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SIX BEST PRACTICES
UTILITIES CAN EMPLOY
TO IMPROVE
COLLECTIONS
PERFORMANCE
BUSINESS
CONSULTANTS
DEEP
TECHNOLOGISTS
highly measurable, visible, and actionable, it is
also influenced dramatically by local ordinances
and challenges that are unique to each utility.
Our benchmarking effort identified six best
practices that utilities can employ to improve
their collections performance. Some utilities are
hesitant to change collections practices, fearing a
corresponding drop in customer satisfaction.
West Monroe’s benchmarking found the opposite
to be true -- generally, utilities that implement and
strictly enforce collections policies have higher
customer satisfaction.
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“
Some utilities
are hesitant to
change collections
practices, fearing
a corresponding
drop in customer
satisfaction.
“
Utilities face increasing pressure from stakeholders
and communities to improve their financial
performance and profitability by minimizing
write-offs for uncollectible accounts. West Monroe
Partners recently benchmarked clients to identify
best practices used to improve utility collections
performance. While collections performance is
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Of survey participants, investor-owned electric
utilities generally have the best revenue
collections performance, followed by combined
municipal operations (e.g., electric and water).
Municipal water utilities demonstrated the
most need for collections improvement. This is
likely due to the prevalence of automatic meter
reading/advanced metering infrastructure
(AMR/AMI) in electric utilities, infrastructure that
supports remote-disconnect, and clear policies
mandated by regulatory commissions for electric
utilities. Water utilities, on the other hand, have
been slower to adopt AMR/AMI solutions, do not
share nationwide or even regional water resource
mandates, and are often more subject to local and
political influences. Water infrastructure in the
United States is dated and expensive to repair, and
sometimes impedes water utilities from promptly
terminating service. These factors, combined with
often highly political delinquency policies, make
it difficult for water utilities to consistently enforce
policies for treating past-due customers.
Multiple utilities who participated in this survey
were concerned about collections policy
enforcement negatively impacting customer
service. Surprisingly, we found evidence that the
opposite may be true – tightening enforcement of
collections policy may actually improve customer
satisfaction at utilities. This was evident at multiple
utilities, one with high collections performance
and another one with low performance. In
both instances, customer service satisfaction
was higher at the utility that strictly enforced
their collections policy and had lower bad debt
write-offs than their competitor. Based on West
Monroe’s experience, utilities that consistently
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enforce their collections policy spend less time
interacting with delinquent customers, leaving
more time to provide high-quality customer
service. Staff availability to service paying
customers could be the key source of increased
customer satisfaction. Additional benefits of a
consistently enforced collection policy include
higher revenue and lower customer operations
costs, both of which help keep water rate
increases in check. Throughout our benchmarking,
the following best practices were identified to
help utilities minimize bad debt write-offs and
increase customer satisfaction.
Best Practice #1 — Collect and
Maintain Good Customer Data
To enhance collections performance, you first
need to know your customers and debtors. At
account setup, utilities should positively identify
customers by requiring a social security number
or driver’s license number. With this information,
utilities can review past payment behavior (if
available), or perform soft credit checks. By
positively identifying customers, utilities can verify
any outstanding balances on other
accounts associated with the customer, and
require payment in full, prior to establishing
new service. Some utilities recognize and reward
employees for finding old debt write-offs for
customers that are now attempting to initiate
service with a new account. Metropolitan areas
with high populations of renters face additional
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challenges in verifying customer information.
Multiple utilities elaborated on the difficulties of
positively verifying tenants, especially if tenants
attempt to transfer account ownership to a
different resident of the property (e.g., roommate,
sibling, or parent). To mitigate this risk, some
utilities assume the administrative burden of
verifying leases to confirm eligibility, while others
leverage local ordinances to pass the final bill
responsibility to the property owner.
Collecting detailed customer data at account
set-up is only one half of the equation – keeping
this everchanging customer data synchronized
between multiple systems is an entirely separate
challenge. To maintain enterprise data, utilities
should develop and deploy a master data
management (MDM) strategy. When widely
understood and used across the organization,
data management strategies ensure data can
be used for meaningful reporting and analytics.
The foundation of MDM is identifying how data
synchronizes between systems and defining flows
for data updates between Customer Information
Systems (CIS), Geographic Information Systems
(GIS), Workforce Management Systems (WMS), and
the Customer Relationship Management (CRM)
Systems. To keep customer data in sync, customer
service employees should document all customer
interactions in a synchronized system. This
includes emails, phone calls, prior service requests,
and associated service requests. Regardless of
where the data is stored, this practice enables all
utility employees access to updated customer
information. When utilities have high quality data,
they are better able to identify trends in customer
behavior and utility performance.
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Best Practice #2—Practice
Premises-Based Billing
It is difficult to verify tenant demographics, and
tenants’ transient nature increases utilities’ risk of
not collecting payment. To address this risk, some
utilities capture both tenant and property owner
data, and will bill property owners or landlords
in the event of tenant non-payment, especially
in high tenant populations (e.g., college towns).
