Benefits Derived From Automating Meter Reading: Developing Your Business Case

Transcription

1 Itron White Paper AMR Business Case Benefits Derived From Automating Meter Reading: Developing Your Business Case Darla Bowers Director, Distribution Channels Itron, Inc.

2 Introduction Utilities come in all shapes and sizes but they all strive for essentially the same end result. They seek to deliver energy and water to their customers in an efficient, safe manner while safeguarding the utility s revenue stream, minimizing expenses and maintaining customer satisfaction. In recent years, the market has witnessed a significant trend favoring meter automation in order to achieve these goals. The Scott Report indicates that automatic meter reading (AMR) shipments in North America were up 27.5 percent in Shipments to water utilities were up 15.5 percent the same year. While many product options varying from electronic meter reading, to mobile- or fixed-base automation are available, utilities need to understand what differentiates each to determine which best meets their individual requirements. In order to develop a business case that reflects the operations of a utility, an understanding must be gained of the utility s unique operating characteristics. Special attention needs to be paid to benefits each utility expects from automating their system. Regardless of the type of automation, the intended benefits should be weighed against the cost of enabling the technology. If the realized benefits exceed project costs, then the project should be undertaken. When looking at automation, it is easy to see the reduction in basic meter reading costs. While the cost of meter reading can vary due to many factors, this is one of the main expenditures to be eliminated through automation. Costs for manual reading typically range from $.50 to $1.50 per read or, depending on labor costs and distance between meters, costs as high as $3.00. By deploying automation, costs can be reduced substantially, even from just electronic meter reading or offsite meter reading (a handheld equipped with a radio device to read meters from a distance). Other costs associated with manual meter reading that are all but eliminated with automation include salaries, benefits, vehicle costs, cellular phone expenses, handheld meter reading systems, maintenance and some general overhead expense, etc. While the cost avoidance associated with basic meter reading may be apparent, there are many other revenue enhancements that can be realized from automation. An Itron AMR system, specifically tailored to the utility, is an ideal investment toward improving the overall operations of a utility. In determining potential benefits, a utility needs a sound understanding of their operating characteristics, which aspects of automation will benefit them and where they will deploy that technology. One size does not fit all. The following areas should be considered in a business case for automated meter reading: Accounts Receivable Utilities billing on a quarterly or bi-monthly basis typically have increased accounts receivable issues associated with larger customer bills. This is compared to the smaller bills of customers billed monthly. To the extent a utility can keep bills small and manageable for their customers, the collectable nature of the receivable is increased. In addition, when a bill is disputed, increased time between accurate reads makes it that much more difficult to collect the full amount in arrears. With the increased workload, some utilities find they are unable to keep crews on scheduled reading cycles and face difficulties in hiring additional personnel. When this occurs, billing cycles can be extended beyond the normal 30 days, again creating a situation where bills become more difficult to pay. With energy and water rates continually increasing, utilities need to keep payments manageable for customers. Utility customers need to be provided their bills in a timely, consistent fashion in order to increase on-time payment patterns. Utilities have seen steady on-time payments from customers, as well as a significant reduction in their total accounts receivable balance, after implementing automation. Re-bill Costs An AMR solution can significantly reduce estimated reads and costs associated with re-billing accounts. Since AMR systems have very high accuracy and read percentages, the system substantially reduces re-bill costs, especially the high cost associated with re-bills for commercial and industrial customers. 2

