Billing solutions: a question of market vs. Maturity

Roxane Richter

Customer Systems Editor

Not so much a case of “Build it and they will come,” as “Build it or they will leave,” utility billing systems vendors are currently fast-peddling high-tech solutions to bridge the chasm between regulated and customer-oriented retail system functionality.

Riding atop a bucking bronco of change in the nation`s deregulating power markets, billing systems are holding tight to mainly scattered bits and pieces of market share. Numerous (more than 100) billing vendors hope to court the energy industry`s billing system dollars-a customer care and billing market expected to expand from 1997`s $5.8 billion in expenditures to $8.4 billion by the year 2000, according to G2 Research estimates.

Generally speaking, billing vendors spring from two specific founts: some are energy industry veterans (selling brand-new systems born and bred by ex-utility execs), and some are immigrants from the telecommunications industry (energy industry novices hawking either older or revamped telco systems or newly purchased utility-specific solutions).”There are some new billing entrants into the energy sector. Not start-ups, they actually have customers and they`ve captured a share of the unregulated retail market,” said Guerry Waters, META Group vice president of energy information strategy services. “They`ve come in and built a new system for the retail market.”

Their experience with deregulated markets favors telecom system vendors, Waters said. “Maybe they can leverage that experience and technology. Plus, they have mammoth amounts of customers, tens of millions, so they`ve solved the scale problem. But it is a common perception that they are somewhat antiquated in their architecture,” he added.

The argument of telecom technologies entering the energy industry seemingly begs the questions: If telecom companies have been producing deregulated billing since the 1980s, do they have the answers to handling the complexities of deregulation? Alternatively, what can commodity-specific solutions, built on up-to-the-minute technology platforms, offer the emerging retail energy markets?

The grass is always greener

Mark Temmings, an account manager for Cincinnati, Ohio-based Convergys Corp., has worked on both sides of the telecom/energy fence. From 1986 to 1998, Temmings worked for Cincinnati Bell Information Services (CBIS) selling cable, Internet and telephone services, and in 1999 began working for Convergys, a provider of outsourced, integrated customer care and billing services software. Convergys claims to produce more than one million bills a day.

“Most telecommunications` systems are based upon 1970s technology. They were built to support a regulated market, one very structured and rigorous in nature,” Temmings said, “In the beginning, we did in fact look at using our system in the utility market. That conversation lasted about 10 minutes. It was clear very quickly that it wouldn`t work.”

Aside from the company`s pressing time-to-market issue, Temmings said Convergys did not want to invest “tens of millions” in re-vamping its billing system. So instead, the company chose to partner with SPL WorldGroup in an outsourced environment. Temmings said SPL`s billing system, CIS Plus, offered up-to-the-minute “`90s technology,” such as three-tier architecture, an object-oriented design and a relational database, and was operational in a dozen areas.

But just how vast a leap is it from telecom to energy? “When I was in telecommunications, I thought, `How complicated can energy be?` Well, it`s a lot more complicated,” explained Temmings. “There are controls, supply and demand matching, price changes and social responsibilities. If you lose a dial tone, you won`t die. But if it`s winter and you don`t have heat, you could die.”

Yet another energy exec who traversed the divide between telecommunications and energy is Joe Voica, vice president of sales for Cambridge, Mass.-based Excelergy, a provider of Web-based customer information and transaction management solutions. Before joining Excelergy in 1999, Voica headed up North American sales for Saville, a competing billing system vendor with deep roots in the telecommunications market.

“Having worked in both markets, it`s amazing to me to see how different states are choosing to deregulate. Each state is doing it differently,” Voica said.

As for telcos who choose to simply “re-commoditize” their system by pasting on shiny, new energy-specific browser front-ends, Voica likens the exercise to “putting a new paint job on a car. It might look good, but it won`t make the car run any better.” Plus, the cost of swapping “megawatt” for “long distance minute” on a rating engine can prove staggering. “Telecoms can`t just tweak their system. They need to invest anywhere from $5 million to $10 million to revamp their system to fit the energy market.”

Steve Doroff, Lodestar`s vice president of product development and implementation concurs. “The nature of what`s being captured is different from telecom to energy. The largest fundamental differences are the transactions, contracts and standardization. In energy, every utility has developed its own standards and data formats. Telecom has always been standardized,” Doroff said.

