With rising unemployment and many

households under increasing financial

pressure, it is not surprising to see a

growing number of utility customers

defaulting on bill payments. Large

numbers of energy and water utilities

around the world, along with telcos, are

indeed grappling with increased

payment arrears and are faced with a

challenge to not only recover revenues

from non-paying customers – but to also

correct behaviours and achieve

customer payment continuity. This paper

explores the renewed potential of prepay

metering and integrated billing and CRM

to meet these challenges.

REDUCING UTILITY BILL ARREARS – A NEW DAWN FOR PREPAY METERING

Gentrack Whitepaper | Reducing utility bill arrears – A new dawn for prepay metering 1

REDUCING UTILITY BILL ARREARS – A NEW DAWN FOR PREPAY METERING

An essential tool for reducing utility

bill arrears

The challenges surrounding prepayment

NEA notes too that consumers “like the discipline of

controlled expenditure and the avoidance of

unexpectedly high bills”. With rising unemployment and many households under

increasing financial pressure, it was inevitable that

growing numbers of utility customers would default on Despite the benefits prepayment meters provide to bill payment. And large numbers of energy and water both utilities and their customers, global uptake has utilities around the world, along with telcos, are indeed been confined to only a few countries. China, South grappling with increased payment arrears.Africa and Turkey, along with the UK, account for 97%

3of the world’s installed prepay meters .But surprisingly, arrears growth has not been consistent,

even among providers of multiple utility services to the In Australia and New Zealand, along with the majority same customer base.of other countries, penetration has limped along at

about 2 or 3% of the installed meter base. Thus far, the To understand why, it is useful to compare the increase

barriers to uptake have been significant.in monies outstanding from domestic customers in the

UK energy sector with those in the water sector.

In 2008/09, the UK water industry experienced a 13% Costs of deploying and maintaining a separate year on year growth in outstanding revenues, with over infrastructure for prepay meters has been 5 million customers owing money to their water prohibitive for many utilities. In addition to the

1supplier . Energy debt on the other hand has been fairly cost of installing a different meter and having to static for many years and although it did start to rise at physically update it for any tariffs charges, the the end of last year, the numbers of electricity expense of managing a separate payment network households in arrears are still only a third of that of is considerable.water.

Obviously, the water industry’s inability to disconnect The issue of fairness, and the capacity of prepay

supply for non payment has a significant influence on meters to contribute to, and increase energy

bill payment prioritisation. However, the fact that 5.8 disadvantage, is of concern to consumer advocate 2million households have a prepayment energy meter groups and regulatory bodies alike. Even in the UK,

will have also played a large part in keeping arrears the lowest cost tariffs are normally not available to

growth lower than in other sectors.prepay meter customers. Indeed prepay tariffs are

often higher than average, reflecting the higher And prepayment meters seem to be popular with those infrastructure costs. Comparing tariff plans who use them. In the UK, the National Energy Action between retailers can be difficult and switching is group (NEA) reports satisfaction rates are commonly 70-not as easy, resulting in customers often being 80%, even higher amongst those on low incomes. The trapped in non-competitive supply situations.

1. Infrastructure Costs

2. Social concerns

Coercion is also a common concern, particularly for Mandated in many jurisdictions, smart metering

changing tenancies. Although the new tenant may deployment continues to be led by both retailers and

have a good credit history, they may still have to use networks dependant on meter ownership structures

the pre-existing prepayment meter. and challenges in respective jurisdictions. While smart

metering technologies have been deployed for

benefits such as deferred investment in network

infrastructure, removal of estimated reads and ‘real-Many regulators, rightly acting to protect consumers

time’ interval data, just to name a few, there are also from further disadvantage, have created codes of

significant cost advantages for utilities that wish to practise for prepayment meter provision.

leverage prepay offerings off the back of these smart Compliance to which however, can be onerous and

metering platforms. The need for utilities to run two costly. For example, in many Australian jurisdictions,

parallel metering and payment infrastructures is now customers must have a mandatory trial period after

removed with advanced metering technologies which the meter can be removed at the behest of

available.the customer and at no cost. There are restrictions

on how much debt can be recovered, if any (often A typical pre-pay meter scenario including integration the primary reason a retailer may want to move a with a utility’s billing, CRM and collections customer onto prepay) and reporting obligations are components is outlined in Figure 1 (overleaf).significant.