Although effective in some situations, there are
legal implications of burdening property owners
with tenants’ debt. Utilities that employ premisesbased billing, however, are most effective in
minimizing non-payment. Premises-based billing
holds the premises owner accountable, regardless
of who occupies the property, and has a handful
of benefits:
ww Service disruptions, when utilities are turned
off between tenants, are eliminated;
ww Property owners are not unexpectedly left
paying tenants’ utility bills;
ww Utility costs can be factored into rent and
lease arrangements, resulting in fewer
individual bill payments for tenants.
For utilities, premises-based billing arrangements
(1) minimize the administrative cost of
establishing new service or move ins/move outs
for tenants, and (2) enhance probability of bill
payments, as property owner data is more easily
obtained than tenant data. If utilities must bill
tenants, they should maintain owner information
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Best Practice #3—Employ
Customized, Risk-based Processes
Aggressively treating all past-due accounts in
a similar fashion is expensive, unrealistic, and
could impact public-perception of utilities. To
combat this, and to maximize effectiveness
of treatment, utilities should use analytics to
segment customers into low, medium, and highrisk pools. When high-risk customers enter the
first stages of delinquency with a past-due bill,
they should immediately receive treatment.
Treatment options include outbound phone calls,
bill notices and inserts, referral to social support
agencies, separate delinquency letters, dunning
letters, termination of service, and handoff of
account to collections agencies. Shortening
the timeline for collections activities, including
termination of service, prevent customers from
incurring unpayable, high-dollar bills. Conversely,
loyal, low-risk customers generally deserve the
benefit of the doubt if they miss a payment. For
customers with proven history of on-time and
in-full bill payment, utilities can create extended
delinquency timelines and offer more lenient
policies, such as beginning delinquency steps
with friendly reminder letters and an outbound
reminder phone call. Outside of the utility
industry, some Fortune 500 companies such
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as Discover have similar leniency in polices,
including one-time forgiveness for late payments.
Customized treatment for customers of different
risk levels enhances customer service, reduces
public perception risks, and reduces collections
costs for utilities.
“
Shortening the timeline
for collections activities,
including termination of
service, prevent customers
from incurring unpayable,
high-dollar bills.
“
as a secondary record for the premises’ account.
This ensures bills can default to the owner if the
tenant vacates the property.
A few utilities surveyed discussed a large focus
on payment arrangements. Creating payment
arrangements with customers is an easy way for
agents to get customers off the phone, while
preventing termination of service. Unfortunately,
utilities shared that customers who have already
incurred a balance high enough to warrant a
payment arrangement, typically are unable to
fulfill the obligation of both their regular bill and
their payment arrangement. Utilities can minimize
payment arrangements by treating past-due
accounts in their infancy, rather than waiting for
accounts to age and incur additional usage, fees,
and penalties. This is better for customers, and
reduces the administrative burden utilities face
in creating payment arrangements that are rarely
honored by customers.
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By sending timely bills, with actual meter reads,
and presenting bill information in an engaging
and clear layout, utilities can improve on-time
payment. When necessary, estimated bills should
leverage customer history, seasonal usage
patterns, and weather trends to mimic the actual
amount due as closely as possible. Customers
who understand and trust their bill are more likely
to pay on time, and are less likely to contact the
utility to question or contest their bill.
Today’s customers expect a variety of payment
channels, and utilities compete with exceptional
payment experiences provided by companies
like Amazon, Netflix, and Verizon. Third party
merchant processors (Authorize.Net, PayPal,
etc.), fortunately, are able to provide utilities with
industry-leading payment channels at affordable
price points, and will assume the burden and risk
of storing credit card data. Few utilities provide
customers with recurring payment channels –
channels that automatically charge customers
every month. These channels, such as recurring,
automatic credit card/debit card, or automatic
ACH, are significantly lower-cost than all liveagent supported payments (e.g., in-person
payment centers, payment by live phone agent).
Utilities can incentivize low-risk and low-cost
channels by waiving deposits for new customers
who enroll and through marketing campaigns.
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Best Practice #5—Leverage State
Laws and Local Ordinances
Multiple utilities surveyed cited issues of political
pressure when attempting to perform collections
activities. Survey results indicate that utilities
which have a published delinquency policy,
including fees, timelines, and cutoff practices,
face the least political pressure. Publishing this
information, and consistently enforcing the policy,
prevents utilities from accusations of biased
treatment, and prevents customers from gaming
collections policies.
“
Multiple utilities surveyed
cited issues of political pressure
when attempting to perform
collections activities.
“
Best Practice #4—Make It Easy To
Pay
A handful of utilities have been extraordinarily
successful in reducing bad-debt write-offs by
leveraging municipal code to ensure payment.
These utilities, all municipally owned, work to gain
support of elected officials. When utilities have
this support, they can align collections policies
to the best interest of the municipality (or state)
and the utility. These aligned collections policies
include requiring payment-in-full for the premises
before property deeds can be transferred,
collecting bad-debt from state tax refunds, and
billing property owners for tenants’ past-due
balances.
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a function of connecting customers to the right
resources.
