Based on the data, I don’t believe some utilities are charging enough for their cut-off fee.
How do you go about setting your cut-off fee? One option is to compare your utility to neighboring utilities and simply follow what they are doing. But is that really the best way to go about it? A better option is to calculate your costs and establish a fair and equitable fee.
This issue unveils a new cut-off fee calculator to help you determine if your cut-off fee is sufficient. But first, let’s look at what goes into calculating a fee…
GFOA best practice regarding fees
Calculate the full cost of providing a service in order to provide a basis for setting the charge or fee.
- Full cost incorporates direct and indirect costs (including operations and maintenance), overhead, and charges for the use of capital facilities. Examples of overhead costs include: payroll processing, accounting services, computer usage, and other central administrative services.
- One useful tool for calculating service costs is Activity Based Costing (ABC). ABC assigns costs to the activities required to deliver a service and can be more accurate than traditional costing methods.
- The associated costs of collection need to be addressed.
Even if your utility isn’t a government entity, this is good advice to follow in setting fees, including your cut-off or reconnect fee.
Activity-based costing for cut-off fees
When determining how much your cut-off fee should be, it’s helpful to analyze the activities required to complete the process. These activities include:
- Preparing the cut-off list
- Delivering final notices (if you use one)
- Disconnecting delinquent accounts
- Collecting payments from cut-off accounts
- Reconnecting accounts
- Dealing with escalated calls from unhappy customers
Included in these activities are the following costs – labor (including fringe benefits), fuel, wear-and-tear and depreciation for vehicles, and consumables (paper, toner, ink, pens, and pencils, etc.)
What is your fringe benefit rate?
An often-overlooked component of the labor cost of any fee is fringe benefits. There are the obvious payroll-related expenses of FICA, Medicare, retirement, and employer-paid health insurance. But that’s not all – don’t forget paid time off.
If you have a full-time employee who earns three weeks of vacation a year, one sick day per month, and eight paid holidays per year, that’s 35 days each year this employee is paid, but doesn’t work. That’s an effective fringe benefit rate of 13.46% (280 non-working hours divided by 2080 annual paid hours).
The U.S. Department of Labor Bureau of Labor Statistics research indicates the fringe benefit rate is 60.51% for state and local government and 42.65% for private industry. If you’re interested in how the BLS arrived at these numbers, please see Table 1 in this press release from September of last year.
Cut-off fee calculator
I’ve developed an online tool, much like the Days of Exposure calculator, to calculate your optimum cut-off fee.
To use the tool, you will need to know the average hourly rates and miles driven (if applicable) for each of the activities enumerated above. You will also need to know the average miles per gallon and price of fuel for your vehicles, your fringe benefit rate, and the cost to mail or place automated calls for final notices.
In addition to the activity-based costs listed above, the tool adds five percent for consumables, much like an auto repair shop adds a percentage to your bill for shop supplies.
To calculate your cut-off fee, please click here.
Is your cut-off fee adequate?
© 2020 Gary Sanders
The 2019 Utility Fee Survey was the fourth Utility Fee Survey, the third of which has alternated years with the Utility Staffing Survey. This means I’ve collected enough data to begin analyzing trends.
Cut-off fee trends
The median fee (the value with an equal number of smaller and larger values) has steadily increased from $35.00 in 2012 to $46.50 last year. Interestingly, the average (or mean) value dropped from 2012 to 2015 but increased gradually in 2017 and 2019.
Breakdown by dollar range
To further analyze the data, I plotted the number of fees in $10.00 increments up to $100.00 and then the number over $100.00. This is displayed in the graph below (clicking on the graph will open a larger image in a new window):
This graph helps to understand the anomaly of 2012 where the mean was substantially higher than the median (34.08% higher as compared the next highest year, 2019, at 13.54%). 2012 had the largest number of fees in the $20.01 to $30.00 range coupled with the smallest number of fees at every other interval except for $80.01 to $90.00. The two fees over $100.00 that year were two of the three highest fees from any year.
