Revenue Cycle Management Project

Revenue Cycle Management Project

Overview

Experiences

Recommendations

Chemo Tecnics Limited RCM Project - Abuja June 2004


Points addressed.

•Project Background

•Ibadan RCM contract area,

•The initial situation on ground

•Challenges faced and solutions implemented

•The result

•Recommendations / Lessons learnt


Project Background.

The project was initiated during 2001 by the NEPA Technical Committee which was appointed in 1999 by the Federal Government.

The RCM initiative was seen as a viable proposed solution that would enable NEPA to improve its revenue collection performance.

After a seven month bidding process, contracts where signed on 12 December 2001 with eight contractors, covering a total of ten contract areas (Ibadan, Abuja, Kano, Port Harcourt, Enugu, Festac, Ijora, Islans, Oshodi/Alimosho, Ikurudu/).

Contracts where signed for a period of three years from the effective date, with a option to extend for a maximum of an additional two years should both parties agree.

Contract staff were deployed on 02nd of January 2002, to initiate the pre-implementation phase, originally intended to last 1 month.

Contracts became effective on the 1 May 2002


Ibadan RCM Contract Area.

The Ibadan RCM contract area is situated approximately 160 km North East of Lagos, covering most of the city of Ibadan which has a population of approximately two (2) million.

The contract area consists out of two Distribution districts of similar size.

•Dugbe 21.0 MWh 52 %

•Molete 19.4 MWh 48 %

The NEPA Staff compliment in the contract area is approximately 556.

468 Field staff

70 Administrative / Billing staff

18 Middle management


Ibadan RCM Contract Area – Initial situation

Non MD MD Total

Dugbe 92,973 365 93,338

Molete 100,652 235 100,887

193,625 600 194,225

99.69 % 0.31 %

Customer base as at start of contract (number of customers):

Non MD MD Total

Dugbe 18,061,408.00 35,078,534.21 53,139,942.21

Molete 20,489,883.28 21,835,827.15 42,325,710.43

38,551,291.28 56,914,361.36 95,465,652.64

40.4 % 59.6 %

Revenue base as at start of contract (in Naira):



A: Before the commencement of the RCM projects Distribution districts where managed by a District Manager, who was responsible for both the technical (distribution) and commercial aspects of the district.

Each District was then further sub divided into a number of “Undertakings” each being responsible for both the technical and commercial activities in a specified geographical area.

B: After implementation of the RCM project, Technical and Commercial responsibilities were separated, with all commercial activities falling under the control of the RCM contractor, and all technical activities falling under the control of the District Manager.

At “Undertaking” level the same situation applied, thus resulting in each undertaking having a Distribution Manager as well as a “Undertaking” or “Commercial manager”



C: The District Budget was separated on a 30 / 70 percentage basis with 30% of the existing District budget now available to the RCM contractor to run the commercial activities.

The remaining 70 % was allocated to the District for running Distribution activities.

D: RCM contractors where directly managed by, and reported to the RCM Coordinator’s Office at NEPA headquarters.

NEPA encouraged strong cooperation between the RCM Contractor and the Distribution Manager in each District.



RCM Contractor

Billing Manager

Commercial Manager

Revenue Manager Marketing Manager

Billing Center Staff Revenue / Accounting Staff Undertaking One

Undertaking Two

Undertaking Three

Undertaking N

Staff Structure of RCM Contract


Ibadan RCM Contract Area – Challenges & Solutions

Staff morale and motivation was generally low.

Their was appreciable resistance to the RCM initiative from all levels of contract area staff.

Shortages in tools and equipment.

Staff had no or little initiative, and was generally scared to come up with new ideas for fear of reprisal (Induced by past experience)

Business processes where non existent, with administration generally in a bad state.

Two different Billing systems:

Inaccurate, suspect billing databases,

with no or little support from the original supplier or agents,

no access to billing databases by means other than through the billing system.

A: Challenges:



Most customers (65 % +) are billed using estimates due to a shortage of electricity meters in the field.

