utility information pipeline

How to avoid billing “spikes”

Recently, one of my connections on LinkedIn, Glenn Barnes with Water Finance Assistance, shared this article about smart meters causing water bills to increase.

Meters are like people

It’s a well-documented fact that meters, like people, slow down with age. Therefore, installing new meters, whether they are smart meters or not, will likely result in increased water bills.

It is commendable that the town plans to conduct a public hearing to address the potential impact on customers’ utility bills. Anytime a utility can be transparent and forthcoming with their customer base about upcoming changes, particularly changes which will impact their customers financially, is a positive step.

Billing “spikes”

The article goes on to discuss citizen complaints about “intermittent spiking”. These spikes in monthly bills occur because bills are currently generated in thousands of gallons rather than in individual gallons. The article gives the false impression that it will take moving to smart meters to remedy this when, in actuality, these spikes are due to the TTWWADI syndrome – continuing to do something because it’s always been done that way.

Chances are, meters are still being read and billed in thousands of gallons because this is the way it was done decades ago. Back then, meters were read on paper and bills were produced manually, or with ledger card machines (if you don’t know what that is, thank your lucky stars!).

Even when reading with handhelds (or still on paper, if you’re that outdated), meters can be read and billed in individual gallons. It takes some changes to the existing database, but it’s not rocket science!

Revisiting an example

I originally wrote about this topic eight years ago, in this post where I showed examples of how truncating readings to the thousands place can impact billings.

The following issue discussed the impact of billing in thousands on conservation efforts, as compared to billing in gallons.

The examples in the original post were rates with a base rate of $25.00 for the first 2000 gallons and $4.00 per thousand gallons above the minimum. From their website, the town mentioned in the article has rates of $25.07 for the first 2000 gallons and $12.54 per thousand gallons above the minimum – quite a difference from the original example!

Let’s revisit those original examples using the rates for the town referenced in the article:

First, the account that was billed more by billing in gallons (clicking on either of the tables will open a larger image in a new window):

And here is the account that was billed more by billing in thousands of gallons:

The graph at the top of the article is based on the first table where the customer would be billed more by billing in gallons. Looking at the blue bars in the graph, it’s easy to see how a customer using just over the minimum can think their bill is higher than it should be once it “spikes” above the minimum.

For eight consecutive months (September to April) this customer would have received a minimum bill. Then, in May, when their accumulated usage rolls to the next thousand gallons, suddenly their bill is 50% higher! Imagine if they had used 110 gallons more in May – then their bill in thousands would have been for 4000 gallons, resulting in a bill double what they had been used to!

Clearly, billing in gallons provides your customer with a more accurate bill each month. Any fluctuations from one month to the next are based on actual usage, not the anomalies of whether their reading rolls to the next thousand gallons or not.

Need assistance?

If you are in the process of replacing meters and need assistance explaining this to your customers or if you are currently billing in units greater than individual gallons, such as hundreds or thousands of gallons, please give me a call at 919-673-4050, or email me at gsanders@edmundsgovtech.com for more information about how a business review could help you.

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© 2019 Gary Sanders

Is this something you should be concerned about?

In a recent conversation with a utility who doesn’t offer bank drafts, I learned the reason why is because of a concern about the security of their customers’ bank account information from hackers.

While this is commendable, is it really a valid reason not to offer your customers the most convenient way to pay while, at the same time, saving your staff time processing payments?

Is this a valid concern?

In my forty years of working with utilities and utility billing software (yes, I’ve really been in this business that long!), I’ve never heard of any customers’ bank account information being compromised by a data breach.

A much more common occurrence

What I have experienced first-hand during my career are five cases of fraud or embezzlement by utility employees, ranging from blatantly obvious to relatively cunning. One of the more elaborate schemes resulted in prosecution and made the news.

In fact, one of those cases is the reason why Logics’ Utility Billing software includes a Void Payment Edit List which reports all voided payments in a batch. All because an astute finance director recognized one cashier had a much higher volume of voided payments than the other cashiers. It turns out there was a reason why – this employee was pocketing cash from some of the voided payments!

While the actual number of cases of fraud represents only a fraction of the utilities I’ve worked with, it is still a much more valid concern than bank draft information being hacked.

Increase bank draft participation

If you’re not offering bank drafts (or if you are and don’t feel like you have as much participation as you’d like), check out my free ebook entitled 5 Surefire Ways to Save Time Processing Payments.

How can you guard against fraud?

