you don’t have a policy in place to prevent a malicious protest like this one.

According to the article, it took the staff more than three hours to count the 49,300 pennies. That, most likely, doesn’t include the additional time required to roll the 986 rolls of pennies before they could be deposited at the bank.

What is your policy for loose coins?

Some utilities have policies requiring coins presented for payment to be rolled, if they exceed the number needed for a roll. Such a policy would have required the frustrated customer in the news story to have rolled all the pennies before presenting them for deposit. This would have saved the office staff the time involved in counting all 49,300 pennies and kept them from having to roll the coins before depositing them.

If you don’t have such a policy, I recommend you implement one before you have a customer decide to wage a “peaceful protest” of a high bill.

Complete the Utility Staffing Survey

Just a reminder, if you haven’t yet participated in the 2018 Utility Staffing Survey, please click here to complete the survey. This should take less than five minutes to complete. The results will be published in a future Utility Information Pipeline.

Please feel free to share this survey with your peers at other utilities.

Thank you in advance for taking the time to complete the survey and for sharing it with other utilities.

Are your policies up-to-date?

If you don’t have a policy regarding loose coins, or feel like other policies may not be up-to-date, 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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© 2018 Gary Sanders

Do you or don’t you…?

…meter individual premises?

Many of the ideas for Utility Information Pipeline articles come from personal experience working with utilities. My second best source of ideas is from listservs I subscribe to. This topic falls into the latter category.

Policy deviation question

About a year ago, a listserv question was posed asking about the pros and cons of deviating from the utility’s policy of metering all single family residences individually and allowing a townhouse development to install a master meter. The homeowner’s association would be responsible for the bill for the master meter.

Pros of master metering

Obviously, the big advantage to a single master meter over multiple individual meters is that the utility only has one meter to maintain, read, and bill. Depending on the number of residences in the development, it is also likely a single, larger meter would be less expensive to purchase and install than many individual, smaller meters.

Cons of master metering

The list of disadvantages is a much longer list…

First of all, if you have to turn the water off for non-payment, you don’t have just one angry person, you have many. Even though, in this scenario, the customer is the homeowner’s association, the reality is you have a public relations nightmare and, if you are a local government, many irate citizens.

If you ever have to enact water conservation measures in the event of a drought, a single master meter makes it impossible to determine who is and who isn’t abiding by the conservation restrictions.

Likewise, if there is a leak within a residence, there is no way to know which occupant is experiencing the leak. Similarly, if there is a leak in the piping on the customer’s side of the meter, there is no way to determine where the leak is.

Finally, depending on the number of units and the size of the master meter, a compound meter would most likely be required to accurately register low flows such as toilet flushes in the middle of the night.

Recommendation

My recommendation in this situation would be that the utility not deviate from their policy. After all, isn’t that why you have policies in the first place – to determine how to handle situations like this?

Is it time to update your policies?

If it’s been a while since you’ve updated your policies, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com to learn how a business review could benefit your utility.

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© 2017 Gary Sanders

Keep reading for free consulting!

I’ve participated in lots of sales training over the years. In a consultative sales environment, where the seller makes an effort to learn about the buyer’s needs before recommending a solution, one of the things we’re taught to avoid is “free consulting”. Free consulting is considered to be giving away information and advice that a prospect would otherwise pay to receive.

Truth be told, a lot of what I write about in this newsletter could be considered free consulting, but I do it to educate my readers and establish both my and Logics’ credibility in the utility billing software marketplace.

Observations from 2017 Utility Fee Survey

Keep reading because I’m about to give away some “free consulting” based on the results of the 2017 Utility Fee Survey. The last Utility Information Pipeline, which was the third and final installment of the Fee Survey results, included returned check fees.

One of the surprising observations was how many utilities either charge more or less than the maximum allowable fee for their state. Of the 117 utilities completing the survey, 27 utilities (representing 23.1%) charge less than the maximum allowed for their state and 26 (or 22.2%) charge more.

