Utility companies across the country are introducing a new service that offers once-unimaginable benefits-enhanced customer service, strengthened customer relationships, streamlined billing processes, lowered costs and one-to-one marketing opportunities. The service is electronic bill presentment and payment, also known as Internet bill delivery and payment, Internet billing or e-billing. But the benefits far outnumber the names.
New York-based research firm Jupiter Communications projects that by 2003 the number of households paying e-bills will jump tenfold to 18 million. With such compelling projections, nearly every industry that bills its consumers has shown significant interest in Internet billing. And utility companies are leading the pack. Utilities such as Consolidated Edison of New York; PECO Energy Co.; Nevada Power; West Texas Utilities Co.; and Cinergy’s Union Light, Heat and Power operating company are among a group of pioneers planning for a time when many customers will choose the Internet over the checkbook. In the past six months, more than 10 electric, gas and water utilities have gone live with the service through technology provider TransPoint, a joint venture of Microsoft Corp., First Data Corp. and Citibank.
Why has the utility industry, an industry not noted for being on technology’s cutting edge, shown such interest in this new technology? Because the utility industry is changing rapidly. This evolution can be attributed to three major forces:
- industry deregulation and consolidation;
- emergence of nontraditional competitors;
- increasing customer expectations.
These same forces are fueling the race to Internet billing.
Industry Challenge: Deregulation and Consolidation
The powerful economic and regulatory forces that transformed the telecommunications, trucking and airline industries now are driving utility industry restructuring. Many utility regulators have decided that consumer choice and open markets are the best ways to achieve a more efficient electric and gas industry. The recent spate of merger and acquisition activity is evidence of the increasing competitive and cost pressures experienced by industry players. It is conceivable that the industry will witness further consolidation that reduces the number of investor-owned utilities from more than 150 to 15 or 20 super-regional firms.
The utility industry’s response to these sweeping changes has been to search for ways to reduce costs and enhance revenue. Like their counterparts in the telecommunications industry, utilities are merging to reap the benefits of scale. Reducing costs per customer, and raising revenues by bundling products and services, will be critical to industry success.
Internet Billing Solution
One solution the industry has tapped is Internet billing. By implementing Internet billing, companies will save 50 percent to 60 percent on the billing process for enrolled customers, including the cost of paper, envelopes, postage, labor and remittance handling. The last factor is the most important. When people pay by check, mistakes occur. Customers put the wrong stub in the envelope, forget to sign the check, neglect to put an account number on the check, or any number of other omissions that cause exceptions in the billing department. These exceptions can double the cost of sending the original bill. In the electronic age, remittance exceptions are vastly reduced.
According to Dennis Jawor, treasury operations director for Consolidated Edison of New York (Con Ed), the company’s primary reasons for implementing Internet billing were collection-cycle cost reduction, expanded customer payment options and improved cash flow.
At the same time e-bills are saving money for a company, they also can make money. Due to the nature of the Internet, e-bills are highly interactive and customizable. All of the hard copy inserts that once accompanied bills now can be made into interactive, brand-building, cross-selling marketing tools. Through links or advertisements on the bill’s face, companies can offer their customers bundled services, energy-efficient appliances, links to service and repair vendors, customer survey information, or any number of other services. Customers then can order the product or service with little or no effort.
Links from e-bills can connect to the existing company Web site, driving more traffic to the site and increasing the site’s return on investment. Many companies view Internet billing as an integrated part of their e-commerce strategy and use e-bills as a venue to introduce customers to Web-based interaction. Making the site more transactional will open a world of opportunities for the company, while offering customers a valuable service. How many utilities can say their Web site is an effective means of communicating with and marketing to their customers? Not many. E-bills have the potential to change that.
Industry Challenge: Nontraditional Competitors Join the Race
Fully Internet-based companies, or “.com” companies, seem to emerge every day. They are affecting clothing companies, bookstores, pet shops and, now, the utility industry. As evidenced by the emergence of Utility.com, Energy.com and Green Mountain Energy, today’s utility company must be particularly nimble and innovative in its approach to reaching and retaining customers.
Now more than ever, utilities need to find ways to remain competitive. The traditional regulated monopoly model is changing. Customers in 21 states, or nearly 34 percent of 54 million U.S. households, now have a choice of natural gas providers. Customers in eight states, or 15 percent of 102 million U.S. households, now have a choice of electricity providers. A recent Cambridge Energy Research Association (CERA) study discovered that more than one-third of respondents would be “absolutely certain” to switch providers for a 10 percent price discount. The survey also showed that accurate billing and responsive customer service are “extremely important” to the vast majority (more than 85 percent) of those surveyed.