Recapping the recommendations included in the above-referenced post, here are some best practices you should ensure your office is following:

  • Assign each cashier a separate cash drawer
  • Issue hand-written receipts only in emergencies
  • Receipt payments as they happen
  • Account for cash overages and shortages
  • Monitor voided payments
  • Have a second employee double check each deposit
  • Review all adjustments to customer accounts

There’s still time to complete the 2019 Utility Fee Survey

If you haven’t yet completed the 2019 Utility Fee Survey, 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@edmundsgovtech.com or call me at 919-673-4050.

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.

Unsure if your cash management practices are adequate?

If you’re unsure if your cash management practices are adequate, please give me a call at 919-673-4050, or email me at gsanders@edmundsgovtech.com for more information about how a business review could help you find out.

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

© 2019 Gary Sanders

Why this isn’t a relevant question…

It seems I get asked the same question with each Utility Fee Survey, “Why aren’t deposits included with the Utility Fee Survey?”.

For starters, the obvious answer is a security deposit isn’t a fee. By definition, fees are non-refundable and security deposits are, of course, refundable. For some utilities this is after a sustained period of good payment history, for others not until the account is closed.

Additionally, I don’t believe comparing deposits between utilities is a useful exercise, which I’ll explain.

Comparing fees

The results of the Utility Fee Survey provide a useful tool for utilities to compare themselves to other utilities to determine if their fees are up-to-date and reasonable. I’ve had several utilities tell me they’ve implemented new fees, or increased existing fees, based upon learning what other utilities are doing.

Periodically reviewing your fee schedule, and comparing it to other utilities, is a useful exercise. Because fees are assessed only to customers who are provided a specific service, they generate additional revenue without raising rates across the board. And, as any utility knows, generating increased revenue without raising rates is a good thing!

Not a relevant question

Periodically, on some of the listservs I follow, someone will ask what other utilities charge as a security deposit. Presumably, this question, much like the question in the opening paragraph, originates from trying to determine if the utility asking the question is charging a fair deposit, compared to other utilities.

The reason for charging a security deposit is to ensure your utility gets paid the final bill when a customer closes an account. A fair and adequate security deposit depends on several factors, including your rates and delinquency policies.

Trying to compare security deposits between utilities without taking into consideration the difference in rates, customer usage patterns, and business practices is pointless.

Is your security deposit adequate?

To assist utilities in determining if their security deposit is adequate, I’ve developed a formula I call Days of Exposure. Days of Exposure is the total number of days of service a customer ends up owing for if they are disconnected for non-payment and never reinstate service.

I’ve developed a online tool to calculate your utility’s Days of Exposure. If you’re interested in finding out if your security deposit is sufficient, please click here to calculate your Days of Exposure.

No takers!

No one stepped forward after the last Utility Information Pipeline to volunteer to track the time involved in taking various types of payments.

If you remember, my premise is that taking cash and check payments isn’t “free” and I’m looking for a few utilities to gather real data to help me analyze the true cost of taking payments.

If you’re willing to participate, please email me and I’ll give you a call to discuss the process in more detail.

There’s still time to complete the 2019 Utility Fee Survey

If you haven’t yet completed the 2019 Utility Fee Survey, 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@edmundsgovtech.com or call me at 919-232-2320.

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.

Unsure if your security deposit is adequate?

If you’re wondering if your security deposit is adequate, please give me a call at 919-232-2320, or email me at gsanders@edmundsgovtech.com for more information about how a business review could help you find out.

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

© 2019 Gary Sanders

Is that really the case…?

A common reason many utilities offer for why they charge a convenience fee for accepting credit card payments is, “It’s not fair for all of our customers to pay for a few who want to use a credit card”.

But is that really the case? Certainly, cash and check payments don’t incur a fee from a merchant processor, but are they really “free” as these utilities seem to think?

Let’s take a look…

Cash payments

Cash payments require entering the payment, printing a receipt, and making change at the time of the payment.

Then, at the end of the business day, someone has to count and balance the cash drawer, and prepare a deposit. Someone then has to take this deposit to the bank. If, for some reason, the cash drawer doesn’t balance, the discrepancy must be researched, and that takes even more time.

Check payments

Check payments, if they are received in the mail, require opening the mail and entering the payment, unless you’re using a lockbox and there’s definitely a cost for that. Check payments at the counter or drive-up window must be entered and a receipt printed. Checks must also be balanced and a deposit made, whether that means scanning them for remote deposit capture or running an adding machine tape or listing them on the deposit slip, all of which take time.