Summarizing how many telecoms feel about tapping into the churning waters of the energy industry, Doug Wendler, marketing chief officer of Houston-based application developer EnFORM Technology LLC, said, “I think telecom today is more complicated than energy. But I can`t say that will hold true in the future.”

And that future is poised for convergence. The convergence of kilowatt-hours and long distance minutes on a singular bill may be close at hand, but the dawn of a multi-commodity and services protocol and network appears to loom in a nebulous future state.

Convergence, schmergence!

“All of these telecom companies say their system is convergent, but it`s not. The pieces of the telecom industry, like long distance, wireless and Internet, are all separate,” said Rod Fomby, a director at EnFORM. “They can`t even get the telecom business together on one platform, much less two industries on one platform.”

But truly convergent, full-service billing solutions might prove more of a far-flung futuristic concept than many industry participants realize. A recent survey of 100 leading phone, cable and electric utilities shows only 2 percent of these utilities are prepared to implement “neighborhood automation,” a new concept that digitally links homes and businesses within a physical neighborhood. Neighborhood automation is critical for phone, cable and electric utilities to gain market share in deregulation, according to Leo Shulman, president of San Francisco based-PC Anything, Inc., the company that conducted the study.

Incredible, cutting-edge applications will give these utilities market share and cut churn down to zero, Shulman said. Neighborhood automation establishes an advanced, secure network that allows neighbors to help each other manage their homes online. By monitoring homes, this private network alerts owners about problems with heating and cooling, security and other home systems and immediately notifies the occupant who can then remedy the situation. The study also showed that when a consumer has three or more services, churn goes to zero.

From a global bird`s-eye view of convergent billing, the United States seems to lag behind the rest of the world`s deregulated and deregulating markets. “The U.S. market really needs a re-think,” explained Paul Hill, director of global telecommunications and energy with U.K-based billing competitor Hansen Corporation Europe Ltd. “In the U.K. and Australia, utilities are deregulated to the blazes. But in the U.S., deregulation takes 10 times as long and they make it all 10 times as complicated.”

Although it might be a long time in coming, convergence is coming, according to leading industry experts. Various commodities and services-such as cable, Internet, wireless, home security, telecommunications, appliances and energy services-will one day appear on a single bill.

Like nothing else, the Internet holds potential to revolutionize billing and bill- presentment solutions. While web-enabled billing systems substantially lower maintenance and customer care costs associated with mainframe and client/server computing, they might also hold the key to standardizing multi-jurisdictional, multi-commodity data transactions. As billing platforms advance, they must enable suppliers to seamlessly enroll new customers at a lower costs, giving them access to a larger marketplace, a key component of survival in deregulated markets.

As for the bill of the future, undoubtedly it will be an electronic presentment over the Internet, graphical in nature, rapidly adaptable in its technology and easily understandable in its form.

Click here to enlarge image

Excelergy`s billing system provides detailed account information, such as customer payment history.

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In Hansen Corp.`s HubEnergy system, both consumption and demand charges can have multiple charging steps per element. System Margin Price, or Pool Price, values can be used for charging purposes.

THE CASCADING COMPLEXITY OF BILLING

The work of a robust billing system can include any of the following functions:

– calculating service charges;

– developing standards for customer enrollment;

– billing the end-user;

– determining billing information;

– collecting payment;

– resolving supplier and customer disputes;

– establishing credit and terminating service; and

– feeding a general ledger.

For energy companies, however, billing systems can cost hundreds of millions of dollars because of the industry`s variety of complex billing and pricing, such as:

– index pricing;

– daily and hourly real-time pricing;

– declining block;

– time of use;

– interruptible rates;

– dual commodity;

– cogeneration;

– multi-site billing;

– rate floors and ceilings;

– transportation costs;

– distribution costs;

– special contracts; and

– unconventional pricing arrangements.

When assessing the differences between telecom- and energy-specific functionality, a few of the more salient issues include:

– differing rating engines;

– technical interfaces;

– web-enabled presentment and payment;

– protocols;

– scalability;

– customer care;

– speed to market;

– system architecture;

– summary-level consolidation;

– dynamics of economics (such as stranded costs); and

– database design and exception processing capabilities (the ability to handle changes in tariffs, utility distribution company (UDC) rules, UDC-mandated calculations, state tax rates, multiple UDCs and states).

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