20 Power Engineering International July-August 2017 www.PowerEngineeringInt.com
Today, a business’s
asset is the data it
which will be opened up to competition in
a similar way to the energy market, not only
will this allow customers to have the option
to switch suppliers, but utilities will also be
able to treat customers based on their credit
Industry factors such as these are likely to
make processes much more effcient in the
long term, but it will take more comprehensive
changes within suppliers themselves for
the dividends to be realized in the short to
Time for an overhaul
When managing customer debt, internal
processes can be challenging for utility
companies. To counter this, suppliers have
generally created specifc sub-teams focused
on handling aging debt, or alternatively
outsourced debt collection to third-party
These problems have been magnifed by
increasing levels of price competition and
customer churn,as suppliers take on fnancially
high-risk customers to boost market share.
Added to this, consumers are increasingly
turning to digital platforms to manage their
utilities, reducing direct interaction between
customer and supplier, and making it diffcult
for the latter to cultivate ‘good’ customers.
Moreover, with most solutions decades
old and debt levels rising steeply, business
processes and the underlying IT systems
tasked with delivering them are feeling the
strain, with some unable to keep pace with
demand for debt management.
To solve this issue, utilities are increasingly
updating their infrastructure and adopting
more technology-driven initiatives. However, it
can be diffcult for suppliers to integrate these,
particularly if existing processes are highly
ingrained into the existing business model.
Furthermore, many of these typical responses,
such as communicating with customers via
digital channels, actually result in additional
To combat these obstacles, suppliers
should engage in a two-pronged approach.
On the one hand, debt collection should
be treated as a one-off exercise rather than
a continuous mission. Therefore, instead of
selling off debts to agencies based on age,
suppliers would beneft by screening them
more thoroughly, to recover as much debt as
possible before passing them on.
Simultaneously, utilities should put new
processes in place to prevent the formation
of new arrears, fortifed by a strong IT
infrastructure. To do this, they are increasingly
using analytics to fx the underlying causes of
errors in their billing and CRM systems, often
the root cause of debt formation.
Data science also allows utilities to sift
through existing data platforms to select
customers whose debt could be recovered
more easily, such as those with good credit
ratings who have gone into debt due to billing
queries, incorrect contact details, or even
those in fnancial diffculties who would be
willing to settle partial amounts in return for
closing the case.
The method of transforming the collection
process itself will vary depending on the
specifc case of each company. More
specifcally, it will depend on the age profle
of the debt, the causes such as billing errors,
fraud, issues tracing customers and the
customer profle, such as whether they need
fnancial help or have bad credit histories.
For maximum effciency, this would ideally
be implemented as a one-off function,
although suppliers can also explore the
following areas to reduce bad debt and lower
the cost to serve:
Early arrears management
The most critical period for utilities to engage
with customers and collect debt is during
the ‘early arrears’ stage, typically the time
between a bill becoming overdue and the
customer being classifed as delinquent.
During this time frame, customers are more
likely to engage with the debt collection
process as the amounts owed are relatively
small. Furthermore, a signifcant number of
customers in early arrears may have simply
overlooked their bill, meaning the barrier to re-payment is low.
Therefore, many suppliers are enhancing
their early arrears management processes,
to ensure that engagement at this stage is
targeted and personalized to the customer.
This is a good place for utilities to begin,
because the strategy can be customized
based on the sophistication of the existing
In any case, more cost-effective cloud-based solutions are gaining popularity, as they
enable omni-channel customer engagement,
to apply the appropriate messaging tone for
the specifc customer demographic.
Alternatively, some suppliers are integrating
automated solutions that use customer
data to directly make risk analysis decisions.
Providers can then drive tailored treatment
strategies, enhance customer satisfaction and
in turn, ease out the process of debt collection.
It is in the interest of most utility companies to
get customers who are struggling fnancially in
the habit of keeping up with their charges, to
ensure they stay loyal. To do this, suppliers can
advise customers on the most appropriate
tariff or payment assistance schemes (such
as arrears allowance, one-time grants or direct
deductions). These specialized tariffs are key,