Billing Most Costly Function in Preparation for Competition, Study Says

Billing system changes rank as the most costly back room operations function for utilities and suppliers preparing for competition, according to a new study by energy consulting, information technology and energy services firm Xenergy Inc. Utilities report spending from $1.22 to $22 per customer, with one utility reportedly spending up to $82 million to make billing system changes needed to accommodate retail access.

Billing, while the most costly function, also has the potential to wreak havoc if not adequately addressed, according to the study, which noted that in a number of cases, billing problems have led to lawsuits or bankruptcy. “Having the right systems in place is critical to the success or failure of competition,” said Jill Feblowitz, Xenergy senior consultant and the study’s project manager.

In the deregulating energy industry, a growing outsourcing market has emerged as an alternative to handling costly back room operations in-house. Different business rules and requirements in each state and uncertainty about retail activity make outsourcing more attractive to suppliers, while cost and time are major motivators for utilities, according to the study. Outsourcing is also expected to play a role in the resource-intensive setup of electronic data interchange (EDI), the data exchange format that allows communication between utilities and their trading partners.

Surprisingly, restructuring has not yet significantly impacted call center activity, except where switching rates are relatively high. The study predicts that another back room function-metering and meter data management-will be affected as competitive metering unfolds and load profiling comes under close scrutiny.

The Xenergy study was based on reviews of 35 utilities and retail energy suppliers in states open to competition. The study examined the back room operations functions likely to be affected by competition, including billing, customer care (education, call center and Internet), metering, load profiling and settlement, EDI and organizational structures.

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