E-utilities increasing efficiencies, services and economies via the Web

Roxane Richter

Customer Systems Editor

Tired of forgetful customers who fail to remember to sign or enclose their checks in their payment envelope? Exasperated with end-users that insist on scrawling illegible service questions on their energy bills? It`s true that even the most profitable of customers can test the patience of long-suffering energy billing providers.

Helping to ease the pangs of service providers` blues is an e-technology rescue, electronic bill presentment and payment (EBPP). Electronic payment formats over the Internet, or e-billing, offer a cost-effective, yet customer-driven, alternative to traditional (mailed/manual) billing. Rather than paying for postage and haggling over the telephone, e-utilities can now transmit millions of electronic bills and marketing messages at fraction of the cost-and in a small percentage of the time.

According to Killen Associates, the U.S. utility industry can save $1.2 billion a year through electronic bill presentment and payment. Plus, for the average consumer, the Internet poses an enticing new route for bills. Experts predict that by year`s end, the average household will be able to view and pay about a quarter of its obligations online, and the number of households banking and paying bills online will surge to more than 22 million. Jupiter Communications forecasts that utilities will lead the way among e-billers this year, to be followed next year by consumer lenders, insurance companies, banks and brokerages.

For a utility, effective customer care and EBPP can serve a myriad of purposes: attract new customers, reduce end-user complaints, minimize churn, effectively switch over new customers, provide points of differentiation, promote a positive corporate image, reduce customer service costs and increase profits.

Open competition, in the form of deregulation, has catapulted a whole range of opportunities and threats onto both current players and new market entrants. And, as with any transition into a new market environment, it inflicts some aches and twinges on its market players.

Easing legacy-to-e-billing transition pains

Many incumbent utilities are currently struggling to replace, reinvent or trash their outdated (regulated environ) legacy systems. Like riding an aging draft horse against a thoroughbred stallion in a race for corporate survival, the pre-choice legacy system simply can`t keep up with the lickety-split pace of the deregulated environment.

According to Gartner Group research, a poll of more than 170 leading U.S. billers found that “ease of interfacing with legacy billing and accounts receivable systems stands out as the single most important criterion businesses use when choosing an e-billing company.”

Just how complicated is accessing and retrieving legacy data and making it available in an Internet-enabled system? “We do the toughest and the hairiest part of the operation in billing. We tap into 10- to 30-year-old legacy systems and extract the information … We think we`ve etched out a real sweet spot in the industry,” said Bob Vish, director of product development at Interface Systems Inc., an Ann Arbor, Mich.-based developer of legacy-to-Internet technologies. Vish said the server-based fee for Interface`s eBill Bridge product runs $70,000 to $150,000 and is implemented within a 30-day, single-billing cycle.

Whereas companies (like Interface) literally “catch” the legacy data, other vendors move in to “pitch” the data in a client-specified (often aggregated) format. In the past, companies like Interface have cooperatively worked with consolidators who provide a central location on the World Wide Web for consumers to log in and review all of their bills. Two such consolidators are TransPoint (a joint venture of Microsoft and First Data Corp.) and CheckFree.

As a billing provider, CheckFree is trying to simplify the process of selecting and deploying an EBPP, thereby accelerating the billers` abilities to get Internet-based billing content to market quickly, which in turn will entice consumers to sign up for the services. “The primary benefit of e-billing to both the biller and the consumer is a much higher bandwidth of interaction. The biller gets to control the experience of how the consumer views the bill. And the consumer doesn`t have to wade through a bunch of paper stuffers and can see data in helpful ways,” said Ken Hobday, CheckFree`s vice president for standards and industry consortia.

Some core components of the EBPP creation-to-implementation process, according to CheckFree, include:

– Creating an electronic bill from data stored in systems designed to generate paper bills;

– Making electronic bills available on the Internet at the biller`s Web site, and at Web sites hosted by a variety of financial services, information and transaction providers (including financial institutions, brokerage firms, service bureaus such as billserv.com and Internet portals such as Yahoo! Finance and Intuit`s Quicken.com);

– Enabling consumers to view, interact with and pay the bill;

– Managing the payment process bet-ween consumers` checking accounts and billers` accounts receivable systems, and

– Providing event tracking and customer service and support for each of these steps.

But electronic billing is not, and never will be, a one-size-fits-all e-solution. Like most technology solutions, a successful techno-mend must address who you and where you`re going.

It all depends on who you are

Initially, every company should address their next-generation billing needs according to their core competencies, market (revenue) opportunities, system architecture, customer scale (and scope), data transfer protocol requirements, regulatory issues and cultural environment. In other words, every company`s process will vary, depending upon the role their priorities, either as an incumbent utility, ESCO or ESP.

In their “Billing in the New Age Energy Industry” paper, The Yankee Group argues that: “The importance of billing depends upon the particularities of a company`s business plan. For new ESCOs or ESPs, providing a single bill for multiple services could be the key to their market differentiation. For others, such as an incumbent utility with a functioning legacy system, a more incremental approach by added online capabilities first, might be more appropriate.” So a new ESCO`s or ESP`s or vendor`s success is based on their ability to leverage new technologies and differentiate themselves; whereas the incumbent`s success is based upon its ability to leverage billing and customer care competencies. In essence, an incumbent`s system interests will focus on business support system functionality, data warehousing and mining capabilities, customer information management, customized bill formats, and front-end customer service representative (CSR) capabilities. And ESCOs and ESPs will attempt to address customer acquisition, network expansion, service differentiation and product line expansion challenges through their billing and customer management technology choices.

