Jefferson Energy Cooperative s Prepaid Program: Using Cellular Solutions for Spot Deployment

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1 Jefferson Energy Cooperative s Prepaid Program: Using Cellular Solutions for Spot Deployment A Case Study by Itron and Exceleron Software Jefferson Energy Cooperative uses a spot deployment strategy to offer prepaid accounts to members. By using Itron s cellular solutions in conjunction with Exceleron Software s MyUsage Prepaid, Jefferson realizes all the benefits of a prepaid program without making a large investment in a full AMI rollout. Smart meters are installed only when members opt into the prepaid program, and consumption data and commands are transmitted via cellular networks, minimizing the cooperative s risk and financial outlays. JEFFERSON ENERGY COOPERATIVE Jefferson Energy Cooperative is a member-owned cooperative business that markets energy and value-added services to improve the quality of life for members and communities. Based in Wrens, Georgia, Jefferson provides electric service to more than 30,000 customers in 11 Georgia counties, including Burke, Columbia, Emanuel, Glascock, Jefferson, Jenkins, Johnson, McDuffie, Richmond, Warren and Washington Counties. Customer Jefferson Energy Cooperative Challenge Reduce delinquent accounts, improve customer service and protect against financial risks in billing environments. Solution Jefferson deployed a cellular-based smart payment solution providing reliable communications capabilities in remote areas, reducing bad debt, increasing member satisfaction and encouraging energy conservation. CASE STUDY

2 THE CASE FOR PREPAID ACCOUNTS Like many other electric service providers, Jefferson had accounts that were routinely delinquent. A subset of members frequently paid their bills late or not at all, which resulted in late fees and disconnection, higher deposits and ultimately bad debt and write-offs. Customers caught in this situation were clearly dissatisfied. Jefferson wanted to find better alternatives to improve its service and protect itself from the financial risks inherent in the traditional billing environment. When new members signed up for service, Jefferson charged a security deposit based on a credit score. Subsequently, if a member s service was disconnected, that individual would enter a higher risk tier and the security deposit would be increased before service could be re-established. These higher security deposits were beyond the means of many members, but Jefferson had no other way to protect itself against the risks of nonpayment. In the mid-1990s, Jefferson became interested in the potential benefits of prepaid electric accounts. Intrigued by the growing popularity of prepaid phones and calling cards, the cooperative realized that prepaid accounts would be a beneficial option for consumers who have trouble paying their electric bills. Consumers with prepaid accounts would have more control over the frequency and amount of their payments, so they would be better able to avoid disconnections and they would no longer need to pay late fees. At the same time, the cooperative would no longer need to request large deposits and could begin to reduce its write-offs and bad debt. As prepaid technology improved and became more widespread in the utility industry, Jefferson evaluated new technology options to identify the best solution for its sprawling service area....prepaid accounts would be a beneficial option for consumers... who would have more control over the frequency and amount of their payments. The cooperative could also begin reducing its write-offs and bad debt.

3 Jefferson Energy Cooperative is located in Jefferson County, in Eastern Georgia. TECHNOLOGY EVOLUTION The technology underlying the prepaid program at Jefferson has undergone many changes over the past 13 years, which the cooperative refers to as Generation 1 (a card-based system), Generation 2 (a power line carrier system) and Generation 3 (spot deployment over cellular networks). Generation 1: A Card-Based System In 2001, Jefferson adopted a spot-deployment strategy for its nascent prepaid program, installing the requisite equipment only for those consumers who opted into the new prepaid program, rather than engaging in a full rollout. They selected a card-based solution with under-the-glass programming at the meter. In this Generation 1 configuration, consumers who opted into the new prepaid program were able to view their consumption history and remaining account balance on an in-home display unit, and used a small card for verification of payment. The prepaid service was made available to all customers and did not require a large security deposit. Consequently, it was very popular with the cooperative s members who had experienced trouble paying their electric bills in the past. Unfortunately, the card-based solution was discontinued by the manufacturer in Additional meters and in-home display units were stockpiled to continue the service, but Jefferson managers were already looking for other options. Generation 2: Smart Meters with Power Line Carrier Smart meter technology was developing rapidly. In 2003, Jefferson purchased a few meters that could send usage data over a power line carrier (PLC). Those meters offered only one-way communication, meaning that they could send meter readings to the cooperative, but the cooperative could not send disconnection commands to the meter. At first, these PLC meters were used to read standard meters (non-prepaid). Then, around 2008 Jefferson combined a collartype switch in conjunction with the PLC meter to obtain capability to connect and disconnect the service. The PLC meter used PLC frequencies on conductors as the communication medium from the meter to the cooperative, but the collar used Jefferson s existing radio frequency (RF) via radio waves for the communication medium from the cooperative to the meter. This radio wave technology capability has been available at Jefferson since the early 1980s for spot load management purposes. Thus, Generation 2 was created within cost guidelines. The cooperative ran a pilot program of ten of the new meter-andcollar combinations, using Exceleron s software-based MyUsage Prepaid, which eliminated the need for prepaid cards and in-home display units. Consumers were given the option of accessing their account information through a web portal or over the phone. While there was some concern about the changes that users