3 Summary Billing Some utilities provide master or summary billings to customers who own multiple businesses within the service area. Typically, this requires the utility to hold bills until all of the summary accounts can be read for a particular month. While some utilities have routed their system to obtain these reads within a short time period, other utilities are required to wait until all accounts have been read before issuing the master bill. AMR enables flexible reading schedules thereby avoiding delays in summary billing of commercial accounts. Billing Cycle Efficiencies While automating their system, there are many opportunities for a utility to increase their cash flow. For utilities currently billing on a quarterly or bi-monthly basis, changing to monthly billing will result in increased cash flows in the first year of deployment. Assuming a utility has collections on average of $1 million per month, or $12 million annually, and they are going from a quarterly to monthly basis for billing, they should add approximately two months of cash flow to the first year of automation for a total of $14 million. After automation they will return to $12 million in collections each year but for that first year, they receive an additional 17 percent in cash flow. This is a significant benefit from automation whereas the utility can move to monthly billing without the added labor that might double or triple their current meter reading expense. A utility has reported using the additional cash flow from more frequent billing to pay for their AMR system. Special Reads: Read and Leave On Reads / High or Low Investigations Every utility has specific operating procedures with regard to field work readings and investigations. A utility s unique procedures need to be explored to discern if more efficiency exists with a mobile AMR or a fixed network system. Some utilities are allowed to estimate final reads but the majority are required to obtain an actual read within just a few days of the request. Policies at some utilities allow some customers to delay their payments pending a re-read for a high or low investigation. This has the potential to negatively affect a utility s cash flow. This type of read is also expensive to obtain manually, but there are alternate ways to gather such reads. Using mobile AMR, a special read file can be generated and the readings can be easily obtained. This can be handled very efficiently utilizing a mobile collector enabled with GPS mapping functionality. With a fixed network system, this information can be retrieved real-time or from the daily read file s most recent record. To understand the benefit, the utility needs to investigate the number of field work requests accomplished annually and determine the costs of such investigations. On average, manually providing a special read can cost a utility from $15 to $30 or more for each activity. An automated system will prove to be a more efficient method for obtaining these reads. Customer Call Center Savings / Customer Satisfaction Issues Utilities receive numerous calls each month related to a variety of subjects. When there is a decrease in a utility s customer satisfaction, the result is an increase in complaint calls. If a utility performs estimated reads, call volumes can further increase as customers distrust estimated reads. In order to determine the type of calls a utility could avoid with automation, a utility needs to examine the reason for a call. While there may not be a tangible way for valuing customer satisfaction, logs in the call center, coded by complaint type, may provide a way to determine the hard dollar costs of providing less than satisfactory service. Post-AMR, utilities report seeing a decrease in customer calls and abandoned calls, and an increase in overall customer satisfaction. Re-Routing / New Service Opportunities As part of an AMR deployment, re-routing opportunities frequently exist. Over the years, as a utility s customer base grows, accounts are added to routes in ways that are not necessarily optimized for manual reading. An AMR deployment is the perfect time to restructure the system for optimal efficiency. Automation also allows a utility to offer customers flexibility within their reading 3

4 schedule. A utility s commercial customer may want their reading on the last day of the month to avoid accruals and accurately close their accounting records. Customers could also receive their bill just days after the close of a month. These scenarios are also wins for the utility as their highest revenue accounts are billed earlier, thus accelerating the utility s cash flow. This service opportunity can be offered with a mobile AMR or a fixed network system. Meter Database Most utilities do not have an accurate, up-to-date database of their meter and module inventory. As part of an AMR roll out, a database can be constructed with pertinent fields and formatting chosen by the utility. Many utilities report discovered service connections as part of the roll out, either from accounts missing from their CIS database or illegal connections that can be corrected and generate new revenue. Safety / Security Issues Utilities, like everyone else, try to avoid lawsuits because of the potential negative ramifications. Utilities who have faced lawsuits from an injured employee or customer know the importance of minimizing their exposure. If a utility has not faced such a situation, they are probably crossing their fingers that they never will. Obviously, the more crews on the road, the more opportunities there are for an accident to occur. Security for both employees and customers is crucial, especially given reading routes that require a two-person crew because of safety concerns, unfriendly dogs and physically hard to access meters. Some utilities even maintain sets of keys to customer homes to read indoor meters. The liability concerns are endless. There have also been unfortunate incidents caused by individuals posing illegally as utility employees to gain entry into a home. Automatic meter reading remedies these concerns by minimizing those personnel in harm s way. Water and Energy Theft and Leak Information Both fixed network and mobile AMR systems deter theft in several ways. An Itron AMR module contains a tamper monitor that detects certain kinds of intrusion and alerts the system operator. The utility can use the AMR data to focus on inactive accounts to ensure there is no unauthorized usage with these accounts. This will help the utility determine if services have been illegally restored. However, the process of automation alone has been known to be a deterrent to theft of service. By simply advertising the automation of meters and the tamper monitor feature, deterrence from potential theft can be realized. Fixed networks offer additional functionality in support of theft detection, as well as more frequent and accurate water leak and energy usage information. Usage data in utility-selected intervals can be programmed to assist in locating tamper and leak information. Within the water fixed network system, additional tools are available for monitoring the water distribution system before the meter to uncover hidden leaks more rapidly and ensure their timely repair. Since this water never goes through a meter to be billed, its potential as revenue for a utility is lost. Inaccurate / Slow Meters As part of implementing an AMR system, the opportunity exists to upgrade each meter to accurately reflect customer consumption. Both electro-mechanical meters and water meters tend to run slow over time, resulting in lost realization of a utility s full revenues. By replacing electro-mechanical with solid-state electric meters, utilities can increase revenues and ensure end-customers are paying for services received. Water meters are especially susceptible to running slow when hard water is present. Replacing aged water meters will positively affect a utility s bottom line. Additionally, many water utilities tie their water and sewage charges together with sewer charges as XX% of water consumed. If the water meters are reporting lower than the actual consumption, the utility is also losing revenue from sewage. 4