Estimates for non metered customers where static, remaining the same month in and month out irrespective of the amount of energy supplied, which can vary quite drastically.

A.1: Challenges continued:

Ibadan Total (Dugbe & Molete) - Bulk Import (kWh)

0.005,000,000.00

10,000,000.0015,000,000.0020,000,000.00

25,000,000.0030,000,000.00

35,000,000.0040,000,000.0045,000,000.00

50,000,000.0055,000,000.0060,000,000.00

65,000,000.0070,000,000.00

75,000,000.0080,000,000.00

Month

kWh

Bul

k

Bulk Import

Billing was four months behind in both Districts.

Little control over the spending of allocated monthly operational budgets existed,

Drastically varying power supply.



Customers had huge resistance to paying their monthly bills:

Payment infrastructure was inadequate with to few available pay points , and with the pay points being forced to shutdown on a regular basis as a result of power outages, causing willing customers to queue, …. just to go home again (no payment made)

Customers resisting payment as a result of inaccurate bills.

Customers purposefully not paying, relying on the fact that they will in all probability not be disconnected.

60% + Tariff increase effected on 01 February 2002.

A.2: Challenges continued:



The major implemented solutions are briefly listed below.

To improve staff morale and help them on the way to believing that they can do better, given all known obstacles, new “rules of engagement” where implemented whereby staff had to provide a proposed solution, taking existing operating conditions into consideration, together with each problem identified.

This minimized the usual response to problems “We can do nothing, Headquarters must provide“, and resulted in staff becoming aware as to:

exactly what resources are currently available,

where and how additional resources could be obtained when required,

thus empowering staff to devise viable solutions within their existing constraints, instead of sitting back and waiting for “Headquarters to provide”.

B.1: Solutions:

Solutions are devised and implemented continuously, with new solutions being added and existing ones modified as operational circumstances change.



To buttress the above initiative, it was decided to make a fixed percentage (30%) of all “Reconnection Fees” collected, available to each Undertaking for their use to improve operational circumstances in their own environment.

Staff on their own initiative then decided to:

use a fixed % of their allocation to incentivize good performing staff,

use the remaining percentage to improve their working environment by buying additional resources, needed on a monthly basis, but not adequately covered by the normal monthly operating budget.

B.2: Solutions continued:

The above two initiatives caused a drastic improvement in the number of defaulting customers being disconnected, and gave staff more control concerning their own future. It lead to an overall improvement in the staff’s belief that they can do better, with this materializing in improved cash collection.



To improve billing operations it was decided to:

move both billing centers to a central location, thus making it possible to share equipment such as printers, generators, and terminals in the event of equipment breakdown, reducing stoppages.

implement a billing program where billing is spread over the month with each of the four Undertakings in each district being billed on a different week of the month, thus reducing the strain on the staff and equipment.

Billing is currently on time, with all billing for a particular month completed before month end, all backlogs have been eradicated 22 months ago.

To improve billing accuracy:

an ongoing customer audit program was implemented, whereby customer information is verified on a route by route basis.

estimations are manually altered on a monthly basis in relation to the amount of energy received.

a program to ensure that actual meters are read at least once every two months, thus ensuring more accurate billing was implemented.




To analyze the billing data as well as implement a system for delivering timely staff performance measurement, it was decided to design a computerized solution, capable of interfacing with the existing billing systems.

An existing solution called “Esperance” was acquired and modified, to perform this duty. The customization of Esperance is an ongoing process, with additional features being implement on a regular basis as needed.

Esperance enables us to:

Detect fraudulent transactions on the billing system

Perform statistical analysis to determine more accurate estimates given supply conditions.

Do monthly staff performance analysis with regards to:

Number of meters read.

Customer response.

Disconnections




To Continuously monitor and verify the billing of MD and other large customers:

All MD and other large customers are continuously monitored, by means of computerized, and manual activities.