Best Practice #6—Make Utilities
Accessible
While our firm typically works with utilities to
improve business performance and enhance
customer experience, we also strongly believe
that utilities provide a commodity service that
everyone deserves access to. Fortunately, this
is something utilities can incorporate into their
collections strategy. Partnering with local charities
who administer Low Income Home Energy/Water
Assistance Program (LIHEAP) funds is a financially
sound decision for utilities, and enables customers
facing financial hardship to receive assistance with
utility bills. Some utilities are even able to directly
connect to federally funded programs through
local administrative agencies and connected call
center lines.
To develop partnerships with social agencies, at
minimum, utilities should participate in assistance
fairs, and designate a team of representatives
for social agencies to contact with a direct
line. Through active campaigns and outreach
strategy, utilities and social agencies can connect
customers to resources providing financial
assistance. Some utilities have seen great success
in developing third party portals for charitable
organizations to verify customer bills and
payment history, or establish assistance funds
that encourage customers to donate on their
regular bill remittance. Success in this area is less
a function of creating new programs, and more
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CONCLUSIONS
Results of our benchmarking effort made it
clear that collections performance continues to
be a strategic, industry-wide issue for electric,
gas, and water utilities. To improve collections
performances, utilities should:
ww
ww
ww
ww
ww
Collect and maintain good customer data;
Practice premises-based billing;
Employ customized, risk-based processes;
Make it easy to pay;
Leverage state laws and local ordinances;
and
ww Make utilities accessible.
To successfully execute these best practices,
utilities should empower a collections strategist
who can coordinate activities between the call
center, billing, collections agents, field operations,
IT, finance, accounting, and regulatory agencies
(boards, commissions, and elected officials).
Successful collections practices continually evolve
and utilities should evolve with them. Developing
formal continuous improvement processes
that drive innovation can enhance collections
performance through improved business
operations;
ww Increased technology adoption (e.g., AMR/
AMI, customer analytics);
ww Modified and leveraged municipal code/
commission rules; and
ww Enhanced training of utility employees and
customers.
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Improving collections performance has a
significant bottom line impact for utilities –
even one-half a percentage reduction in bad
debt write-offs generates significant financial
return – and it improves utility reputations in
the communities they serve. West Monroe’s
Collections Maturity Model is a tool to help
utilities benchmark their performance against
six industry best practices, and can foster
dialogue on collections strategy, performance,
and shortcomings. As utilities seek to improve
customer service and satisfaction, it makes sense
to look at all customer touch points, including
collections processes. For many utilities, a holistic
view of the customer experience they provide
leads to better customer satisfaction,
increased standing among their peers, and
improved financial results.
West Monroe Partners extends our deepest
thanks to the utilities who participated in this
COLLECTIONS MATURITY MODEL
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benchmarking effort. Survey participants include
investor-owned utilities, municipal utilities,
and cooperatives. Due to the highly sensitive
nature of collections strategies and performance,
individual survey participants and their specific
results are anonymous. There were 3 smaller sized
participants (0-100K customers), 7 medium size
participants (100-1M customers), and 2 larger
participants (1M+ customers). Annual write-offs
ranged from 0.25% of operating revenue to 3.0%.
Our team has experience developing and
executing collections strategies – from customer
analytics and data strategy to technology design,
development, and implementation, West Monroe
Partners can help utilities improve financial
performance, while improving customer service
levels and public perception. Our team has deep
industry experience defining technical and
functional requirements, redesigning business
processes, and strengthening business strategy.
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About West Monroe Partners
West Monroe is a progressive business and
technology consulting firm that partners with
dynamic organizations to reimagine, build, and
operate their businesses at peak performance. Our
team of more than 850 professionals is comprised
of an uncommon blend of business consultants
and deep technologists.
This unique combination of expertise enables us
to design, develop, implement, and run strategic
business and technology solutions that yield
a dramatic commercial impact on our clients’
profitability and performance.
To learn more about West Monroe Partners and our
experience with utilities, please contact:
Tom Hulsebosch
Senior Managing Director,
Energy & Utilities
Tricia Anklan
Senior Consultant,
Energy & Utilities
Tom Hulsebosch is a senior managing
director, leader of the firm’s Energy &
Utilities and Sustainability practices,
and serves on the Board of Managers.
Tom is also the executive sponsor of
West Monroe’s Innovation Network and was the architect
responsible for developing the firm’s ConnectTheGrid
interconnection tool. A 25-year veteran of the utility,
ISP and wireless telecommunication industries, he has
extensive experience creating and delivering technologyenabled business solutions for utilities, enterprises, public
safety agencies, and service providers.
Tricia has four years of consulting
experience focused on improving
business processes and effectively
leveraging technology. Her experiences
include IT strategy, enterprise
dashboards and analytics, and executing on a multi-year
$12M business process improvement project, including a CIS
upgrade, user acceptance testing, and unifying business/
system logic. Tricia has project management experience on
both strategic initiatives and technology-driven solutions,
and has worked in several industries, including energy &
utilities, mergers & acquisitions, manufacturing & distribution,
[email protected]
healthcare, and litigation.
[email protected]
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