5 Energy and Water Conservation / Efficiency Efforts The cost of supplying energy during peak generation periods is more expensive than base load generation periods. To encourage usage in off-peak times, fixed networks enable utilities flexibility in offering energy customers time-of-use pricing. Without interval consumption data, a utility cannot provide pricing that encourages alternate usage patterns. Other conservation or efficiency concerns exist for a variety of reasons, but are especially prevalent in drought areas. Effectively monitoring adherence to imposed water restrictions can be challenging. Currently, most utilities use their field employees for this monitoring or via phone calls from other customers reporting illegal usage. These methods are costly and ineffective compared to automation. Water utilities are also beginning to look at billing customers based on the intervals when water is used. Automation can provide the interval usage information to make this possible. 5

6 The organizational impact of AMR reaches much further than simple savings from avoiding manual meter reads. In order to truly understand all the benefits associated with an Itron automation system, the utility needs to determine all the potential areas affected by AMR. Due to the unique nature of each company, there is no generic business case for determining whether a utility should deploy a system or not. It is reasonable, however, to expect a positive cash flow and good rate of return from an Itron AMR deployment. It is imperative to look beyond basic meter reading expenses to determine how the system will drive efficiencies and savings throughout many departments in the organization. Itron has helped numerous utilities in developing their business case for investing in AMR. Whether you re a water, gas, electric, or combination utility, Itron has the experience and knowledge to help build a business case reflecting the unique operating structure of your utility. Itron has over 3,000 utility customers nationwide that put their trust in us for their AMR deployments, making us the industry leader. Utilities interested in gaining a better understanding of AMR and its benefits should contact their Itron distributor or account executive and request AMR business case assistance. Itron Inc. Itron Inc. is a leading technology provider to the global energy and water industries. Itron Inc. consists of Itron in North America and Actaris outside of North America. Our company is the world s leading provider of metering, data collection and utility software solutions, with nearly 8,000 utilities worldwide relying on our technology to optimize the delivery and use of energy and water. Our products include electricity, gas and water meters, data collection and communication systems, including automated meter reading (AMR) and advanced metering infrastructure (AMI); meter data management and related software applications; as well as project management, installation, and consulting services. To know more, start here: Itron Inc. Corporate Headquarters 2111 North Molter Road Liberty Lake, Washington U.S.A. Tel.: Fax: Due to continuous research, product improvement and enhancements, Itron reserves the right to change product or system specifications without notice. Itron is a registered trademark of Itron Inc. All other trademarks belong to their respective owners. 2007, Itron Inc. 6 Publication WP-01 10/07