Articles
The Business Case for Advanced Metering
AMRA News, Note: this article was originally published in AMRA News in 1995. As of 2006, the analysis remains the same, though costs have increased significantly – an estimated 50%.
According to Theodore Barry Associates, the most important savings from advanced metering are coming not from eliminating manual meter reading but instead from a combination of reduced billing and accounting costs, improved cash flow, and corporate strategic benefits in a deregulating environment. Significant savings will also accrue at customer call centers through access to more information and automatic reporting of outages. This article is about billing and accounting savings; next month, we will address cash flow.
While U.S. electric, gas, and water utilities will spend over $2 billion to read meters this year, the same utilities will spend more than three times as much — $7 billion in all — to bill their customers. Another $5 billion will be spent handling phone calls, including customer complaints, billing questions, outage reports, and other items.
1995 Customer Accounting & Customer Service Expenses for U.S. Electric, Gas & Water Utilities
Source: Energy Information Administration, U.S. Department of Energy
Through advanced metering — sometimes called “fixed-network” automatic meter reading — utility accounting departments have access to functionality that enables them to streamline the billing and collections process. This reduces manual expenses associated with special handling, estimating bills, meter investigations, and other issues. Even better, it improves customer service by ensuring timely and accurate billing and by giving utilities the ability to offer summary billing, customer-selectable bill dates, split-month billing, and what one utility representative called “virtual billing.” (While it is unclear what virtual billing really is, I know I would love to be able to pay my utility bills with “virtual payments!”)
The key to seeing the anticipated benefits of advanced metering is to think about the reasons utility accounting staffs are so large. One of the most important causes is the need to handle exceptions and problems. The great majority of accounting work is already automated: meter reads are transferred electronically to the billing computer; bills are calculated, printed, and mailed automatically; and even customer payment checks can be read and encoded electronically. Much of the remaining work is manual handling of special situations, including problem solving. Advanced metering eliminates much of this work while improving the efficiency with which the rest can be performed.
Some examples illustrate how accounting processes will be streamlined and where savings can be expected by comparing today’s process with tomorrow’s advanced metering-based process.
1. Obtaining complete meter reading route information.
Today: Many utilities wait until all the reads from a route have been turned in before sending the meter reads to billing. This is to allow meter readers flexibility in getting access at difficult customer sites and in completing their entire routes. While the vast majority of reads are turned in on the scheduled date, as many as three days may pass before the routes are completed. This may involve phone calls to meter reading supervisors to try to expedite reads, handling phone calls from marketing representatives striving to get bills out faster, and creating and maintaining interim data files to hold reads from the incomplete routes. Tremendous accounting staff time is spent on the phone dealing with these issues.
Tomorrow: With advanced metering, complete sets of meter reads will be delivered on the scheduled read date. Staff time associated with trying to get complete routes will be virtually eliminated.
2. Handling inaccurate meter reads.
Today: As meter reads are loaded into the billing system, some of these reads are “spit out” as exceptions having problems. This results in a variety of potential corrective actions, such as phoning the meter reading supervisor to question the read, preparing a tag to have the meter read again (which also involves, obviously, the need to go out and read the meter again), or calling the customer to verify the read if, say, it is a post card read. Each of these solutions is time intensive and add up to significant totals even for a small percentage of the meter reads, since a utility may handle as many as 50,000 bills per day or more.
Tomorrow: Realistically, even in an advanced metering environment there will be exceptions that must be handled manually. However, to obtain correct reads, accounting staff will merely enter the account number at their computer terminal and, usually within 30 seconds, have an updated and corrected read. After a short time, the exceptions list will have been dealt with and the reads forwarded to the billing computer for processing.
3. Eliminating estimated bills.
Today: When a meter read is missed, an estimated bill is calculated. These estimates are sometimes done manually and, even if done via an automated process, usually checked manually. Again, while the percentage may be small, the cumulative result in staff time and cost is often quite large.
Tomorrow: Estimated bills will be virtually eliminated. For any meter read potentially causing the need to estimate a bill, the accounting clerk can simply read the meter on-line, update or verify the read, and enter the data into the billing system for normal processing. A smarter system can carry out even these steps automatically, thus freeing accounting staff for other functions.
4. Reducing bill investigations.
Today: Customer complaints often generate a request to review a bill, re-read a meter or check a meter for proper operation. Accounting staff are often involved in coordinating this process: they issue field service tags, maintain records of the event, receive updated field information, enter data into the billing system, and coordinate with customer service representatives to call customers back with the results of the bill investigation.
Tomorrow: Tomorrow’s utility customer will start with greater confidence in the meter reading and billing system. No longer will the customer be seeing estimated bills. Meter reads will be fully automated with electronic database updates rather than manually entered data subject to fallible human eyes and fingers. In fact through constant electronic monitoring, customers will know they do not even have to call in to report an outage; the utility with advanced metering will know about the outage before the customer calls and will likely even know which piece of equipment failed and caused the outage.
In this environment, the customer will be far less likely to question meter reads or meter accuracy. This translates into a significant reduction of bill investigations. Moreover, for those investigations that occur, the accounting representative will have far more information immediately accessible to answer the question. This includes on-line meter reads, historical daily and monthly meter reads, and other data. Thus, accounting staff will be able to answer the question much faster and, in most cases, without having to dispatch a field service representative to the customer’s premise. Again, the savings are significant.
Conclusion
While customer accounting workload is not going to disappear, even in the most advanced environment, tomorrow’s accounting employee will have access to powerful applications software and communications capability. These will combine to eliminate routine problems and greatly facilitate the resolution of remaining issues. To sum up some of the above examples, advanced metering will result in —
- Having complete sets of meter reads on each scheduled read date with little or no need to investigate or wait for missing reads
- Rapid handling of questionable meter reads through “on-line” access to meters to repeat or verify meter reads
- Elimination of the need to estimate bills by having accurate, actual reads or the ability to re-read meters on line
- Reduced quantity of bill investigations, combined with powerful tools to quickly and accurately handle such investigations
In short, advanced metering provides information to help significantly reduce the 49% of U.S. utilities’ annual customer accounting and customer services bill that is associated with billing. If all of the savings described above totaled as little as 10% of accounting and billing costs, the annual savings would be over $700 million for the industry, a significant number by any measure.