The bottom-line economics of billing

To date, there are over 130 vendors vying for the business of utility billing and EBPP. Some of the companies actively pursuing billing and EBPP for utilities include Siebel, Excelergy, SPL WorldGroup, Science Applications International Corporation (SAIC) and Peace. Many vendors who began in billing for cable, wireless, wireline and financial institutions have reinvented themselves (and their software) as utility-specific solutions, including USCS International, CSG Systems, Billing Concepts, CheckFree, Convergys, LHS Group, Saville, AmDocs, Keenan and Intertech.

Yet since the dawn of software and the microchip itself, the age-old questions of “build or buy” and “in-house versus outsource” always seem to loom overhead- often pitting in-house IT staff against fiscal corporate hawks in a head-to-head battle for departmental survival.

“As an outsourced biller, we can save companies 25 to 50 percent on their billing and call center operations through our huge economies of scale, efficiencies and software development costs. That`s a big foot in the door for us,” Jim Dahmus, Convergys` president of utilities business unit, said. “Especially for ESPs and ESCos, we`re a risk-free option. We charge on a per-bill basis, about 50 cents to one dollar, so there`s no up-front costs. If they choose to build an in-house system or license a billing solution, they`re not protected if their business doesn`t materialize.”

Dahmus also explained that newly deregulated ESPs and ESCos don`t normally have a large in-house IT department, and subsidiaries are oftentimes barred through regulatory mandates from using their parent`s existing system. In the end result, utilities are faced with a three-pronged sword: outsource to a billing vendor, invest $50 million to $100 million and several years to build a system of their own, or pay $3 million to $7 million to license an e-billing solution (and pay ongoing maintenance costs). Add in the fees of a paper bill (envelope stuffing, postage, paper and personnel costs) and you`ve hit somewhere between 65 cents to $1.50 per bill. But by using e-billing, costs can plummet to under 25 cents per bill (many estimate 30 to 40 cents per e-bill).

Going global

No longer confined to the U.S. markets, e-billing is now going global. In Canada, Newfoundland Power participated in a national electronic billing pilot program developed by e-route inc.

In August of 1999, approximately 50 Newfoundland Power employees took part in the pilot which will allowed participants to receive and pay their bills over the Internet. Based on the outcome of the pilot, Newfoundland Power will determine the timing of making this option available to customers. When made available to the public in the spring of 2000, the e-route project will be one of the biggest electronic billing initiatives in North America.

“Newfoundland Power is proud to be one of the first utilities in Canada to take part in such a project,” said Karl Smith, vice president, finance and chief financial officer, Newfoundland Power. “The project provides an opportunity for Newfoundland Power to learn more about electronic commerce technology and how the company can offer customers more choice and convenience in terms of electronic billing and payment options. In addition to the anticipated benefits for customers, electronic billing has great potential for companies to achieve cost savings in bill processing.”

At the heart of the promise of electronic billing

With the advent of high-technology developments like eXtensible Mark-up Language (XML), more and more market participants can share information broadly and efficiently. Just as HTML advanced the adoption of data presentation over the Internet, XML should fast-step the use of data exchange over the Internet. Many industry experts feel that interoperable, web-enabled data exchange is at the heart of the promise of electronic billing and payment.

In conclusion, every month utilities are offered a chance to “make a difference” in their customer interactions through a propitious intermediary-the bill. By channeling that one-on-one interaction into successful marketing, sales and customer service, e-billing offers some rather enticing promises. But keep in mind that effective customer care and billing for utilities needs to address the entire customer care process-accessibility, order taking, billing, collections and complaint management-while creating customer loyalty and building profitable relationships. So keen-eyed utilities should take advantage of this cutting-edge opportunity to make a difference and “expand the bandwidth” of customer interaction through a web-enabled billing system.

NEXT-GENERATION/E-BILLING CONSIDERATIONS

— First consider company`s core competencies (who you are/ who you want to be);

– Assess company`s cultural environment;

– Evaluate market (revenue) opportunities;

– Consider current system architecture and how core functionality might dovetail into new next-generation system;

– Assess all technical interfaces;

– Closely examine cost of ownership/licensing of system vs. outsourcing system (consider service, maintenance of hardware and software, database and operating system and the scope of the license itself);

– Know current (and future) customer scale and scope;

– Appraise ease of administrating system (user-friendly, browser-based versus more complex system-based);

– Assess system`s overall customer care functions (like customization of bill presentment, web-enabled payment, etc.)

l Know system`s data capabilities and requirements (consider all transactions, contracts, standardization and data formats);

– Hit your time-to-market goals (and keep within implementation schedule); and

– Meet all regulatory requirements.

BILLING SYSTEM CRITERIA

– Broad collection treatment strategies, such as continuous follow-up, credit rating/worthiness modeling or pre-pay;

– Robust rating engine that can handle innovative and non-traditional rates, plus engine should allow user to build new, customized rates;

– Summary-level consolidation, plus robust data tracking, warehousing and mining and exception processing capabilities (to handle changes in tariffs, UDC rules, state tax rates, multiple UDCs and states, etc);

l System that (currently or in the future) can implement web-enabled presentment and payment (EBPP), and customized e-bill formats;

l Allowance for network expansion, service differentiation and product line expansion (such as bundled value-added services);

– Utilizes efficiencies of new architecture and data transfer interchange;

– High scalability;

– Accessibility across the organization;

– High rates of customer retention through accuracy and accessibility (retaining customers costs 60 to 80 percent less than obtaining new ones);

– Real-time (for customer information updates and cash receipts) or batch (desirable for remote reading) processing, or a blend of both;

– Data sharing from point-of-initial-contact through the total customer cycle;

– Managing and tracking of targeted marketing programs;

– Easy-to-use reporting and query capabilities; plus

– Proper system installation, implementation, system updates, quality documentation, day-to-day support and staff training.

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