Billing has always been a mission-critical operation for utilities. For the utility with environmentally-aware customers, its importance is increasing. By combining environmental and financial information, "green billing" helps customers understand the long-term environmental effects of their personal energy and water use.
THE EVOLUTION OF GREEN BILLING
Utilities around the world face increasingly strong pressure to help mitigate the negative environmental effects of electricity use.
This pressure is not entirely new. Over the past several decades, utilities have developed a number of programs aimed at environmental preservation. They have controlled power plant emissions. They have promoted appliance efficiency. They have added renewables to their traditional fossil-fuel generation mix.
Emissions controls have, of course, proved popular and widely accepted. The same cannot be said, however, of programs that raise prices significantly or that lower— in the consumer’s mind—comfort or convenience. Despite consistent utility educational efforts, consumers rarely if ever choose a new home based on the efficiency of its appliances or insulation. Many consumers appear unwilling to invest in technologies like programmable thermostats, despite their high return on investment. Surveys consistently show high levels of public support for renewables, but when it comes time to buy them, few do.
There is growing evidence, however, that rising concerns about global climate change could trigger real change. Confronted by the potentially dire consequences of global warming, political leaders and industry regulators are once again turning to utilities for environmental leadership. They are asking for new and effective conservation initiatives, and they want utilities to do more than encourage conservation. This time, they want programs like demand response and critical peak pricing—programs reinforced through the billing system.
AN EMERGING UTILITY AGENDA
Few utilities—if any—will choose to gamble on the possibility that new scientific and technological discoveries will remove the conservation burden from their shoulders. Most will find themselves partnering with government bodies and communities to find ways to slow the negative environmental effects of energy and water use.
Those partnerships will almost certainly require major changes in fundamental relationships with customers. They will require new products, services, and pricing that significantly lower consumption.
SEARCH FOR LEADERSHIP
For the most part, neither regulators nor customers are clear about the best path to dramatically lower energy emissions or ensure continuing robust water supplies. Public officials and private organizations are actively seeking utility experience and help in evaluating and implementing programs to alter historic consumption patterns.
Help is clearly needed. Any behavioral change requires an initial catalyst, a plan of action, and continued positive reinforcement. Without all three, efforts to change will almost always fail.
The first has already emerged. News media are full of warnings about climate change and shortages. Few consumers, however, can readily define the correlation between reducing personal consumption and preserving the environment. Fewer still have access to the positive reinforcements that will make behavioral changes permanent.
THE ROLE FOR BILLING
What is most clear to utilities from experience is that half-hearted “education” programs have little if any permanent effect on consumption. To make a difference, utilities must weave the conservation mission into fundamental business processes. And utilities’ most fundamental customer-related process is billing.
The utility billing system or customer information system (CIS) can, in fact, play a key role in providing customers with a clear picture of the relationship between consumption and environment. It can offer options. It can help customers turn behavioral alternatives into habits. Not every CIS, however, is capable of playing this role.
In most cases, the customized legacy systems of the 1980’s and 90’s are far too inflexible even to begin to address conservation and efficiency programs in a meaningful way. Some of the lower-end vendor-produced billing systems are little better. Meeting emerging conservation and efficiency demands requires a robust and flexible CIS that changes readily, without customization or programmer assistance.
EVALUATING YOUR CIS
To help customers maximize opportunities and motivation to reduce energy-related greenhouse gas production, your CIS should be able to handle:
- Multiple sources of supply so that customers can choose to purchase “green” energy in whatever amounts they choose.
- Rates that vary frequently. Some studies suggest that varying flat rates monthly rather than annually1 or semi-annually can substantially reduce peak demand. You can readily explore this option if your CIS permits rate changes without programmer intervention. Ideally, your CIS should let you “plug in” rate changes via configurable tables that do not require extensive testing before the rates take effect. One of the most limiting aspects of a legacy CIS is rate-change inflexibility. Systems that require months to develop and test rates are simply untenable in an environment that increasingly requires utilities to help and encourage customers to conserve.
- Penalty rates. No utility wants to precipitate a customer’s health crisis because that customer is unable to pay for energy-using heating or air conditioning. That does not mean that current rate and pricing structures must persist. Utilities will increasingly need to reexamine their long-standing practice of lower prices for high-volume customers. As environmental concerns rise, a growing segment of the public may begin to advocate penalties on consumption deemed careless or excessive.
- Scripts and other business process assistants that help customer service representatives explain efficiency and conservation options to puzzled customers.
- Submetering. Both studies and common sense show consumers use less when they must personally pay for water and fuel. Single bills for apartment houses and condominiums encourage waste. Your CIS should not limit your ability to address customers individually.
- Time-of-use pricing,2 which encourages customers to shift optional electricity use to off-peak hours. Time-of-use pricing maximizes use of base generation that, by definition, is always “on” and therefore always producing the same amount of greenhouse gases whether or not the resulting electricity is used. When customers make better use of base electricity, they almost always rely less on peak generation—generation that can be readily ratcheted back in response to lower demand. For utilities that rely on fossil fuels for peak generation, the result is almost invariably fewer total greenhouse gas emissions. Time shifting can help water utilities as well as electric utilities when utilities pump water to a high point to take advantage of gravity feeds. Today, utilities universally try to limit pumping to times of off-peak electricity rates. But consumers who use water imprudently during the day to such an extent can thwart reliance on off-peak pumping that the pumps can maintain the system only through peak-hour operation. Higher peak rates for water consumption address this problem.