Every month billing data is compared against the customer history, and the prevailing supply situation to ensure that the billing correlates to the above.

All suspect billing is investigated, by physically inspecting the meter installation and verifying the accuracy of the meter as well as the integrity of the installation, using an electronic energy data logging instrument.

To improve cash receipting operations:

A new computerized Cash receipting system “NetPay” was introduced, and interfaced to both billing systems, thus eliminating the need to manually capture cash receipts in the billing system, as was the case with the old system.

Install generators and UPS’s at all cash receipting locations.

Contract with banks to act as collecting agents on behalf of NEPA, thus effectively doubling the number of Pay points.




To Improve Customer service and facilitate a timely response to billing queries.

Established a customer service infrastructure, by creating and staffing a position of a Customer Relations Coordinator at district level

Each CRC manages a team of Customer Relations Officers, one located at each undertaking.

This resulted in speeding up the process related to determining and processing billing corrections, improving customer perception & service.



Ibadan RCM Contract Area – The result.

Although the task is by no means completed, substantial progress has been made, with further improvements expected during the remainder of the contract.

Ibadan RCM Contract area (Dugbe & Molete) - Revenue Collection progress (=N=)

80,000,000.00

100,000,000.00

120,000,000.00

140,000,000.00

160,000,000.00

180,000,000.00

200,000,000.00

220,000,000.00

Jan-

02

Feb

-02

Mar

-02

Apr

-02

May

-02

Jun-

02

Jul-0

2

Aug

-02

Sep

-02

Oct

-02

Nov

-02

Dec

-02

Jan-

03

Feb

-03

Mar

-03

Apr

-03

May

-03

Jun-

03

Jul-0

3

Aug

-03

Sep

-03

Oct

-03

Nov

-03

Dec

-03

Jan-

04

Feb

-04

Mar

-04

Months

=N=

Co

llect

ed

Total Revenue Collection

New Tariff Implementation 01/02/02 RCM Effective Date



Improved collection in relation to the amount of energy received.

Ibadan 12 month Moving Avg (=N=) collected per bulk kWh received .

2.00

2.50

3.00

3.50

4.00

4.50

Months

Avg

=N

= C

olle

cted

per

kW

h r

ecei

ved

12 Month Moving Avg =N= per kWh received

New Tariff Implementation 01/02/02

RCM Effective DateRCM Team On-site



Non MD MD Total

Dugbe 96,867 274 97,141

Molete 125,547 343 125,890

222,414 617 223,031

99.72 % 0.28 %

Customer base as at March 2004 (number of customers):

Non MD MD Total

Dugbe 68,634,880.44 48,885,549.52 117,520,429.96

Molete 64,828,669.38 38,691,483.75 103,520,153.13

133,463,549.82 87,577,033.27 221,040,583.09

60.4 % 39.6 %

Revenue base as at March 2004 (in Naira):



Comparison of the initial situation met on ground in (January 2002), against the current situation on ground (March 2004).

Jan 2002 March 2004 Difference

Total Revenue 95,465,652.00 221,040,583.00 + 125,574,931.00

% Of Total Revenue derived from Non MD

Customers40.4 % 60.4 % + 20.0 %

Change in customer population

194,225.00 223,031.00 + 28,806.00

Change in Avg. Naira collected per kWh

bulk received.

2.52 N/ kWh 4.22 N/ kWh + 1.70 N / kWh


Recommendations / Lessons Learnt

Top Management commitment to any new initiative is absolutely essential, otherwise ground level resistance will severely hamper progress.

Contracts must be drafted around specifics that can actually be delivered, be clear as to what support or infrastructure will definitely be available, and what can not be committed to.

Distribution and commercial activities must not be separated, since distribution performance directly impacts customer service and resulting ability to collect.

Open functional billing system, well supported by the original supplier is essential.

Clear communication regarding supply conditions, is essential so that difficulties can be accurately relayed to customers to build and maintain the relation.

Revenue Cycle Management Project

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Revenue Cycle Management Project