The integration of higher levels of renewable energy on the grid will go toward supporting increased levels of end-user demand. This transition calls for greater revenue management to support utilities in supplying reliable power to customers while remaining financially sustainable in the process.
Revenue management, in its broadest sense, is defined as the ability of a company to manage their revenue resources effectively. It involves all the activities necessary to ensure that the company’s income is properly planned and completely accounted for, and that all income, once collected, is secured and transferred to the relevant bank accounts.
In terms of a utility company, revenue management is key to the growth, success, and smooth operation of the business. This is especially relevant when a utility is a re-seller and having a healthy cash flow is required to sustain the supply and demand chain for these services. The utility must be able to collect all revenue owed to it, so that it may be able to pay suppliers timeously to prevent service disruptions, just as it would expect the same from its consumers.
Challenges faced at utility companies
Most utilities that are in distress are such as a direct result of poor cash flow due to late and even non-payment for services rendered or consumed. Considering that a customer must first consume a service such as electricity, the conventional billing cycle can take up to 90 days before payment is received. The utility will send out a meter reader to gather the required consumption data manually for billing. The bill is then generated and sent to the consumer, and then it’s a matter of awaiting payment.
One of the challenges faced by end-users, is that meters are not read monthly, which leads to an average billing. The ramification of average billing is utility companies’ call centres having to deal with client disputes, resulting in delays in payment and customer dissatisfaction. Infrequent readings also lead to poor data collection, making analysis difficult and therefore the utility will not have sufficient insight for future planning.
Revenue collection and protection
There are various options available that can help simplify the billing cycle and ensure an increased rate of revenue collection. The traditional prepayment model, using the highly secure Standard Transfer Specification (STS) technology for transfer of credit to a meter, is the entry-level solution to guaranteed collection. Consumers pay upfront for services at point-of-sale devices that then issue secure tokens that are entered into the relevant meter, giving the consumer access to the number of units purchased. This can be in energy units (e.g. kWh) or in currency value, based on the type of meter being used. A consumer has a display unit connected to the meter showing the remaining credit. The consumer can then `top-up’ the credit when required, allowing them full control and management of their utility device.
Another advantage of using a prepaid Revenue Management System (RMS), is the ability of the systems to apportion a percentage of the prepaid amount tendered toward outstanding debt. Consumers’ Enterprise Resource Planning System (ERP) account balances can be integrated into the RMS, which supports multiple accounts, such that a fixed value per month, or a percentage of every transaction, is automatically deducted when a prepaid purchase is made. The transaction value collected from these types of transactions, on behalf of account payments, is then exported back to the ERP system to reconcile the debt. This process benefits both the utility and the consumer who will gradually have their overall debt reduced and eventually paid off.
Taking the smart route
The advent of smart metering opens new possibilities when combining smart prepayment with Advanced Metering Infrastructure (AMI) technology. Meters are virtually online and can be read at intervals of around 5 minutes. This allows a utility to have access to the consumption profile data of consumers, which can be used by EPR systems to create billing data as often as possible. Smart prepayment solutions allow a consumer to prepay their billing account. The value of consumption is calculated every time a meter is read, with the bill then deducted from the prepaid balance on the billing system. Smart systems include a ‘wallet’ mechanism, which users can monitor and top up credit when required. The system can initiate a remote disconnection of the meter if the account is not managed or goes into arrears. Consumers are also alerted when credit is low and approaching disconnection levels.
Smart meters can also be used in traditional postpaid billing. As the meters are read daily, a bill can be generated on the billing date and delivered electronically to consumers, who then have a limited time to pay, thus reducing the billing cycle drastically. Consumers who default on payment can be disconnected remotely, eliminating the cost of engineers being sent to the customer site to disconnect the service.
Monitoring and analysis
The above-mentioned solutions all gather valuable data based on consumers’ buying and usage patterns. Using available data analysis tools, this data can be used to provide valuable insight into a utility’s operations and performance. Predictive analysis will assist with capacity planning, ensuring continued service excellence by the utility such that available resources are well managed. Revenue managers can benefit greatly from having implemented tools that take data and turn it into knowledge and wisdom.
Conlog has engineered innovated solutions and services to address the specific requirements of revenue management. Speak to our expert service staff to find out more on how we can help you with revenue management, collection and protection while focusing on monitoring and data analysis.
Conlog, a proudly South African Company, has been at the forefront of pioneering solutions since the inception of the South African prepayment metering industry. A combination of innovative solutions and superior product design, coupled with a desire to meet and exceed our customers’ needs with service excellence, has led to Conlog being positioned as a market leader. We specialise in providing a holistic electricity metering solution to enable utilities with the flexibility to efficiently collect, manage and protect their revenue. ESI
REVENUE MANAGEMENT SPIN-OFFS
• Planning for future income levels, including the determination of income sources and tariffs
• The physical collection of income through the vending or point of sale system
• Accounting for products or services delivered and income collected in an Enterprise Resource Planning System (ERPS)
• Safeguarding and securing cash collected and ensuring efficient transfer to bank accounts
About the author
Conlog’s Solutions Architect, Selvan Govender, has over 20 years’ experience in the IT industry. This experience is in marketing, services, project management and execution, with a current focus on product innovation, strategic planning and designing fit for purpose solutions for customers. Selvan holds a Post-Graduation Diploma in Business Administration.