What does this mean for your utility?
Cut-off or reconnect fees, as with any fee, should accurately recoup the cost of providing the service associated with the fee – in this case preparing the cut-off list, disconnecting, and reconnecting the accounts on the cut-off list.
Clearly, cut-off fees for the average utility have increased over time. If your cut-off fee has remained static for several years, it’s time to reevaluate your fee.
To assist you with doing that, I’ll be unveiling a new online tool, much like the Days of Exposure calculator, to calculate your optimum cut-off fee in the next Utility Information Pipeline.
Is your cut-off fee adequate?
© 2020 Gary Sanders
This is the annual end-of-the-year issue, where I usually take a moment to look back on the year past and to the year ahead. This year that seems even more relevant as we say goodbye to the decade of the teens (I said goodbye to my teens a long time ago!) and look ahead to the 20’s!
2020 will mark the tenth year of publishing the Utility Information Pipeline. What began as just an idea in the fall of 2010 led to the first issue on January 4, 2011. That inaugural newsletter, announcing what I was planning to do and inviting readers to subscribe, was emailed to a couple hundred Logics customers. From that group, 76 people responded and became charter subscribers. Of those original 76, 37 are still subscribers today – 214 issues later!
The 2019 Utility Fee Survey was the fourth Utility Fee Survey, so I’ve collected enough data to begin analyzing trends. Look for a couple issues in early 2020 to examine these trends, including one that analyzes cut-off and reconnect fees. Along with that issue, I’ll be unveiling a new online tool, much like the Days of Exposure calculator, to calculate your optimum cut-off fee.
2020 Utility Staffing Survey
2020 will be an even year, so that means it will be time for the biennial Utility Staffing Survey again. Look for the 2020 Utility Staffing Survey invitation in the spring with the results to be published a few weeks after that.
Blog moving to EdmundsGovTech.com
With Logics’ acquisition by Edmunds GovTech earlier this year, my blog will be moving from the Logics website to EdmundsGovTech.com early in 2020. When that happens, this will be one of the first places it will be announced.
Also, with the Edmunds acquisition, management is very much interested in having me speak to more groups. If you are part of a trade association and would like to have me speak at your annual conference or training session, please give me a call at 919-673-4050, or email me at firstname.lastname@example.org.
New years’ resolutions and goals
Happy New Year 2020! If one of your goals for the new year is to improve your utility business office operation, please give me a call at 919-673-4050, or email me at email@example.com to see how a business review could help you.
© 2019 Gary Sanders
Over the course of the next few Utility Information Pipeline issues, I’ll be analyzing and reviewing some of the trends I observed from the 2019 Utility Fee Survey. If you need a refresher, here are links to the three results issues for the 2019 Utility Fee Survey:
- 2019 Utility Fee Survey Results – Part I
- 2019 Utility Fee Survey Results – Part II
- 2019 Utility Fee Survey Results – Part III
But before we start analyzing the data, let’s take a look at something else that stood out to me.
Generic email addresses
One of the things that surprised me about the survey responses is the number of utilities still using generic email addresses. By this, I mean an email address without a domain name specific to the utility. For example, firstname.lastname@example.org rather than email@example.com.
Over the seven-year history of the Utility Fee Survey, the percentage of generic email addresses has dropped slightly, with the exception of a small uptick in 2017:
A bigger surprise
Even more surprising to me were the attendees from a recent utility conference where I presented my Improving Revenue Collections for Utilities presentation. A whopping 68.75% of the utility staff (this excludes board members and non-utility employees) attending the presentation had generic email addresses!
Branded email means credibility
A Verisign survey, dating back to September 2015, “found that 65 percent of consumers believe a company-branded email is more credible than a business using a free email account.” Even though your utility may not be a for-profit business, the need for credibility is no different!
If this was the case in 2015, I have to believe it’s even more important now – over four years later!