- Historic usage graphs. The CIS should be able to develop and insert these onto bills so that customers can track their progress over time in reducing consumption. Graphs should cover a minimum of 13 months—and more if possible. Many consumers find it helpful, find long-term conservation efforts reinforced by a CIS that can document two years of consumption and calculate averages that identify each customer’s trend line.
- Prepaid metering that lets customers establish their own consumption limits and stick to them.
- “Carbon footprint” analysis. The CIS should be able to show customers graphically the relationships between greenhouse gas emissions, their personal choice of supply, and, if appropriate, their time of use. 3
- Bills in multiple languages so that all customers can be included in conservation and efficiency programs.
- Incentives and rebates. Utilities have long been involved in regulatormandated rebate programs for, for instance, energy-efficient air conditioners or compact fluorescent light bulbs. Increasingly, however, regulators are requiring utilities to withhold payment until customers demonstrate an actual reduction in consumption. In these cases, the CIS must be able to analyze bills before and after the installation of the equipment subject to the rebate and release payment only to consumers who meet the minimum expectation of reduced electricity use. It is particularly important that the CIS offer the option to include incentives either as a subtraction from the monthly bill or as a separate payment. There is currently no “best practice” as to whether such payments should be included on the bill or delivered separately. Utilities report varying responses to varying plans. Some see greater participation when they include the incentive on the bill. Others get better results by highlighting the conservation effort through a separate payment. As you gain experience with different programs and different customers, you will want to try out alternatives and compare results. Your CIS should not restrict your options.
- Web portals. A CIS that populates individual customer Web portals helps customers identify use trends. Portals can then provide tools that let customers explore “what if” scenarios that demonstrate the effects of various conservation and efficiency strategies on their bills and their carbon footprint.
Customer analysis that accommodates demographic inputs from non-utility sources. While utilities almost invariably make incentives available to all customers in a class, there is far more pay-off in marketing incentives heavily to those most likely to use them. An apartment dweller using electricity only for lighting, home entertainment, and a few landlord-provided appliances is unlikely to respond to home insulation incentives. In contrast, utilities will obviously get better results when they market pool-heating incentives to those whose county property records indicate that they have pools.
The checklist above represents an array of relatively small changes likely to be required as regulators, utilities, and customers move forward with programs to reduce greenhouse gas emissions. Far more dramatic is the requirement now being addressed in North America (California, Ontario, and elsewhere) to implement interval metering and pricing for all customers including residential consumers. Few if any utilities can accommodate universal interval billing with IT systems currently in place. Many lack even the software to handle interval or “complex billing”—a name that only hints at the depth and sophistication of its underlying software algorithms. And those with complex billing software in place—now typically used for large industrial customers—will likely find themselves overwhelmed by the onslaught of terabytes of new data that arrive when hourly meter reads replace twelve annual customer data points with more than 8,000. Most will want to offload the data into a Meter Data Management system that can make data available to many departments for use in outage restoration, dispatch, supply portfolio refinement, and other business processes.
Despite the challenges posed by the need to handle massive amounts of additional data, interval billing greatly enlarges the scope of conservation options by enabling programs like:
- Demand response, which encourages conservation and appliance time shifting by increasing electricity’s price during peak periods. A variation of demand response is critical peak pricing, which raises the price only occasionally, during periods of exceptionally high demand.
- Help with high bills. Graphs of interval bills readily reveal patterns of use. By training customer service representatives in the likely causes of and remedies for high usage during different times of the day or days in the week, utilities can help customers identify sub-optimal electricity use and adopt conservation alternatives. Utilities can make similar services available through individualized Web portals.
- Anomaly detection. Utilities that actively monitor hourly reads can readily expose and halt attempts at theft. They can also detect unusual consumption patterns that, for a household, might indicate a refrigerator inadvertently left running in a garage or a break-in at a supposedly vacant vacation home or rental property.
THE STRATEGIC CIS
Billing has always been a mission-critical operation for utilities. For the utility with environmentally aware customers, its importance is increasing. By combining environmental and financial information, “green billing” helps customers understand the long-term environmental effects of their personal energy and water use. Green billing can thus become part of a utility’s larger role in contributing to community interests while meeting customer satisfaction goals.
1 For instance, in “The Short-Run Effects of Time-Varying Prices in Competitive Electricity Markets,” (University of California Energy Institute, CSEM WP-143R), Stephen P. Holland and Erin T. Mansur suggest that could be realized through setting flat rates monthly rather than annually. “Monthly flat rate adjustment has many of the same effects as RTP adoption, captures more of the deadweight loss than time of use (TOU) rates, and requires no new metering technology,” they find.
2 That is, segmenting consumption into three or four time “buckets,” like peak, shoulder, off-peak, and weekend rates. Time-of-use pricing requires time-of-use meters that report separate consumption totals for each “bucket.”
3 Note, however, that, this analysis can lead to inappropriate customer behavior at utilities that use coal for base generation and natural gas for peaks. Customers switching from peak to off-peak consumption would, in this case, believe they were generating more greenhouse gases by using off-peak electricity. The CIS must be able to accommodate an adjustment so that customers do not attempt to lower their emissions profiles by switching consumption to peak hours.