Billing options for the trends in the utilities market

Metering International

By Kirill Rechter
December 1, 2010

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The rollout of smart metering and the emergence of multiple service environments are creating tremendous opportunities for utilities companies. From a billing perspective, smart metering enables utilities companies to manage more accurate billing processes, while multiple service environments enable utilities companies to create vast new revenue streams. However, the existing billing systems commonly used by utilities companies often support only flat rate billing scenarios and are generally dedicated to the workflow processes of a single core service.

The article takes a look at both smart metering and multiple service environments in the utilities market and discusses the billing options available to utilities companies to benefit from these two trends.

Smart Metering and Real-Time Data Consumption

Smart metering is creating new consumption data that until recently was not available. This new consumption data is enabling new rating and billing possibilities for utilities companies.

First and foremost, the real time access to consumption data improves the accuracy of rating information and reduces the cost involved in compiling billing related records. Current processes involve a cumbersome series of estimates, reassessments and adjustments. This process relies on significant manual input, exposing a utilities company to errors throughout the entire billing process. With smart metering and the real time availability of consumption information, the process of aggregating consumption information to a billing system can now be automated.

With accurate consumption information now available in real time, utilities companies can improve the forecasts of their overall supply needs. As a result, a utilities company can properly manage and commit to service level agreements (SLAs) with industrial customers. Taking this a step further, the bi-directional communication and real time monitoring enabled by smart metering allows SLAs for service fulfillment to incorporate complex usage parameters and statistics.

At the same time, smart metering allows rating scenarios to be based on a range of consumption parameters. For example, an electricity provider can charge different rates based on the time of day. This can be used to discourage overloads in electricity usage during the day and direct industrial consumption to off-peak hours. An electricity provider can also provide multiple energy types with discounted rates for renewable energy, such as solar or wind. With bi-directional and real time communication, smart metering enables customers to manage thresholds on their utilities consumption. As such, a gas or water company could send a real time alert to a customer as consumption nears the predefined threshold limit.

Multiple Service Environments

In parallel to rolling out smart metering, many utilities companies have begun to offer additional services or are exploring options to provide new services. Many of these additional service offerings are not traditional utilities services, such as fixed line telephony and broadband services, while some utilize the existing network capacity of utilities companies, such as powerline communication services.

These additional services provide utilities companies with valuable sources of additional revenue. However, each of these additional services has unique order management, service provisioning and billing workflows and requirements that are different from a traditional, single service utility environment.

Many legacy billing systems typically used by utilities companies do not include rating engines and are set with business processes for a specific core utilities service. In such a framework, it is not possible to provision and bill for additional services, whether utilities-based or communications oriented, that require usagebased rating and the ability to interact with different network elements.

There are also many municipalities that provide multiple services, including water, waste removal, taxation and various city services. Like the multiple service environments of utilities companies, each service offered by a municipality has specific workflow processes and billing requirements.

Billing Options to Support Smart Metering and Multiple Service Environments

The billing systems used by many utilities companies and municipalities are not positioned to support the billing scenarios created by smart metering or handle multiple service environments. Most utilities companies use billing systems that support only flat rate usage scenarios and are programmed for single service workflows of a core service. It is common that utilities companies use either internally developed billing systems or vendor supplied billing systems that are restricted to a specific utilities service.

With such billing systems, utilities companies as well as municipalities are not able to generate the operational benefits from smart metering or the financial gains of multiple service environments. In order to access these benefits, utilities companies and municipalities have four clear options to remove the stumbling blocks of their billing systems – extend the functionality of the legacy billing systems, implement a parallel rating engine or billing system, use a managed/SaaS billing service or deploy a multiple play replacement billing system. These options apply to utilities companies and municipalities of
all sizes.

Option 1 – Extending the functionality of the legacy billing system

The functionality of a legacy billing system can most likely be extended only if the system is developed in-house. A legacy system that is dedicated to the operational workflows and billing requirements of a single core utilities service is unlikely to include a rating engine to process the consumption-based data supplied by smart metering or has the flexibility to be adjusted to the workflow needs of additional services. For utilities companies with in-house billing systems, developing a rating engine and adding workflows is possible, although managing the business evolution of this additional functionality is a difficult and expensive process over the long term.

Option 2 – Implementing a parallel rating engine or billing system

For an instance that a utilities company wants to support just smart metering, implementing a third party rating engine to process real time consumption data to run in parallel to a legacy billing system is an option. However a rating engine alone is not enough for a utilities company to support a multiple service environment.

To support the offering and billing of a second service, a utilities company could deploy a parallel billing system to run side-by-side with the legacy billing system. However, this situation has its limitations. To begin with, operating two billing systems makes creating bundled service packages and offering cross product discounts difficult as the two systems run in parallel and do not interact. Furthermore, maintaining two separate systems creates redundant maintenance work for IT staff and adds to the complexity of operations with two separate customer databases and product catalogs.

Option 3 – Use a managed/SaaS billing service

A managed or Software-as-a-Service (SaaS)-based billing service is a good option for utilities companies that are interested in offering additional services and have not yet invested in additional network infrastructure. A managed/SaaS billing service also removes the need to license, deploy and maintain an in-house billing system for additional services. By using a managed/SaaS billing service, a utilities company can focus on marketing additional services to its customer base and can even move the billing operations of its core service to the managed/SaaS service.

It is interesting to note that smart metering and multiple service environments are creating opportunities for competitive service providers, such as network operators, postal authorities and IT divisions at municipalities, to host a billing system and offer managed billing services in a SaaS model. Utilities companies and municipalities of all sizes throughout the world are evaluating their options for approaching both smart metering and multiple service environments. To meet the varied needs of utilities companies and municipalities, the hosted billing system must be able to support a multitenant architecture in order that the unique workflows and billing requirements of each utilities company and municipality can be supported separately, although from one instance of the billing system.

Option 4 – Deploy replacement billing system

For a utilities company with growth plans to embrace smart metering and offer additional services beyond its core utilities service, replacing the legacy billing system with a fully functional billing system that supports multiple services and complex usage-based rating should be considered strongly.

By managing a fully functional billing system with a single customer database, strongly integrated workflow processes, centralized product catalogue and unified service activation processes, a utilities company is well positioned to succeed with smart metering and multiple service environments. Such a billing system can facilitate increased revenues, while reducing the complexity of its billing operation.

Utilities companies that decide to replace their legacy system should be prepared to allocate the resource for an involved deployment process.

What’s best for your company?

Determining which billing option is the best for a particular utilities company depends on the objectives and growth plans.

For a utilities company interested in rolling out smart metering for its traditional utilities service only, internally developing or deploying a third party rating engine to handle real time consumption data is sufficient.

A parallel billing system could be appropriate for a utilities company looking to add a second service, although this option has its upward limitations in terms of no ability to offer cross product discounts, while creating redundant maintenance work with two customer databases, product catalogues and workflow processes.

A managed billing service in a SaaS model is an attractive option for utilities companies as well as municipalities looking to provide multiple services, both utilities and non-utilities services, without investing in additional network infrastructure or deploying a dedicated in-house billing system.

For utilities companies with definitive growth plans that include smart metering and multiple services, a fully functional billing system with strong parameter-based rating and the ability to support multiple services with a unified customer database, centralized product catalogue and strongly integrated workflows is a must.

About the Author

Kirill Rechter is the CEO of LogNet Billing. He is an expert in designing and implementing complex customer management and billing solutions for multiple play service operations.