CHAPTER 3
CUSTOMERS AND MARKETS
RAMP: A Unique Solution to
Recovering Lost Revenue
The Revenue Assurance Management Program not only identifies leads for the
utility, but maximizes revenue recovery via improved billing and loss prevention.
www.UtilitiesProject.com/10743
R
evenue losses are a common
problem among utilities across the
globe and are typically segmented
into three categories:
Administrative
losses, <2%
Commercial
losses, 1- 3%
• Technical – energy/commodity lost
during distribution;
• Administrative – internal operational
issues related to under-billing; and
• Commercial – theft and fraud.
Across all three loss types, UtiliPoint (a
leader in providing research to the utilities industry) estimates revenue lost at
between 3 and 7 percent (see Figure 1).
The following review will focus on
administrative and commercial losses,
which make up 2 to4 percent of total
revenue.
For a typical large North American
utility, commercial and administrative
revenue losses can amount to over $150
million per year.
Most utilities employ small internal revenue assurance teams that largely focus
on theft and rely on field personnel to
identify and resolve issues. Also, current
revenue assurance processes within utilities are highly manual and not data-inten-
Energy billed,
93 - 97%
© 2005 UtiliPoint® International, Inc.
Figure 1 Typical Utility Revenue Losses
sive. Employing such an approach leaves
significant money on the table.
Recently, computer applications have
emerged for utilities to purchase that
automate the process of looking for
either unpaid bills or energy theft. This
approach, however, also fails to optimize
the revenue recovery, due to inexperience with these analytical tools, insufficient staffing and a utility’s hesitation to
invest in prevention programs.
IBM had developed a Revenue Assurance Management Program (RAMP) to
WRITTEN BY
Ed Glister, IBM Global Technology Services
Ed Glister is a meter-to-cash specialist in IBM’s Global Technology Services organization. He has
more than 20 years’ experience in the utilities industry and 10 years of consulting with utilities
and other industries. Mr. Glister’s focus has been on identifying opportunities to improve contact
center, back-office and revenue assurance performance through the utilization of enhanced data
analysis and leading practices. He has led more than 20 contact center diagnostic reviews and
helped successfully implement these recommendations with many companies. Mr. Glister is currently pursuing his doctorate in management and management science.
p106
Innovation in Action
Technical
losses, 1- 3%
address revenue losses in the utilities
industry. The program is comprised of a
proprietary methodology and set of tools
to identify and recover lost revenue for
gas, electric and water utilities. RAMP has
as its foundation a gain-sharing and governance model that meets the needs of utilities, with various implementation options.
A unique characteristic of RAMP is that
as opposed to being just an application
that the utility can purchase, the offering is available as a service to the utility.
RAMP materially improves the identification, collection and prevention of administrative and commercial losses across
20 different loss types. The program
includes:
Statistical Analysis
OF Loss Types
IBM applies sophisticated filters to a
utility’s billing, metering and other transactional data in order to identify different
loss types including, but not limited to,
theft losses, miscalculated bill due to com-
white paper
pany error, incorrectly sized meter/regulator for consumption, and under-registering meters.
Analytical tools are available through
Itron, an IBM partner, as well as tools
developed by IBM Research (see Figure
2). The tools capture and analyze more
than 125 fields of data, helping to materially improve the identification of losses.
The analysis tools are complemented
by the experienced IBM-Itron team,
combining decades of industry expertise
with critical analytic skills. The following
capabilities and services are available
with RAMP:
20 to 25
Usage Score
10 to 15
5 to 10
0 to 5
25
20
15
10
5
0
-5
-1 0
-1 5
-2 0
-2 5
-3 0
-3 5
-4 0
-4 5
-5 0
-5 5
-6 0
-6 5
-7 0
-7 5
-8 0
-8 5
-9 0
-9 5
-1 0 0
200%
150%
100%
Flexible Identification, Investigation
and Recovery Approach
The RAMP approach enables a utility to
collaboratively determine which tasks in
the revenue assurance recovery process
should be completed by which partner.
IBM is flexible in assigning roles and is
prepared to undertake all RAMP tasks.
