Public Power - June 2008 - (Page 70)

CUSTOMER SERVICE Chasing Bad Debt: How Far Should You Go? By Jim Paterson Public new ways to handleconpower utilities are sidering an old problem – bad debt. More often than not, utilities find traditional, rigorous customer service and collection methods more effective than newer approaches, such as selling debt. “We have the philosophy that the only way to control bad debt write-off is to control the active account collections,” said Kathy Burns, vice president of customer relations at the Electric Power Board in Chattanooga, Tenn. “We keep our collection schedule very tight.” Robert Pinchuk, president of Columbia Financial International, which offers collection agencies a number of services and products and provides consulting about debt-handling, agreed. Exacting collections processes are most effective, he said. Chattanooga EPB requires payment 15 days after billing, followed by a disconnect notice three to five days later, then a seven-day pay back period, said Burns. The utility works closely with customers to make payment arrangements. Before EPB writes off a closed account, internal collectors work on the accounts for 90 days using a variety of tools, including the utility attorney and a software package called Debtmaster, which manages the collection process. “Since we expend so much effort trying to collect accounts before and after the account close, our bad debt write-off percent is fairly low — about 0.12 percent,” she said. An 70 JUNE 2008 APPA benchmark survey put EPB’s debt write-off at near the lowest in the industry. Terrebonne Parrish Consolidated Government, in Louisiana, signs a contract with new customers and checks for outstanding bills they may have with the parrish government, said Customer Service Manager Ed Lawson. The utility also mails final bills by certified mail. The Eugene Water and Electric Board, in Oregon, also tries to be diligent about non-payment, and uses an up-front deposit system (two times the historical highest bill) to reduce problems, said Dawne Howard, customer service credit and collection supervisor. The utility works hard to recover debt from those delinquent customers who leave and return to EWEB. Nationwide, selling debt is an increasingly popular trend: $110 billion was sold across the United States in 2005, up from half that amount in 2000. However, that practice is not the best option for a public power utility, especially a smaller one, said David Ehrlich, vice president of marketing for Infovision, a large national collection firm that buys debt from several large investor-owned power companies. The 0.5 to three percent the buyer will typically pay for the debt often does not prove to be worth the upfront work to arrange the sale, and make sure customers are treated well. If a utility has $100,000 of bad debt and would recover only $2,000, there is no motivation to rely on a collector, Ehrlich said. “We would only get pennies on the dollar,” said Karen Vanca, assistant director of customer care and solutions at Azusa, Calif., Light and Water. “And we also have no idea how our name will be used.” She says she believes other utilities have made the same decision. Collection agencies can take anywhere of 20 to 40 percent from the debts they settle. E Utilities should look at their debt management process and maximize the use of the resources in-house, Ehrlich said. “Then it is all about return,” he said. “Step out of the box. Make a proposal to a good agency and challenge them to give the utility a higher return. Don’t worry about the percentage they are making. If they make money, you make money. Worry about what you are getting at the end of the day.” Some utilities use debt-handling consultants to determine how the utility process might be improved and online services that provide a network of attorneys to investigate debt, said Pinchuck. Services such as GlobaleClaims.com use the Internet to connect organizations holding bad debt with collection attorneys. Businesses can post their bad debt and collection specialists can choose which accounts they wish to take on. GlobaleClaims.com also provides a platform where information about the debt can be downloaded from the utility and made available to collectors. “The system translates information from any database efficiently. The utility can upload a report within 24 hours and often they get 20 to 60 percent collection rates. It is a good option to consider,” Pinchuck said. Jim Paterson is a writer in Olney, Md. PUBLIC POWER http://GlobaleClaims.com http://GlobaleClaims.com http://GlobaleClaims.com

Table of Contents Feed for the Digital Edition of Public Power - June 2008

Public Power - June 2008 Contents Perspective 10 Questions Finding Common Ground on Climate Change Solutions A Patchwork Approach to Renewable Energy Whose Grid Is It Anyway? The Little Utility That Could Benchmarking Customer Service Can Prairie Hay Power Your Town? Storming the Control Room Investing in the Smart Grid Coming of Age: Superconducting Cables Community Broadband Economic Development Customer Service Human Resources For Governing Boards Safety Parting Shot

Public Power - June 2008

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