Prepayment meters by their very nature allow self

disconnection. Consumers, who may otherwise be We know cost is only one of several barriers to protected from disconnection through hardship prepayment metering uptake. The need to address programs or legislation (for example, no regulatory and social concerns is just as pertinent. As disconnections during periods of extreme weather much as advanced metering is the prepayment conditions), could disconnect themselves with enabler, a utility’s ability to tackle customer centric serious health consequences for one or more issues will often come down to the performance of its household members. This is particularly relevant for back office billing system. Prepay billing and vulnerable households and for those with a medical supporting CRM capabilities should include:dependency.

Accurately capturing the details of all potential The advent of the ‘smart grid’, and the deployment of prepay customers and determining their suitability smart meters as a key component for demand-side before they make that switch, is crucial if high risk participation, finally offers utilities both a low cost and self-disconnection is to be avoided. Systems with socially fair means of increasing their prepay customer preconfigured call scripts facilitate identification of footprint. vulnerable and medically dependent customers,

3. Regulatory Requirements

4. Self Disconnection

• Embedded CRM

The prepayment billing system is now as

relevant as the meter

Prepay or Smart Meter – you choose

Gentrack Whitepaper | Reducing utility bill arrears – A new dawn for prepay metering 3Gentrack Whitepaper | Reducing utility bill arrears – A new dawn for prepay metering2

1 2

3

Utility Debt Week conference presentation, November 2009, Water UK. National Energy Action Group. Prepayment Metering Report 2007, ABS Energy Research

www.water.org.ukwww.nea.org.uk/prepayment-meters

REDUCING UTILITY BILL ARREARS – A NEW DAWN FOR PREPAY METERING

An essential tool for reducing utility

bill arrears

The challenges surrounding prepayment

NEA notes too that consumers “like the discipline of

controlled expenditure and the avoidance of

unexpectedly high bills”. With rising unemployment and many households under

increasing financial pressure, it was inevitable that

growing numbers of utility customers would default on Despite the benefits prepayment meters provide to bill payment. And large numbers of energy and water both utilities and their customers, global uptake has utilities around the world, along with telcos, are indeed been confined to only a few countries. China, South grappling with increased payment arrears.Africa and Turkey, along with the UK, account for 97%

3of the world’s installed prepay meters .But surprisingly, arrears growth has not been consistent,

even among providers of multiple utility services to the In Australia and New Zealand, along with the majority same customer base.of other countries, penetration has limped along at

about 2 or 3% of the installed meter base. Thus far, the To understand why, it is useful to compare the increase

barriers to uptake have been significant.in monies outstanding from domestic customers in the

UK energy sector with those in the water sector.

In 2008/09, the UK water industry experienced a 13% Costs of deploying and maintaining a separate year on year growth in outstanding revenues, with over infrastructure for prepay meters has been 5 million customers owing money to their water prohibitive for many utilities. In addition to the

1supplier . Energy debt on the other hand has been fairly cost of installing a different meter and having to static for many years and although it did start to rise at physically update it for any tariffs charges, the the end of last year, the numbers of electricity expense of managing a separate payment network households in arrears are still only a third of that of is considerable.water.

Obviously, the water industry’s inability to disconnect The issue of fairness, and the capacity of prepay

supply for non payment has a significant influence on meters to contribute to, and increase energy

bill payment prioritisation. However, the fact that 5.8 disadvantage, is of concern to consumer advocate 2million households have a prepayment energy meter groups and regulatory bodies alike. Even in the UK,

will have also played a large part in keeping arrears the lowest cost tariffs are normally not available to

growth lower than in other sectors.prepay meter customers. Indeed prepay tariffs are

often higher than average, reflecting the higher And prepayment meters seem to be popular with those infrastructure costs. Comparing tariff plans who use them. In the UK, the National Energy Action between retailers can be difficult and switching is group (NEA) reports satisfaction rates are commonly 70-not as easy, resulting in customers often being 80%, even higher amongst those on low incomes. The trapped in non-competitive supply situations.

