Utilities Turn to EBPP,But Where Are the Customers?

By Steven M. Brown, Associate Editor

More than 90 percent of respondents to a recent energy industry survey reported at least considering offering electronic bill presentment and payment (EBPP) to customers. The percentage of customers currently using EBPP, however, is significantly lower.

Based largely on the promise of cost savings, increased customer satisfaction and a desire to enter the brave new world of e-business, increasing numbers of U.S. utilities are making electronic bill presentment and payment (EBPP) available as a service offering. But while more energy utilities are opting to implement EBPP, utility customers have not greeted the offering with a great deal of enthusiasm.

According to research conducted by Chartwell Inc. for its report “Chartwell’s Guide to Billing in a New Era, 2nd Edition,” 33 percent of 101 surveyed utilities report that they are either offering or testing EBPP (Figures 1 and 2). That number is up significantly from those released in a survey conducted a little over a year earlier when Chartwell found that only 10 percent of surveyed utilities were offering or piloting EBPP.

In addition to the roughly one-third of utilities offering or testing EBPP at the time of this latest survey, another 31 percent have firm plans to launch the service and 28 percent are considering it, according to the Chartwell research. Only 8 percent of surveyed utilities reported no plans to implement EBPP.

The list of utilities contracting with EBPP vendors and service providers grows on an almost daily basis, but for a variety of reasons customer adoption of the technology remains low, currently hovering at about the 1 percent mark-or lower, depending on whose statistics you read. Low customer EBPP adoption, however, isn’t a problem specific to the utility industry; the adoption rate across all industries doesn’t appear to be much higher than 3 percent or 4 percent. But given the regularity of a utility bill and the popularity of other customer billing options such as budget billing and electronic funds transfer, one might question why utility industry customers don’t lead the pack of EBPP adopters.

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It’s certainly a question utilities would like to answer.

Marketing, Usability are Keys at Reliant

Utilities are showing increased interest in EBPP for good reason. Early estimates suggested that by implementing EBPP the industry could save more than $1 billion a year-primarily by lowering postage, handling and certain administrative costs. The emergence of a number of e-billing application service providers (ASPs), such as billserv.com, Princeton eCom and Derivion, has made the EBPP proposition even more attractive by decreasing the time it takes a utility to realize a return on its e-billing investment.

Unfortunately, EBPP also has a number of strikes against it-not all of which are specific to the utility industry.

Perhaps first and foremost among the strikes against EBPP is the fact that it is still a new-or even unknown-offering in the eyes of all but the most techno-savvy of residential utility customers. Karen Edge, senior program director for the META Group’s Energy Information Strategies division, pointed out that most customers are still leery of paying their bills online, and a good deal of consumer education needs to take place before significant numbers will adopt the new offerings. Concerns over privacy and security may be largely unfounded, but they are consumer concerns nonetheless. Using the Internet, with its advanced encryption technologies, to make payments to billers has been likened to using an armored truck to transport grocery money, but customers are still hesitant to enter their payment information online. Utilities have to assure consumers that making their payments online is just as safe-if not more so-than paying bills through the postal system.

Even before utilities educate consumers on the privacy and security of e-billing systems, they must market the service and let consumers know it exists. Houston-based Reliant Energy launched its EBPP solution, called eBill, in mid-July 2000. The eBill software was developed by BlueGill Technologies (which was acquired by CheckFree Corp. in late April 2000), and Reliant implemented its solution using billserv.com as the ASP. eBill is currently available to 1.6 million Reliant electric and natural gas customers in Houston. According to Brian Landrum, Reliant’s e-business vice president, the utility’s customers have been relatively quick to adopt the service. Although he was unable to provide specific numbers, Landrum said he believes eBill has been adopted at a rate higher than the standard less-than-1-percent rate commonly cited by utilities. Landrum attributes some of this success to the technically savvy customer base his utility serves in the Houston area, but he also says that marketing and usability are among the factors that can spell success for a utility’s EBPP venture.

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“A lot of companies launch their e-billing capability and simply put a link to it on their sites,” Landrum said. “When they do that, they’re only going to get the customers who are actively looking for the service. But to spur adoption, you have to market your service to the customers who wouldn’t normally be looking for it.”

Landrum said Reliant has alerted customers to its eBill option mainly by including promotional literature with its paper bills. Reliant’s eBill is also promoted through another of the utility’s Web sites, a home services and communications portal called GuideStreet.com.

Reliant also made a point of testing its EBPP solution extensively before going live. Before promoting eBill to customers, Reliant promoted it internally to employees. Those employees were then given time to put the system through its steps, uncovering any potential bugs before the full launch.

Landrum said that the time spent building a quality e-billing system, testing it thoroughly, then promoting it has led to success for Reliant.

“We’re ahead of the industry benchmarks (for customer adoption),” he said. “We’re currently running at about two times the adoption rate we originally anticipated. Every week, we’re adding customers at roughly the same rate that we were adding them after the first 30 days. It’s been a very steady, linear growth.”