Internet Billing Solution
In many cases, new market entrants offer a broad range of energy services targeted to niche market segments. To remain competitive, the industry’s response has been to drive change in the traditional utility environment and move toward becoming more technologically savvy. Internet billing effectively molds a utility’s offering to address consumer behavior and industry trends without radically changing the way the business is run. Utilities can reach their customers quickly and easily without sacrificing the critical one-to-one communication on which the relationship depends. In fact, Internet billing can enhance that vital once-per-month communication by making the experience quick, easy and convenient for customers.
Internet billing gives customers more bill-management options, as well as better customer service. Customers can track their billing independently with immediate, electronic access to six months of billing history. They can compare past usage or assess usage patterns visually with graphing capabilities, a feature not frequently offered in paper-based billing. If customers have concerns about an e-bill, they can send e-mail or call a toll-free number to discuss the matter with a customer service representative trained in Internet billing.
As consumers begin to have more choices regarding utility service providers, customer loyalty becomes a critical pursuit. Internet billing can give utilities an edge over competitors that do not offer this value-added service.
Industry Challenge: Customer Expectations Rise
As companies and industries change with the times, so do customer expectations. With new options for communication and gathering information, customers now expect:
- choices and flexibility;
- free information;
- easy, hassle-free services;
- control over processes.
Utilities must be responsive to the “what’s in it for me?” question, or risk losing customers to companies that answer with innovative, valuable products and services. One way the industry has responded to this change in customer attitude is to incorporate information technology as an integral part of its business processes and customer-focused strategy. Creating electronic-based services such as Internet and telephone payment, offering Web-based customer service, and developing the company Web site into a helpful place to get answers or solutions are now necessary to fully serve customers.
Internet Billing Solution
Internet billing is the most recent step in leveraging information technology to help meet consumer demands. The functionality offered by e-bills-interactivity, rich graphical capabilities, self-help, Web-based customer service, customized messaging, speed and convenience-can put utilities on an equal footing with the best customer-focused industries in the world.
“Customers will benefit from the convenience and peace of mind this service provides,” said Jawor. “No more lost or delayed mail, no more late payments, and no more late fees.
“After implementing Internet billing and doing minimal promotions, we received positive comments,” he continued. “Most of the customer feedback about e-bills has been to thank us for making their lives a little easier.”
The Race Is On:Systems Are Implemented
With the rationale in place, many utilities have chosen to implement Internet billing systems. The program is completed in a number of steps. First there is a meeting of the minds, in which the utility and the technology provider discuss the company’s specific needs and how to best implement the system. Then systems integration and testing are completed, followed by a pilot program during which real users test the system. Finally, the system is put into production. This process can be completed in as few as six weeks, depending on the priority the company gives the project. The cost is minimal and is quickly regained as the company begins to realize savings from streamlined e-billing.
Working with TransPoint, Con Ed completed implementation of the system in eight weeks. It installed the service with internal IT staff and, according to Jawor, the company found the TransPoint system very easy to work with.
“We first installed the beta version and then converted to the production product, after piloting the service with about 50 customers and employees. It was easy,” Jawor said. “Mapping our very large print file to the template tools was the largest part of the effort.”
During the pilot, customers could log in to the TransPoint service center using their own secure password, view their bills (including detailed itemization of local taxes, special charges and the associated regulatory information), review their previous payment history and make electronic payments directly from their selected bank account.
At the end of the day, consumers will vote with their feet, or, in this case, clicks of their mouse. “Consumers want information and convenience. If you can deliver an e-bill that gives customers a sense of security and information when they want it and where they want it, we’re starting to find that people are really attracted to it,” said Jawor.
Jawor said Con Ed would like to see 100,000 customers sign up for Internet billing in the next year: “Ultimately, we could have 30 percent of our 3.5 million customers using this service, which will significantly reduce our revenue-cycle costs, improve our cash flow, increase our customer satisfaction and reinforce our image as a business leader.”
Russ Henn is utility sales vice president at TransPoint, with vertical market responsibility for the electric, natural gas and water industries nationwide. Prior to joining TransPoint in 1998, Henn spent 15 years in the energy industry in various sales, marketing and financial positions. TransPoint is a joint venture of Microsoft Corp. and First Data Corp., with Citibank as a minority equity investor. For more information about e-bills, please visit www.transpoint.com.