Utilities and Telcos: Different Domains, Similar Challenges

The need for quality data, enhanced billing, improved regulations, more education and further collaboration were the five fundamental outcomes from the inaugural Risk & Assurance Group (RAG) Utilities meeting held in London last month (pictured).

Having spent many years in telecoms risk management, it was enlightening to see that the utilities sector, even though longer established, is not as mature when it comes to revenue assurance. The dynamics in utilities are different from the subtleties of the telecoms industry. Communication service providers have a myriad of services and product offerings, multiple devices offerings, post-paid/prepaid subscribers and multi-play offerings. In the utilities industry, there are fewer services. You can buy water, gas, and electricity, but what else? Many have expanded into complementary services, offering phone, broadband, etc, but they are certainly not as comprehensive. The common factor may be that they both have complex tariff plans.

Utility service providers seem to have the frustrating problem of not knowing all their customers at any one time. Think about it… The proliferation of new build housing estates, fluid tenancies with short term rental leases, changes in building usage, to name just a few factors that makes it hard to track and know your customer.

A simple ‘hands up’ request in the meeting room to see how many people had been impacted or experienced issues with utility providers was very indicative of the situation facing the industry. The huge number of hands raised demonstrated that that the utility industry has some major revenue issues to contain. Stories from the audience of not being billed, multiple bills, overcharged, meters not read, no meter in place, etc. were clear indicators that revenue is being lost.

The Need for Data Quality

UK utilities companies are constrained by only being able to back bill for the previous twelve months, sounds a long time doesn’t it? But utilities companies, due to legacy infrastructure and process, may only invoice twice a year or once a quarter, so the need to get billing accuracy on target is critical to minimise billing error issues and the possibility of missed revenues. Leakage drivers (as in the telco industry) are around setting up tariffs correctly, monitoring consumption, applying correct discounts, ensuring promotional periods are tracked, etc.

Mandy Meehan, Systems Integration Development Manager at Wave, a water utility, provided some insights into the challenges facing the industry. In her opinion, with her professional experience and long tenure in the utility industry, quality of data is the driving force to ensure effective processes and controls mitigating risk and assuring revenue. With business margins being continuously squeezed, the need to detect losses and revenue leaks and optimise collections, etc. is critical for commercial success.

Data in utilities, as in telecoms, is critical for accurate billing and maximising revenue streams. Without quality, consistent and substantiated data there will always be challenges to optimise operations and revenue generation. The availability of such data is sometimes more challenging. Whilst the utility wholesaler may own 200+ data points, the retailer maybe has 20+ such data points. The reliance on the retailer to generate accurate billing, timely and detailed invoices and timely collection is hindered by this dependence on this expanded dataset which could be slow and laborious in changing, updating and receiving.

It is therefore crucial to define a data dictionary with recognised responsibility for maintaining such data. Good data quality allows for reports to be generated, providing visibility of processes which can be understood and managed effectively. Good quality data allows for automation, providing speed on critical processes and improving productivity and then allows resources to proactively tackle other things within the business.

Complementing this data with other external intelligence, such as change of tenancy, mail returns, feedback from 3rd parties (meter readers, feedback from new owners on vacant properties, meter cracked, conversion of flats, etc.) provides further enhancement to risk management activities.

The Need for Better Billing

Experiences from the telecom industry and the utility industry demonstrate the same underlying requirement – data quality and auditable data means good quality and reliable data being presented to billing systems. The need to have processes and policy that ensure clean, intelligible, quality data is being fed into these databases should be high on everyone’s agenda.

Penny Walton, the Sales and Billing Manger at United Utilities, one of the largest listed water utility companies in the UK, spent 30 years in telecoms sales and billing where revenue assurance was just one facet of this role, and as an operational manager is tasked with getting clean and accurate bills out to United Utility consumers.

She highlighted within the water industry, the need to bill all their customers and bill accurately – even though it sounds very simple for water, is actually quite complex. Profit margins are small (as low as 3%) so the need to bill accurately and all customers is paramount.

Today Penny has three data integrity personal to support the need to have qualitative data that can be relied on for billing. One of her first tasks when she joined United Utilities 18 months ago was reviewing the legacy two annual bill cycles when 1.8million customers in an 8 to 10 week period are invoiced. Improving this billing process to look at billing at anniversary contract date billing, implementing direct debit subscription-based billing, etc. would remove the peaks and troughs of revenue when distributed across the year and would allow for improved debt management controls. It would also remove the bottlenecks in contact centres with such a condensed billing period.

Changing the billing cycles would proactively identify possible issues/bad debt, delinquent behaviour, changes in customer activity, people moving, etc. and allow for collection to be timelier and more successful as well as provide much more detailed visibility of the financial and operational health of the business.

Some of us already have utility smart meters. This smart technology is not being fully utilised, but it could allow utility providers to charge per day, peer week, per month? Such technology is available now, but utility providers will need to make significant investments in updating their billing systems and other supporting systems as well as process and culture to allow such invoicing and billing to occur.

The Need for Better Regulation

Water supply in the UK is a monopoly and consumers can only get service from their regional provider. This is different to electricity and gas where over 100 providers are contesting for your business.

The regulators Ofwat and Ofgem have heavily regulated the industry with the emphasis on consumer rights. The latest initiatives include capping prices to ensure reduction in bill shock. Utility providers are being pushed by regulators to ‘Know Your Customer’ (KYC) to reduce the damaging issue of bad debt and improve customer satisfaction and ultimately be more competitive. At the end of the day, the more losses the utility providers incur, means the end customers will ultimately have to pick up that bill and thus expect higher annual costs.

Ofwat have introduced directives and initiatives such as PR19 and Service Incentive Mechanism (SIM). Although they are meant to benefit and support the consumer, they can actually sometimes hinder business, with utility companies trying to avoid being penalised with large fines, whilst maintaining customer satisfaction and not focusing on the core issues.

Because of legislation and regulation, utilities have always tendered to favour the customer when issues occur. This has a direct impact throughout the business supply and service chain including the agents and customer services personnel, where if not managed and educated correctly can mean significant and unnecessary revenue loss for the utility provider.

The Desire for Collaboration

It was clear from just this one short day in London, the positive energy, pride and proactive approach by the utility providers’ employees who are passionate about their jobs and tasks ahead of them, gives confidence that maybe some of the legacy negative experiences faced by many consumers will steadily diminish.

Telecoms may be more mature in RA initiatives, but if utilities can harness their passion and continue to contribute to such forums and share and assist their peers, it will not be long before the next Risk & Assurance Group Utilities meeting is arranged and more utility providers join their peers to working together to jointly manage risk and revenue loss.

Luke Taylor
Luke Taylor
Luke is the founder of Risk Reward Awards, an association whose goal is to encourage recognition of the best work done by risk professionals. Previously he was the Group Chief Commercial Officer and Deputy Chief Executive Officer of a risk management software developer. Luke now divides his time between Risk Reward Awards, RAG and Lateral Alliances, his consultancy business where he works with the likes of Symmetry Solutions, XINTEC, GBSDTech, Yates Fraud Consulting and Focus Data, to name a few.