15 to 20
50%
0%
Usage Discrepancy
-50%
-99.9%
5%
-5 to 0
-10 to -5
-15 to -10
-20 to -15
-25 to -20
-30 to -25
-35 to -30
Score
55%
45%
35%
25%
Model Uncertainty
15%
-40 to -35
-45 to -40
-50 to -45
-55 to -50
-60 to -55
-65 to -60
-70 to -65
-75 to -70
-80 to -75
-85 to -80
-90 to -85
-95 to -90
-100 to -95
Source: IBM and Itron
Figure 2 RAMP Capabilities and Services
Enhanced Back-Billing System
Once a revenue assurance lead is confirmed to be a loss, there is a need to
back-bill the account (subject to any PUC
or utility company guidelines that restrict
the length of back-billing).
age losses occur frequently, particularly
for meters that are inaccurate and also
for several theft types. These loss types
exhibit a rather constant, fixed percent-
to determine the appropriate base level
of usage/demand. A seasonally adjusted,
customer-specific base graph is then created and compared with the tampered
The RAMP approach enables a utility to
collaboratively determine which tasks in the revenue
assurance recovery process should be completed by
which partner.
Many utilities have a less-than-optimal
method of reconstructing the back-bill,
effectively losing a portion of the potential revenue recovery. To effectively
back-bill the account, it is necessary to
understand the causative reasons for
the meter under-registration, and then
to use a back-billing approach that recognizes and responds to those causative
factors.
Typically the causative factors leading
to under-registration fall into one of two
categories: “fixed percentage” of loss and
“variable patterns” of loss. Fixed percent-
age of loss once the loss starts. As an
example, if tampering disables one phase
of a two-phase meter, and that phase
carries 45 percent of the load (based on
an analysis of the customer site at time
of theft detection), then the re-billing
would need to make up for that missing
45 percent.
A “variable pattern” loss would be
caused by a different kind of theft, e.g.,
a customer who tampers with the meter
one week, but not the next. The key here
is to measure the total load and also look
at periods when no tampering occurred
readings to highlight the amount of
under-registration.
Once the theft type (fixed versus
variable) is known, then a re-billing tool
can recalculate the missing amounts.
This, however, is only one aspect of the
re-billing engine. The re-billing tool must
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p107
RAMP: A Unique Solution to Recovering Lost Revenue
CHAPTER 3
CUSTOMERS AND MARKETS
1200
Bills
Model
Kwh per bill
1000
800
600
400
200
Sudden, 45%
drop in energy
use after April
0
9/1.01
9/1.02
9/1.03
8/31.04
Source: IBM and Itron
Figure 3 Actual Bills of a Specific Customer vs. Its Three-Year Model
IBM
Lead Generation
Analytical Tool Sets:
• Revenue Assurance
• Credit & Collections
Qualified
Leads
Lead
Pursuit
Incremental
Revenue
Realized
%
%
Client
Figure 4 RAMP Solution Yields Leads
also recognize other factors, like days
in the month for variable loss types and
whether there was an estimated reading
(estimated readings can distort re-billing,
since an under-billing in the estimated
month can artificially inflate the usage
in the month where the actual reading is
recorded).
The end result is a professional presentation that helps the utility to improve
the back-billing accuracy (start date and
p108
Innovation in Action
amount of recovery), facilitating customer
discussions and supporting back-billing
challenges with the PUC or other public
organizations, e.g., for prosecuting theft
(see Figure 3).
Investments to Enhance Utility
Loss Prevention
The RAMP review will identify the root
causes of several loss types and help
quantify the loss impact on the utility.
IBM, after utility review, is prepared to
undertake loss prevention projects which
require IBM’s investment when there is
an appropriate anticipated return on
investment.
In the end, RAMP not only identifies
leads for the utility, but it maximizes revenue recovery via improved billing and
loss prevention.
RAMP is supported by a proprietary
database to enable detailed loss recovery
analysis, combined with a work flow management system that plans, controls
and supports daily revenue assurance
investigations.
Gain Sharing Provides
Unique Advantages
to Utilities
An additional, key aspect of the RAMP
solution is the opportunity to provide utilities with revenue upside through a gainshare arrangement (see Figure 4). This
arrangement is unique to the industry
and provides potential utilities in a capital-intensive industry with the opportunity to recover losses with minimal to no
investment, with reduced risk. The percentage of gain sharing that goes to the
utility is specific to each contract. However, the gain-sharing formula is based
on a “due diligence” review of potential
benefits and costs, and it is developed so
that the arrangement provides the utility
with significant revenue recovery over a
potential multi-year contract. n