Revenue Assurance for Energy Retailers - what does that mean?

Brave Energy Systems finds millions of dollars in unbilled revenue every year for our clients using our Revenue Assurance products. When Brave started developing these products, "revenue assurance" within the energy retailing industry was a rarely used term. We are now starting to see organisations create new roles - such as Revenue Assurance Managers within their business. This is great to see. The telco industry has been performing this function for years and it's great to see our industry begin to put robust systems and processes around this critical function in place.

Brave has thrown the term revenue assurance around for a number of years but there is no real definition of what it is in the context of energy retailers - so we'll give you our view of what it is and how we go about securing those cost and revenue streams.

Revenue Assurance is about validating that your input costs and revenue streams are accurate. For energy retailers in Australia the costs and revenue streams are shown below.

The core input costs for a retailer are the wholesale costs (approx 30%) and the network costs (approx 50%). The revenue stream is simple - its the bills we send to our customers (100%). The key to revenue assurance is to have a strong reference point for cross checking the operational systems. At Brave, our Standing Data repository and our Meter Data repository which are maintained by market messaging, provide the majority of what we need to detect revenue leakage.

With this independent set of data we can now begin the process of reconciliation. Each line in the diagram above is a reconciliation point. The following points of reconciliation can therefore be defined;

Bill Reconciliation - The auditing of the billing system. We compare the output of the billing engine - the customer invoices (say from a print file) to the independent data set. This comparison is performed using models which perform thousands of tests on each bill and bill line. The outcome of these tests determine if the bill is correct or contains revenue loss. Where no bill exists, the models determine whether a bill should have been produced or not.

NUOS Reconciliation - the validation that the NUOS Invoice from the distributor is accurate. It should be noted that what some retailers call NUOS reconciliation is in fact NUOS Pass-thru reconciliation because its more about sanity checking the retail bill against the NUOS invoice. This largely becomes a simple check of KWh comparison and whether they are in fact the retailer or not. This is not validation of the NUOS invoice by any stretch of the imagination. NUOS Reconciliation involves confirming the distributor has invoice according to their published tariff. This means checking Time of Use splits, Demand charges, Blocking (or usage steps), their rates, metering charges, solar credits and more.

NUOS Pass-thru Reconciliation - this is a check that the retail bill contains the pas thru network costs. This is often difficult to do accurately because in the case of Mass market customers, the billing system rarely separates the network and retail calculations so that means we are comparing retail bill lines with different rates and potentially different structure (time splits, steps etc) to that of the network invoice. Its not an apple and apple comparison and so this largely becomes and exercise of confirming consumption is the same. Its a very simple set of tests and Brave implements these tests as part of Bill Reconciliation.

Settlement Reconciliation - this is a reconciliation of MSATS Settlement invoices against the independent data set. Settlement reconciliation is really more about meter data alignment (and standing data) than anything else. Because the meter read data involves an MDP sending different sets of data to MSATS, the Distributor and the retailer, the differences in wholesale settlements are predominately due to consumption differences.

Standing Data Reconciliation - This is the confirmation that our independent sets of data are maintaining alignment with what MSATS is storing. Brave also uses this component to enable reconciliation of other back office systems' standing data against the market.

All of these processes combine to provide a comprehensive revenue assurance process as outline in the diagram below.

We hope this overview goes some way to defining what revenue assurance for energy retailers means. Brave are are experts in revenue assurance. Our solutions are unique in this market, and if you have a feeling that you are not billing everything you should, or that your input costs are not being validated to the degree that they should then our revenue assurance modules will certainly assist your business. Contact Brave for a demonstration or for further information.

Retailers - Are you losing millions of dollars in unbilled revenue?

There is a lot of publicity around the electricity sector in Australia at the moment. Its either the reporting of power price increases due to carbon tax or gold plated networks or about some billing problem resulting in a pensioner receiving a $90,000 bill.

What's not generally reported on is all the customers who are not being billed at all. A quick scan of the internet discussion forums however and you can find information on certain retailers that are known for being unable to bill solar power. Other retailers appear to struggle to bill interval meters correctly - unable to handle retrospective changes to meter readings and then there are occasions where a customer doesn't get billed since they decided to churn to a new retailer. It appears every retailer has some problem or another  that is leading to customers who are not receiving bills for more than a year at a time.

The problem seems to be getting worse - ask any group of friends about their electricity bill and more often than not you'll find someone who doesn't receive a bill - at least for 12 months or a horror story centered around trying to resolve a billing error only to see the same problem resurface next quarter.

Energy Retailers are losing money, lots of money. Revenue loss is occurring on a number of fronts.

• Retailers are failing to bill customers - sometimes (and incredibly) for years in a row due to account setup issues or operational process failures.
• Retailers may not be billing accurately - for example only billing the peak register of a peak/off-peak meter
• Retailers can't bill because of missing meter reads or incorrectly configured or inaccurate standing data
• 3rd party providers are passing on incorrect costs such as distribution fees which are going undetected
• 3rd party providers are sending different meter reads to AEMO, the distributor and the retailer causing differences across settlements, networks and retail billing.

Energy retailing is a complex business and the generation of a customer's monthly/quarterly invoice is the end result of a number of business processes and data flows that involve a number of different companies. When any of these processes or data flows fail, its highly likely the invoice generation process will fail too. Fixing "billing exceptions" is a costly and time consuming activity.

Its not billing exceptions that lead to the greatest of revenue loss. Its a significant contributor only in the event that a billing exception can not be corrected within the regulatory time frame for invoicing a customer. At that point, each day outside this period needs to be written off. Typically, retailers focus their exception processing efforts on the billing exceptions queue - because of the cash flow impact that results otherwise. The the truth is, this rarely addresses the underlying cause of the exception and so, in time, another billing exception on this account is likely.

What retailers need to be concerned about is the revenue loss that is occurring undetected. Or to use a famous quote from Donald Rumsfeld - "the unknown unknowns" and even the "known unknowns" (we know we have a problem but cant find it!).

Brave has been called in to find these "known and unknown unknowns" on a number of occasions for a number of energy retailers as part of a proof of concept implementation - and the results have been eye opening. Tens of millions of dollars in under billing have been identified using our unique revenue assurance tool sets. Almost every retailer we performed this task for had some significant revenue leakage.

The managers that take the initial proof-of-concept results from our solution and go on to implement a structured revenue assurance process ensure that this sort of undetected leakage never occurs again and in the process reduces their exception handling costs, improves the company's cash flow, improves overall margin and implements an IT solution which provides a positive ROI before it even goes live.

So how do we do it? - Brave's Billing Reconciliation module uses flexible decision trees to analyse the invoicing data against the published market data to identify where problems exist. For each day of the reconciliation period, the system can then categorise the NMI and its revenue and leakage status. When the   process is completed each NMI receives an analysis summary show whether it has leakage issues, when they occurred, for how long and an estimate of the leakage amounts.

A Reconciliation Analysis Summary for a Single Site

Once all this information exists, we are able to aggregate it to executive and operational management levels to provide a holistic view of the total revenue leakage being detected, where in time it is occurring, the reason it is occurring and whether this leakage issue is getting better or worse (trends) overtime.

With Brave's Bill reconciliation module, you can implement a robust revenue protection strategy, move from reactive to proactive exception management, prioritise and co-ordinate exception resolution teams and make the entire process visible to all levels of the organisation to ensure it gets the level of attention it demands.

If you would like to understand how to find the millions of dollars you may be losing, contact Brave for further information.