Can smart meters replace billing?

The general view of customer billing is set in two camps – those who believe the billing cycle is a good marketing and communications channel to the customer, and those who believe billing simply adds cost to the process of customer payments.

MI 4 99 Smart The true value of using the billing cycle as a marketing channel is now being questioned – not least because most customers are not in the right frame of mind to accept new marketing offers when opening a quarterly bill!

Today a bill is seen by many as an outdated system that adds cost to the payment process. Call centre activity, for example, peaks after a billing cycle. Most of the queries relate to understanding the bill or disagreeing with a meter read or estimation. The result is often an unscheduled re-read (the most expensive kind) and/or a reprocessing of the bill.

Is it possible to provide the customer with more information whilst offering flexible payment schemes to suit changing circumstances – and reduce the costs to the supply company and increase customer loyalty?

Yes – use the meter to bill the customer. Or, put another way – allow the customer to use the meter as a flexible payment tool.

Most impediments to this form of payment involve the means by which energy is traded and settled at wholesale level, and the mechanisms used for data collection and aggregation. These impediments have now been solved.

How is it possible to pay your bills via the meter (or for convenience a suitably located terminal)? It is already commonplace to send cash transactions to a meter (prepayment) and some systems offer the ability to clear down credit for refund – a cash transaction the other way. The issues come down to security of the transaction itself and having all the appropriate variables at the meter at the right time.

Some form of communication is necessary to get the electricity costs into the meter. There are many options available, depending on the services you want to offer. AMR (fixed radio/telecoms) and Teleswitch (broadcast radio) are just two. Trials have already proved that price reflective messages can be broadcast and energy cost calculated at the meter. Such systems include Distributed Settlements, Celect and Credanet.

How does it work?

The meter receives costs of electricity from the supplier. The meter measures the real-time consumption of energy, accumulating the cost of electricity. It uses the contract (tariff) to uplift the costs and adds any other charges to present a cumulative bill to the customer. Finally the meter calculates the use of system charge to complete the last of the variables. All the customer does is initiate a payment via a button press, confirm the payment (another button press) and copy down the amount to be paid.

Then the meter generates an encrypted transaction code, which is sent to the supplier. The supplier decodes it, checks that payment is correct, allocates payments to generator and distribution company and confirms receipt to the customer.

While this happens the meter calculates an encrypted authorisation code and displays it. This code accompanies the payment, and as far as the customer is concerned is the end of the transaction. The supplier receives the authorisation code and is able confirm payment and lay off appropriate costs to all parties.

How does the code work?

Code 0123-4567-8910-1112-1314
Meter Reading 90616
Payment amount £35.00
Generator cost £22.00
Distribution cost £10.00
Supply margin £ 3.00

The encrypted code can contain various amounts of data, depending on the mode of transmission. Typically it provides the following information:

  • A meter reading
  • The total amount of the transaction
  • The cost of the electricity provided
  • The cost of delivery (distribution costs) by calculating the resulting margin for the supply business.

Result – real time metering – real time settlements – no meter reading – no estimation – no billing = low overall cost and high customer satisfaction.

How is the transaction sent ?

Implementing such a scheme relies on two infrastructure decisions – getting variables into the meter (already covered) and returning the authorisation code.

The simplest method is for the customer to write it on the back of a cheque. Alternatively telephone/IVR systems could take these codes and credit/debit card payments. Two-way communications permit the meter to send the code on demand, initiated by the customer or supplier, and to authorise a direct debit payment based on actual amounts in real time.

Self-billing actually delivers a win-win situation, where the customer receives benefit (information and control) and the supply company reduces cost. This perpetuates the marketing cycle for the supply company, which can offer an incentive to customers to move to the scheme and pay promptly so as to enjoy discounts based on cost reduction rather than margin reduction.