David Hughes explains why it is crucial that energy billing and metering practices are accurate before the roll out of smart meters begins in earnest.

Energy meters have always been and will continue to be the "cash register" for energy suppliers, but they are also more than that. They are the heart of the business for both consumers and suppliers. Without meters and the tracking they allow, consumers would simply be unable to pay their bills.

As the energy market has had to deal with growing competitive pressures over the past decade, metering has fallen to the bottom of the priority list, but with a rapidly changing marketplace and prices soaring, this clearly needs to change. Meter reading performance has to be a priority issue at board level.

The government has given the go-ahead for smart energy metering and there is a potentially huge opportunity for those energy suppliers that are both willing and in a position to participate in a rollout programme. For those that are not ready, this is not only a missed opportunity, but it could also become the root of huge financial losses.

The advent of smart metering is going to be a challenge for suppliers that have a history of billing difficulties. Smart metering is likely to exacerbate the problems caused by billing and measurement inaccuracies and cause further financial damage to suppliers unless they are remedied well before any smart metering rollout. The more successfully that billing and meter reading inaccuracies are resolved, the less exposure to financial risk and poor customer service suppliers will face.

A half successful job is as bad as no job at all when it comes to preparing for smart metering. If suppliers try to remedy their poor billing situation but do not do a complete job, any sort of smart metering rollout is going to fall flat on its face. It would be like building a house on faulty foundations.

Billing performance

Therefore suppliers should make billing performance their highest priority - and ensure that it is completely watertight - before even considering the roll out of smart meters. Managers should look to the weakest points of the system first, to ensure that basic inaccuracies are minimised. With current meter reading, these are typically the communication of raw data and the data entry itself.

The most common cause of these weaknesses is simply human error. Ensuring the accurate entry of data at the point of meter reading must be the first point of call. Often this can be done through increased training and the provision of performance-related rewards for those responsible for the front line meter reading. It could also be helped by something as simple as redesigning data entry forms to make them easier to use.

The underlying data relating to customers' meter readings must be as up to date as possible, ensuring that the discrepancy between meter readings and the amount a customer pays is minimised. Currently this is an issue of time and process lag. Data is taken from a meter reading and then it is passed on to be processed by whatever systems are in place. Often several weeks can pass between meter reading and billing, which leads to either an additional estimated charge or an out-of-date undercharge, neither of which is desirable.

The settlement process is another area that needs a clean up. Energy suppliers must ensure that data is consistently and accurately being fed into their risk management and demand forecasting processes. With bills routinely based on customer readings, closing the loop with these processes will again be essential to minimise financial losses before a smart metering rollout.

Mismatched systems

As the products of mergers and acquisitions, numerous suppliers have found themselves with a mismatch of three or more different billing systems. Having suffered the pain of attempts to collate them, many successfully adopted a "rip out and replace" approach. While this involved considerable one-off investment, these suppliers would resoundingly agree on their return in terms of both efficiency and payment capture.

These companies are now ideally placed to reap the rewards of smart metering.
Unfortunately, the move from traditional meters to smart meters is not as simple as getting rid of the old for the new - it is a transformational change. Those who simply replace old meters containing inaccurate data with the new smart meters will lose important historical information forever. They could be forced to write off deficits, leading to substantial losses.

Suppliers need to set in stone the processes involved at every stage in the collection of data. Care must be taken in ensuring data collection is consistent across all departments. In many cases data can be altered at each stage of the collection process. This can only be solved by working from the bottom upwards and "ring-fencing" data to provide a single version of the truth that no single individual can change at any point in the process.

Introducing smart metering is not a panacea that will resolve every conceivable billing problem. Its success depends entirely on inefficient and inaccurate metering and billing practices being rectified.

Perhaps most important of all is the way that reforms are implemented. New policies and processes must be approved at board level, and the board must lead implementation too. Beyond this, at all levels of the supplier organisation employees must know and understand the importance of the roles they play in such an implementation. This is after all a full change management process, and without company buy-in, it runs the risk of failure.

Those that rise to the challenge and lay the necessary foundations for smart metering will find themselves at the top of the energy suppliers' league. They will also avoid the additional costs associated with unplanned customer contact and dealing with complaints.

David Hughes is utilities practice director at ABeam Consulting.
Email: dhughes@abeam.com

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