The graph below illustrates the utilities that do not charge the maximum allowable for their state and how much their fee is below or above the maximum allowed (clicking on the chart will open a larger image in a new window):

Free consulting

Here’s the free consulting… Take a moment to verify if your returned check fee is the maximum allowed in your state and, if you are charging less than the maximum allowed, increase it at your first opportunity!

Why would you charge less than the maximum allowed for customers who intentionally write bad checks to your utility? (You can always waive the fee if your customer has a convincing explanation of why their check bounced.) If you’ve been reading the Utility Information Pipeline for a while, you know I am a proponent of charging user fees to generate revenue wherever possible and returned check fees are no exception.

If you’re charging more than is allowed

If your returned check fee is more than is allowed for your state, I recommend reviewing this with your attorney to determine if your customers have any legal recourse against your utility for overcharging them.

What is allowed in your state?

Here is a guide by state and here is a more in-depth analysis, including references to the statute that governs returned check fees in each state. If you have any doubts about what you are allowed to charge in your state, I suggest consulting with your attorney.

Is it time to review your fees?

If you haven’t reviewed your fees recently, there’s no time like the present! If you have questions about the fees you charge or would like assistance reviewing your fee structure, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com to learn how a business review might benefit your utility.

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

5 easy ways to get more bank draft customers

Recently, during a sales presentation, I came to the bank draft tab in Logics’ Utility Management application. I asked, as I always do, if they accepted bank drafts. The City Administrator spoke up and said he wished 99% of their customers were bank draft customers. When I asked why not 100%, he replied “There’s always that one percent that won’t do it, no matter how much sense it makes.”

After everyone stopped laughing, one of the office staff asked if I had any ideas how to increase bank draft participation. Interestingly enough, I had just finished the first draft of an ebook entitled 5 Surefire Ways to Save Time Processing Payments. The first of the five ways is bank drafts and the chapter goes on to list five ways to promote bank drafts.

Here they are…

1. Waive the first late fee in exchange for signing up for bank drafts

Whenever a customer calls to complain about being charged a late fee, offer to waive the penalty if they sign up for bank drafts. Once they are a bank draft account, they will never be late again!

2. Offer incentives to sign up

I know of utilities that offer a one-time $5.00 credit for signing up for bank drafts. Others give a $1.00 per month credit for the first year the customer is drafted.

3. Ask every new customer if they want to pay by bank draft

Have you applied for a life insurance policy recently? Insurers practically make issuing the policy contingent upon the insured agreeing to pay by direct debit. Why not deal with new customers applying for service the same way? There’s an age-old adage in sales, “assume the close”, and the same technique can work for signing new applicants up for bank drafts. Why not hand them a bank draft form along with the application to sign?

4. Include a signup form on your website

Ideally, your customers should be able to complete an online form with the bank draft information. But, if not, at least post a downloadable sign-up form on your website so your customers can complete and return it to your office.

5. Promote bank drafts on your utility bill

Does your utility bill have a section for comments you can enter each billing? Why not use this to publicize bank drafts along with whatever other announcements you have that month? If you print full-page bills, you can also include a bank draft sign-up form as an insert with the utility bill.

How do you promote bank drafts?

What does your utility do to promote bank drafts? Do you have a unique or innovative way of encouraging your customers to sign up for bank drafts? Please leave a comment at the bottom of this post for other readers to see.

2017 Utility Fee Survey results

The next Utility Information Pipeline, to be published on July 18, will include the first set of results for the 2017 Utility Fee Survey. The survey technically closed at the end of the day, June 30, but I haven’t started recapping the results yet.

If you haven’t participated and would still like to, you may click here to complete the survey. It should take less than five minutes to complete.

Trying to streamline payment processing?

If you’re looking to reduce the amount of time it takes to process payments, or streamline any other part of your operation, 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