How Can Suppliers Tackle Energy Billing Vs. Settlement Challenges?

Achieving the right balance between settlement and billing is not easy, explains Richard Cullen, Practice Director at Engage Consulting.
Published: Fri 15 Aug 2014

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Gaps between billed revenue and settlement costs are a common problem for many energy suppliers and getting the balance right between settlement and billing can be tricky and costly.

These gaps can result in millions of pounds of lost revenue through over settlement and under billing. Overbilling can also damage customer relationships. Such gaps are difficult to identify and time consuming to resolve since the processes involved are highly complex. This is bad for supply businesses and for the vast majority of customers.

The need for accurate billing

The goal of every energy supplier is to provide excellent service to their customers. This includes giving them a fair deal and billing them correctly for the energy supplied. In doing this, suppliers have to ensure that the costs they incur are recovered via billing. Any number of factors can contribute to imbalance gaps such as:

  • Inaccurate meter readings caused by mistakes made when reading the meter, or faulty meters

  • Inability to access premises, or to obtain readings from customers resulting in estimated readings

  • Meter reading validation issues resulting in estimated readings

  • Inaccurate information held in billing systems resulting in billing inaccuracies or the inability to raise a bill

  • Incorrect information held in settlement systems resulting in inaccurate settlement volumes

  • The theft of electricity or gas through bypassing the meter entirely

Smart meters change the billing landscape

With smart meters being rolled out in Great Britain from December 2015, there is a real opportunity for suppliers to obtain more meter readings and to deliver new and improved services to customers. The way in which suppliers manage these increased volumes and ensure data integrity and correct customer billing could make or break their business.

Good data integrity is critical

Although the coming of smart meters promises to improve the method and frequency of data collection from meters, we won’t see an end to imbalance gaps. The meter exchange process associated with the rollout could expose many longstanding errors that have as yet gone undetected.

In addition, unless suppliers have good data integrity, and are in control of their imbalance gap position before smart meters are put in place, the extra data they have from smart meters could make discrepancies between billing and settlement even more difficult to identify.

Smart meters are expected to result in suppliers offering new and improved services to customers – such as rewarding them for changing their usage patterns. Many of these benefits will require alignment between billing and settlement and so those suppliers with mismatches will be at a real disadvantage.

Bridging the energy revenue and margin gaps

One way to help supplier’s bridge these imbalance gaps is the new cost module we’ve added to our Revenue and Margin Assurance (RAMA) Solution, which will enable energy suppliers to calculate gross margin for each of their meters. RAMA has been designed by energy sector technical experts with a deep understanding of customer billing and settlement processes, and data analysts with many years’ experience working with energy suppliers on these issues.

RAMA automatically tracks, monitors and analyses suppliers’ billing and settlement data on an on-going basis, identifying the sources of energy volume and cost discrepancies across their electricity and gas and customer portfolios. Any volume gaps and margin issues are flagged up in time for issues to be resolved before the billing and settlement deadlines expire, and suppliers gain complete visibility of which meters are causing problems.

The RAMA system provides vital business information on their efforts to manage the imbalance gap that can help suppliers increase their profitability. Using such a system suppliers save time and effort in identifying the source of discrepancies, and can quickly discover which meter end-points are causing the problem – so protecting their revenue and enabling them to provide a better deal and service to customers.

We believe RAMA can benefit all energy companies, whether they are a niche supplier or one operating across a number of customer segments, deliver tangible financial and customer benefits and mitigate regulatory risks.