1. Infrastructure Costs

2. Social concerns

Coercion is also a common concern, particularly for Mandated in many jurisdictions, smart metering

changing tenancies. Although the new tenant may deployment continues to be led by both retailers and

have a good credit history, they may still have to use networks dependant on meter ownership structures

the pre-existing prepayment meter. and challenges in respective jurisdictions. While smart

metering technologies have been deployed for

benefits such as deferred investment in network

infrastructure, removal of estimated reads and ‘real-Many regulators, rightly acting to protect consumers

time’ interval data, just to name a few, there are also from further disadvantage, have created codes of

significant cost advantages for utilities that wish to practise for prepayment meter provision.

leverage prepay offerings off the back of these smart Compliance to which however, can be onerous and

metering platforms. The need for utilities to run two costly. For example, in many Australian jurisdictions,

parallel metering and payment infrastructures is now customers must have a mandatory trial period after

removed with advanced metering technologies which the meter can be removed at the behest of

available.the customer and at no cost. There are restrictions

on how much debt can be recovered, if any (often A typical pre-pay meter scenario including integration the primary reason a retailer may want to move a with a utility’s billing, CRM and collections customer onto prepay) and reporting obligations are components is outlined in Figure 1 (overleaf).significant.

Prepayment meters by their very nature allow self

disconnection. Consumers, who may otherwise be We know cost is only one of several barriers to protected from disconnection through hardship prepayment metering uptake. The need to address programs or legislation (for example, no regulatory and social concerns is just as pertinent. As disconnections during periods of extreme weather much as advanced metering is the prepayment conditions), could disconnect themselves with enabler, a utility’s ability to tackle customer centric serious health consequences for one or more issues will often come down to the performance of its household members. This is particularly relevant for back office billing system. Prepay billing and vulnerable households and for those with a medical supporting CRM capabilities should include:dependency.

Accurately capturing the details of all potential The advent of the ‘smart grid’, and the deployment of prepay customers and determining their suitability smart meters as a key component for demand-side before they make that switch, is crucial if high risk participation, finally offers utilities both a low cost and self-disconnection is to be avoided. Systems with socially fair means of increasing their prepay customer preconfigured call scripts facilitate identification of footprint. vulnerable and medically dependent customers,

3. Regulatory Requirements

4. Self Disconnection

• Embedded CRM

The prepayment billing system is now as

relevant as the meter

Prepay or Smart Meter – you choose

Gentrack Whitepaper | Reducing utility bill arrears – A new dawn for prepay metering 3Gentrack Whitepaper | Reducing utility bill arrears – A new dawn for prepay metering2

1 2

3

Utility Debt Week conference presentation, November 2009, Water UK. National Energy Action Group. Prepayment Metering Report 2007, ABS Energy Research

www.water.org.ukwww.nea.org.uk/prepayment-meters

Gentrack Whitepaper | Reducing utility bill arrears – A new dawn for prepay metering 5Gentrack Whitepaper | Reducing utility bill arrears – A new dawn for prepay metering4

and other information to assist with determining regulatory rules surrounding prepay customers

prepayment suitability. The details of the financial must also be supported. A system with a flexible

counsellor or welfare agency contacts can be linked rules based engine enables utilities to attribute the

to each account where required for hardship grants correct trial periods, debt recovery caps and

or similar schemes. “disconnection not allowed” periods to each

customer. Regulatory guidelines can be easily Capturing and ensuring the continued accuracy of email configured, updated and due process automatically and mobile contacts for low credit alerts also becomes followed with flags raised for manual intervention systematic. as required.

Such flexibility can also be used to run special

prepay promotions for a restricted period to grow With many utilities running one billing system for

market share or customer value. For example, a multiple jurisdictions or states, the different

• Flexible Rules Engine

consumer could receive extra credit if they opt for But as smart meter deployment ramps up across many

dual fuel or purchase other products via their energy regions, utilities are beginning to investigate the role

retailer. this technology can play in providing a customer

friendly, competitive, prepay supply option.

They will discover that leveraging their smart meter One of the criticisms of existing prepayment meters investment will dramatically reduce the cost of prepay has been the difficulty many customers have in supply. However, it will become apparent that it will be accessing available energy hardship grants. With the the type of back office billing, CRM and collections billing and collections systems having a direct system deployed that will determine the relative interface with welfare agencies, local authorities and success of any prepay offering.other third parties, such as Centrelink in Australia,

any monies can be automatically credited to prepaid Certainly there are billing systems that can handle

accounts directly, and information to support grant both post and prepayment in parallel. But for those

applications is easily accessible. Integration with utilities running less agile systems, many will find it

other payment processing, billing and credit cheaper, faster and easier to deploy a more flexible

management systems used by the utility is essential rules based system to manage their prepay accounts

to ensure information is shared across the entire only. Undoubtedly, there is still work to do. Utilities,

organisation to support stronger decision making regulators, consumer bodies and welfare agencies

and prepay customer services.need to work together to refine existing processes and

protocols to ensure the maximum benefit for all

parties.In the UK in particular, many consumers proactively

opt for a prepayment meter as a budgeting and But the barriers to a cost effective, socially equitable, consumption management tool, even if they aren’t prepay energy supply are, at last, coming down.in debt to their supplier. But these consumers still

demand a competitive and transparent energy tariff.