None of this takes into account if the check bounces! If a check is returned for insufficient funds, you might have to research which account was paid by the check. Then you have to contact the customer and add the bad check amount and (hopefully) a returned check fee back to the account.

Credit card payments

Credit card payments, on the other hand, especially online and IVR payments, require minimal personal intervention compared to processing a cash or check payment.

If you have a fully integrated online bill pay or IVR system, the payments are immediately logged in your system and there is no need to import a file the next day. Even if your online bill pay system isn’t fully integrated, importing a file of credit card payments takes far less time than entering cash or check payments.

Balancing the day’s credit card payments is as simple as comparing the total in your system to the merchant processor’s website or the total from your third-party online bill pay provider.

And, of course, no bank deposit is required for credit card payments.

Some utilities don’t accept payments in person

I know of at least three utilities who, for various reasons, don’t accept cash or check payments in person. And I know of one other that accepts checks and credit cards in person, but no cash.

Admittedly, the three who accept no payments in person are all privately owned utilities. I completely understand the ramifications of a public utility not accepting payments in person.

However, this does underscore the fact that some utilities have acknowledged how costly accepting payments in person can be, and, consequently, they’ve opted not to.

How much does it really cost to process payments?

Obviously, there are costs associated with accepting cash and check payments, especially in person. But how much are these costs and can they be quantified?

This is where you can help!

I’m looking for a few utilities who are willing to invest the time and effort into logging the amount of time the aforementioned activities entail.

If you decide to participate, you will be provided a link to a Google spreadsheet where you can log the number of payments received each day and the amount of time required for each activity.

In exchange for maintaining this log for a month, I will provide you with a detailed analysis of how your utility compares to the other participating utilities. I will publish the results (without identifying the participating utilities) in a future Utility Information Pipeline.

If you’re willing to participate, please email me and I’ll give you a call to discuss the process in more detail.

Have you completed the 2019 Utility Fee Survey?

If you haven’t yet completed the 2019 Utility Fee Survey, 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@edmundsgovtech.com or call me at 919-232-2320.

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.

Unsure what payment methods you should offer?

If you’re wondering if your utility is offering the best possible payment options, please give me a call at 919-232-2320, or email me at gsanders@edmundsgovtech.com for more information about how a business review could help you find out.

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

© 2019 Gary Sanders

Consumer Expectations & Experiences 2019

I’ve written in past years about the Fiserv Billing Household Survey, now called Expectations & Experiences: Consumer Payments, which describes consumer trends in paying bills. You can read those articles from 20132015, 2016, and 2018.


Results of the 2019 survey

You can find a summary of the results of the 2019 survey here. Toward the bottom of the page is an orange button with a link to download a document with more detail about the survey results.

The document lists four major findings, of which the top three are applicable to utilities:

  • Online payment activity is increasing
  • Security concerns are decreasing
  • Decrease in need for a paper trail
  • Person-to-person payments are becoming more popular

Let’s examine the first three in more detail:

Online payment activity is increasing

While this isn’t at all surprising at face value, what is surprising is the use of online payments by baby boomers and seniors is increasing faster than any other age group. However, as was my point in the last Utility Information Pipeline, the overall use of online payments is highest among younger people.

Mail is still the most popular method of receiving bills (49%), but being able to view a bill from your website is close behind (41%), a significant increase from 2017.

Security concerns are decreasing

What I find most intriguing about this finding is more people believe paying their bill on your website (46%) is more secure than paying by mail (40%)! What this tells me is, if you’re not offering online bill pay, you are doing your customers a disservice!

Decrease in need for a paper trail

I hadn’t thought about this perspective in the past, but apparently one of the factors keeping customers from paying online is the lack of a paper trail. However, as the graphic above points out, the percentage of customers who don’t use online or mobile bill pay has decreased from 37% in 2016 to 28% in 2018.

The bottom line

In the final analysis, if you’re not offering online bill pay or ebill presentment, you likely aren’t meeting the needs of your customers, no matter what their age group is.

Have you completed the 2019 Utility Fee Survey?

If you haven’t yet completed the 2019 Utility Fee Survey, 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@edmundsgovtech.com or call me at 919-232-2320.

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.

Unsure what payment methods you should offer?

If you’re wondering if your utility is offering the best possible payment options, please give me a call at 919-232-2320, or email me at gsanders@edmundsgovtech.com for more information about how a business review could help you find out.

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

© 2019 Gary Sanders

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Gary Sanders

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 gsanders@edmundsgovtech.com



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