Regulation Sets Unique Roadblocks

Utilities’ EBPP efforts are also hamstrung by factors unique to a historically regulated industry going through deregulation on a fairly sporadic, state-by-state basis. The META Group’s Edge pointed out that some of the marketing strategies that could be used to promote EBPP, and some of the efficiencies that can be gained through the successful implementation of EBPP, are not currently available to large parts of the electric utility industry.

“We’re seeing companies in other industries offering certain incentives-discounts, loyalty programs, frequent flyer miles and so on-to make EBPP more attractive,” Edge said. “Unfortunately, most of the regulators are not going to allow utilities to offer many of those types of incentives.”

If utilities were able to offer economic incentives-say a small percentage discounted from the monthly bill-to customers who utilize EBPP, customers might be more likely to adopt. Economic incentives have worked for Georgia-based electric cooperative Flint Energies. Flint isn’t currently offering incentives to customers who use the cooperative’s e-billing solution, but the company is offering $2 monthly credits to its customers who opt to have their utility bill payments automatically drafted from a personal bank account. Flint Energies spokesperson Hayley Greene said that customer response to the monthly credits has been positive, with approximately 7,000 or 8,000 of the co-ops 60,000 customers currently opting for the automatic account deduction. Greene said that the monthly credit is justified by the reduction Flint sees in administrative costs.

Edge also said that regulatory requirements may limit the amount and type of payment options a utility can offer to its EBPP-using customers. Experts and providers almost universally agree that for EBPP to be successful, customers must be allowed to use a number of different payment options, including automatic funds transfer from a bank account, debit cards, credit cards, digital money, etc. Currently, the most popular EBPP payment option offered by electric utilities seems to be transfer of funds from a customer’s bank account. Allowing credit card payments as an option poses difficulties in most locales because the regulated utility is not able to defray charges levied by the credit card company and instead must pass those charges on to the individual customer.

Carolina Power & Light (CP&L) is currently facing just that situation with its new EBPP offering, called SpeedPay. Through SpeedPay (a product of E Commerce Group), CP&L aims to expand its customers’ electronic payment options. Since May 2000, CP&L has offered an EBPP solution that allows customers to approve deduction of funds from personal bank accounts. SpeedPay takes customer convenience a step further by allowing customers to make payment via a checking account, credit card or debit card either through the Internet or over the phone. However, CP&L must charge customers an additional 2.8 percent to use the service. Company spokesperson Aaron Perlut doesn’t see the 2.8 percent “convenience charge” as being a deterrent to adoption of SpeedPay, but only time will tell whether customers will be willing to overlook additional charges.

Patience-EBPP Will Work

Despite regulatory obstacles and the relatively low adoption rate to date, analysts predict that EBPP will be a success in the utility industry. Even in these nascent days of EBPP, utilities like Reliant Energy are demonstrating that e-billing can save money and strengthen relationships with customers when the technology is implemented and managed properly-but patience is a must.

“There is a cost savings that we expect to see over time,” said Reliant’s Landrum. Part of that cost savings for Reliant comes from the fact that Reliant discontinues the issuance of paper bills to its EBPP customers once they’ve gone through two billing cycles using eBill. (The META Group’s Edge pointed out that discontinuation of paper billing isn’t likely to be an option in fully regulated environments.) “You don’t get the savings right away because there’s a certain amount of fixed cost associated with creating the EBPP capability,” Landrum said. “But there’s a variable cost savings that over time should lower our costs to serve customers.”

Since Reliant’s eBill is provisioned by ASP billserv.com, Landrum said he expects Reliant to start seeing the cost savings benefits in a much shorter time frame than had the utility purchased and installed a full system on its own. “If you follow an ASP model, you can really minimize that upfront investment,” Landrum said.

Edge agreed that utilities looking to implement EBPP for cost savings should go the ASP route. She said that the META Group recommends outsourcing EBPP and making the service as visible as possible by offering it through a number of billing consolidators. Edge also pointed out that ASPs provide an advantage beyond reducing upfront implementation costs. “ASPs can be a big help on the advertising and marketing side,” she said. “They’re very savvy about customer education, and they’re not going to make any money unless people adopt the solution. It’s in the ASP’s best interest for consumers to adopt. We don’t understand why utilities wouldn’t use the ASP model for EBPP.”

Edge also noted that when EBPP takes off for utilities-and she believes it will-most of the activity will be on the commercial and industrial customer side, not the residential side where most attention is presently being paid.

“In coordination with EBPP, utilities can provide a lot of different tools to help their C&I customers understand their energy usage,” she said.

Edge said that the META Group expects customer adoption of EBPP to increase to about 20 percent to 22 percent by 2004 and that the majority of the EBPP business will be on the commercial and industrial side. At the present, she said EBPP should be more of a customer-focus effort for utilities than a cost-savings effort, but as adoption increases, utilities will be able to offset some of the regular ongoing costs associated with billing.

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