A system that allows utilities to quickly modify and

update tariffs will ensure they can compete for

prepaid customers.

In the clamber to justify smart metering investment,

attention has tended to focus on estimating potential

energy efficiency gains and meter reading cost

reductions. The benefits of using advanced metering

infrastructure to both recoup debt and prevent further

arrears have been largely overlooked.

• Interoperability

• Flexible Tariff Handling

The barriers are, at last, coming down

Figure 1: Integrated Prepay Metering, Billing and CRM

Gentrack Whitepaper | Reducing utility bill arrears – A new dawn for prepay metering 5Gentrack Whitepaper | Reducing utility bill arrears – A new dawn for prepay metering4

and other information to assist with determining regulatory rules surrounding prepay customers

prepayment suitability. The details of the financial must also be supported. A system with a flexible

counsellor or welfare agency contacts can be linked rules based engine enables utilities to attribute the

to each account where required for hardship grants correct trial periods, debt recovery caps and

or similar schemes. “disconnection not allowed” periods to each

customer. Regulatory guidelines can be easily Capturing and ensuring the continued accuracy of email configured, updated and due process automatically and mobile contacts for low credit alerts also becomes followed with flags raised for manual intervention systematic. as required.

Such flexibility can also be used to run special

prepay promotions for a restricted period to grow With many utilities running one billing system for

market share or customer value. For example, a multiple jurisdictions or states, the different

• Flexible Rules Engine

consumer could receive extra credit if they opt for But as smart meter deployment ramps up across many

dual fuel or purchase other products via their energy regions, utilities are beginning to investigate the role

retailer. this technology can play in providing a customer

friendly, competitive, prepay supply option.

They will discover that leveraging their smart meter One of the criticisms of existing prepayment meters investment will dramatically reduce the cost of prepay has been the difficulty many customers have in supply. However, it will become apparent that it will be accessing available energy hardship grants. With the the type of back office billing, CRM and collections billing and collections systems having a direct system deployed that will determine the relative interface with welfare agencies, local authorities and success of any prepay offering.other third parties, such as Centrelink in Australia,

any monies can be automatically credited to prepaid Certainly there are billing systems that can handle

accounts directly, and information to support grant both post and prepayment in parallel. But for those

applications is easily accessible. Integration with utilities running less agile systems, many will find it

other payment processing, billing and credit cheaper, faster and easier to deploy a more flexible

management systems used by the utility is essential rules based system to manage their prepay accounts

to ensure information is shared across the entire only. Undoubtedly, there is still work to do. Utilities,

organisation to support stronger decision making regulators, consumer bodies and welfare agencies

and prepay customer services.need to work together to refine existing processes and

protocols to ensure the maximum benefit for all

parties.In the UK in particular, many consumers proactively

opt for a prepayment meter as a budgeting and But the barriers to a cost effective, socially equitable, consumption management tool, even if they aren’t prepay energy supply are, at last, coming down.in debt to their supplier. But these consumers still

demand a competitive and transparent energy tariff.

A system that allows utilities to quickly modify and

update tariffs will ensure they can compete for

prepaid customers.

In the clamber to justify smart metering investment,

attention has tended to focus on estimating potential

energy efficiency gains and meter reading cost

reductions. The benefits of using advanced metering

infrastructure to both recoup debt and prevent further

arrears have been largely overlooked.

• Interoperability

• Flexible Tariff Handling

The barriers are, at last, coming down

Figure 1: Integrated Prepay Metering, Billing and CRM

Email | info@gentrack.com Website | www.gentrack.com

This document is the intellectual property of Gentrack Ltd. The intended recipient may use thisinformation only for the purpose for which it was supplied, including copying and archiving for internal use.

It may not be disclosed to third parties without the prior written consent of Gentrack Ltd.