4 would see, Jefferson s customer outreach paid off. We were worried about consumers who were used to seeing the in-home displays, since not all of them have a computer, said Yvette Brock, member services supervisor, but the new prepaid system was actually a relief compared to the previous system with the in-home displays. Pleased with the progress of this prepaid pilot program, in 2009 Jefferson rolled out full implementation of Generation 2. As Jefferson s prepaid program expanded, early technologies continued to be supported. The old card-based system worked alongside the fabricated, non-interfaced meter-andcollar system communicating over PLC/RF technology. Overall, the system worked well, but Jefferson experienced difficulties in obtaining accurate meter reads over the PLC in certain geographic areas. In addition, while the prepaid PLC was a good option in densely populated service areas, Jefferson had identified other service areas where deploying AMI at 100% would not be cost-effective. Then, in 2011, the meter collars that Jefferson had selected were discontinued by the manufacturer and history seemed to repeat itself. Jefferson purchased enough collars to last another couple of years and began researching other options. Our customer approval and satisfaction shot up by more than 80% once we started the prepaid program, and we had an 82% acceptance rate... Generation 3: Spot Deployment with Cellular Solutions At this point, Jefferson had 11 years of experience and knew exactly what to look for in prepaid metering technology. Spot deployment, remote disconnection, reliable communications in remote areas, member-friendly exchanges and cost-effectiveness were paramount. Looking for creative solutions, Jefferson turned to Itron s cellular solutions team for assistance. Using circuitry placed under the glass, Itron s meters permit daily readings to be communicated back to a collection point via the Verizon cell phone network. This approach presently offers Jefferson a seamless, scalable method for implementing prepaid services programs in alignment with its spot deployment strategy. Whereas a full PLC deployment with remote connect/disconnect features requires system-wide, high capital spending, Itron s cellular networks obviate the need for such investments. To verify network coverage reliability, Jefferson conducted a 200-point test using locations throughout its service territory. Remarkably, the three-month test yielded a 100% success rate. Management at Jefferson was pleased to have found a way to obtain all the meter reads and signals that would be needed for remote disconnection and reconnection, and the cooperative elected to proceed with Itron and Exceleron. Full integration was completed in January As of June 2013, more than 1,000 of Jefferson s 30,000 members have prepaid accounts. One-hundred eighty-five of those accounts rely on Itron meters, and soon all of the remaining card-based units will be swapped out with Itron meters. Our prepaid program has used the services of a lot of different vendors over the years, said Dan Fowler, senior vice-president of energy services for Jefferson, but our members have been happy with each variation and for the most part it has been seamless from their perspective. He notes that Jefferson receives very few, if any, complaints about its prepaid program. BENEFITS The prepaid program at Jefferson has yielded all the advantages that the cooperative anticipated, namely member satisfaction and a reduction in bad debt. The prepaid program has also generated additional benefits, such as greater energy conservation. Member Satisfaction Our customer approval and satisfaction shot up by more than 80% 1 once we started the prepaid program, and we had an 82% 2 acceptance rate in Generations 2 and 3, said Mr. Fowler. Suddenly, our customer service representatives were no longer the bad guys. He noted that members had more options in the prepaid program than in the traditional 1 Based on a Jefferson Energy Cooperative survey of 100 prepaid accountholders in Generation 1, representing 50% of the participants in the prepaid program. 2 Based on a Jefferson Energy Cooperative survey of 1,000 prepaid accountholders in Generations 2 and 3, representing 5% of the participants in the prepaid program.