How to solve this
There’s an easy, low-cost way to solve this. First, secure a domain name for your utility. If you already have a website, you’ve got this step covered.
Next, signup for Google’s G Suite which provides branded email, shared calendars, and cloud storage for as low as $6 per user per month. You get the same easy-to-use email interface you may already be using for your personal email with a branded email address identifying your utility.
If you’re considering doing this, please contact me and I can provide you with a promotion code good for 20% off the first year of either the G Suite Basic plan or G Suite Business plan.
Questions about how to do this?
If you have questions about getting started with branded email addresses for your utility, please give me a call at 919-673-4050, or email me at firstname.lastname@example.org and I’ll be glad to assist you.
© 2019 Gary Sanders
Five years ago I wrote about using Google Fusion Tables to create your own maps. Unfortunately, Fusion Tables will be “turned down” (isn’t that a pleasant euphemism for something that’s going to simply stop working?) on December 3 of this year.
But there’s another option
Fortunately, there is still a relatively easy way to create a map of locations for those of us who aren’t skilled Geographic Information System (GIS) users.
Google offers My Maps, which works much like Fusion Tables by letting you import a list of addresses and populating pins on a Google Map for each address. Follow along to see how easy it is to create a map…
Let’s create a map
Start by creating a CSV (comma-separated values) file or an Excel spreadsheet (it must be an .XLSX file) with the data to be imported and mapped.
In a real-world scenario, you might want to map meter reading routes or all the accounts on the cut-off list. For this example, I didn’t want to compromise a customer’s actual data, so I chose data that is readily available on the internet. I bank with Bank of America and know they have a list of banking locations on their website. I harvested the location data from the bank’s website, and using some of the data manipulation tools I wrote about recently, I converted the data into a pipe-delimited text file:
I then opened this file in Excel and added column headings, which are required by My Maps:
Your file can have the full address in one column (as this file does), or it can have separate columns for Address, City, State, and ZIP Code.
In order to show an address error for illustration purposes, I changed the address for Lynnwood Collection to a PO Box.
Now we’re ready to import the file and create your map. Start by going to Google My Maps – https://www.google.com/mymaps.
Click on CREATE A NEW MAP.
Click on Import.
Drag your Excel spreadsheet or CSV file to the window or click on “Select a file from your device” to import your file with addresses to be mapped:
Click the column (or columns) containing the address. This is what My Maps will use to locate the placemarks on the map:
Choose a column to identify the title of the markers on the map. In a real-world scenario, this might be the service address or name of the account. For my illustration, this is the bank branch name.
Now, click Finish and My Maps will create your map.
Once the file is imported and the map created, if you have any bad addresses (for example, PO Boxes) that can’t be mapped, this message will be displayed:
Click on “Open data table” to correct the addresses. A grid similar to this will be displayed:
The addresses with errors will be listed at the top of the data table. You can correct the error right in the data table, without having to fix your original input file and begin the process all over again.
By default, My Maps will draw the map with all the markers having the same color:
However, you might want to see different color pins on the map for different addresses. For example, different colors based on the services provided, or to distinguish between manual and radio read meters on a meter reading route. In my example, I want to be able to visually see the difference between full-service banks and ATM-only locations.
To do this, click on the Uniform style hyperlink:
From the window that pops up, change Uniform style to the field in your data you want to use to determine the color of the marker. In my sample data, this is the Type field:
Google will randomly assign the colors of the map pins, based on the criteria you specified. If you want to change the colors, click on one of them, then click on the paint bucket icon at the bottom of the window and select your desired color.
I chose purple for full-service banking centers, blue for ATM-only locations, and green for Bank of America Advanced Center, whatever that is!
Congratulations, you’ve created your map!
Now, if you want to share your map with others, you can do so by clicking the share button for your map:
Then select the method you want to use to share the map:
Questions about creating your map?
If you have questions about creating your map, please give me a call at 919-673-4050, or email me at email@example.com and I’ll be glad to try to assist you.
© 2019 Gary Sanders