5 Exceleron Software s MyUsage Prepaid allows members to access information about their prepaid account online. billing environment. Once members received notification of a low balance or a pending disconnect, they could choose whether to make a payment and/or decrease their energy usage based on their financial situation. Mr. Fowler emphasized that the prepaid program is voluntary. When individuals apply for new service, Jefferson runs a credit check and indicates how much the security deposit will be. In cases where the security deposit presents a financial challenge, the customer service representative presents the prepaid program as a more affordable option. Members can and do switch between the prepaid program and traditional billing, but most of these members prefer the prepaid program, which allows them to easily monitor how much electricity they are using over time....bad debt is now half of what it was when Jefferson began offering prepaid accounts in Generation 1. Lower Write-Offs and Less Bad Debt Mr. Fowler also reported that bad debt is now half of what it was when Jefferson began offering prepaid accounts in Generation 1, coupled with higher security deposit requirements for standard metering. Exceleron s MyUsage Prepaid includes a debt recovery feature that allows prepaid consumers to pay off their past-due balance over time. Jefferson has configured the program with a 50% recovery rate, so for every $20 paid by a consumer, $10 is applied toward the past-due balance and the other $10 is applied to the prepaid account balance for future consumption. As of April 2013, Jefferson has recovered over $40,000 in bad debt through this debt recovery feature alone in Generations 2 and 3. Mr. Fowler opined that it would have been highly unlikely for Jefferson to recover those funds through other means, such as collections, since most delinquent accountholders choose to move out of the service area rather than pay off their outstanding debt.

6 Energy Conservation Consumers in Jefferson s prepaid program are more likely to conserve energy. A recent study found that consumers participating in prepaid energy programs typically reduce their energy usage by 11%. 3 This behavioral change is attributed to the way in which greater access to energy consumption data provides a clear financial incentive for consumers to reduce their energy usage. In recent months, Jefferson has observed even greater energy conservation than what was found in the study, with an average decrease in consumption of approximately 13% for its prepaid accounts. We thought prepaid would be a good fit, but it has been an even better fit than we anticipated, said Mr. Fowler. Offering prepaid accounts is one of the best things we ve ever done. It makes the customer happy and it helps to relieve our bad debt. PLANS FOR THE FUTURE Because the current configuration of the prepaid program (using Itron meters, cellular networks, and Exceleron s MyUsage Prepaid) is working well, Jefferson anticipates marketing its prepaid offerings more aggressively. Our goal is that anyone who has trouble paying the power bill should opt to have a prepaid account, said Mr. Fowler. Once those consumers are able to keep up with their energy consumption on a daily basis, Jefferson anticipates that bad debt will be minimized. Jefferson hasn t yet finalized a marketing strategy, but is considering the use of video and other media to promote the benefits of prepaid accounts. The cellular solution is working well, said Mr. Fowler. It provides everything we wanted for our spot-deployment strategy. 3 Source: The Effect of Prepayment on Energy Use, a report of the Prepay Energy Working Group, DEFG LLC, Washington DC, March 2013 (available upon request, contact codwyer@defgllc.com). We thought prepaid would be a good fit, but it has been an even better fit than we anticipated... Offering prepaid accounts is one of the best things we ve ever done. It makes the customer happy and it helps to relieve our bad debt. Co-authored by prepayment solutions partner: Exceleron Software s patented MyUsage Prepaid is a straightforward, turnkey solution for creating and managing prepaid accounts for utility services. The webbased, hosted application is fully integrated with utilities existing IT systems and payment vendors, with no requirements for additional hardware or in-home display units. As of mid-2013, more than 80 utility service providers have selected MyUsage to launch and manage their prepaid programs. For more information about MyUsage and its benefits for utilities and consumers, visit Harvest Hill Road, Suite 233 Dallas, TX sales@exceleron.com Itron is a global technology company. We build solutions that help utilities measure, monitor and manage energy and water. Our broad product portfolio includes electricity, gas, water and thermal energy measurement and control technology; communications systems; software; and professional services. With thousands of employees supporting nearly 8,000 utilities in more than 100 countries, Itron empowers utilities to responsibly and efficiently manage energy and water resources. Join us in creating a more resourceful world; start here: CORPORATE HEADQUARTERS 2111 N Molter Road Liberty Lake, WA USA Phone: Fax: While Itron strives to make the content of its marketing materials as timely and accurate as possible, Itron makes no claims, promises, or guarantees about the accuracy, completeness, or adequacy of, and expressly disclaims liability for errors and omissions in, such materials. No warranty of any kind, implied, expressed, or statutory, including but not limited to the warranties of non-infringement of third party rights, title, merchantability, and fitness for a particular purpose, is given with respect to the content of these marketing materials. Copyright 2013, Itron. All rights reserved WP-02 8/13