Economy, new regulations are impacting utilities
MOSINEE, Wis.--(Business Wire)--
Impacts of a difficult economy. Increased regulation. Consumers demanding many
more payment options. Aging IT resources. Uncertainty about what smart grids
will bring.
These are some of the many challenges facing utilities in 2009, and the pressure
will only continue into 2010 and beyond, based on preliminary results of a
survey commissioned by WAUSAU Financial Systems and Sierra Energy Group / Energy
Central.
"In a stressed economy, smooth payment processing and timely information about
transactions is crucial, yet that`s not what many utilities are experiencing,"
said Mike Tallitsch, Vice President - Corporate Solutions of WAUSAU Financial
Systems. "In fact, their performance is handicapped by outdated technology.
Utilities can`t thrive if they don`t have the right information or the ability
to offer the many payment channels their customers now require."
The research analyzed payment processing trends in the utilities industry;
identified areas of concern for utilities of all sizes; and noted economic
implications on customer payments. More than 100 utilities responded, with a
majority in the independently owned utility area. Most of the respondents hold
senior leadership positions.
The major initial findings:
* Nearly two in three (65 percent) of utilities interviewed reported the current
economic environment is affecting the industry and making processing customer
payments more difficult.
* Billing and cash flow were identified as major concerns impacting a utility`s
ability to make accurate business decisions. There is a lack of information
about daily investible dollars, driven by the fact that 85 percent use dated,
legacy systems.
* As just one measure of the impact of inadequate payment systems, 10 percent or
more of payments take more than three days to process.
* Two-thirds of utilities lack confidence in their ability to new meet demands
due to market volatility, new regulations and pressures. This includes demands
related to green energy, cap and trade, and smart grids.
* Smart grids will create new billing demands, such as two-way billing and
demand response reconciliation. But because smart grids are still being built,
utilities have not yet turned attention to the billing requirements they will
face. Lack of cash flow and access to capital adds to the challenge.
* Even if demand for utilities` services is down, operating and maintenance
costs remain constant. In addition, delinquencies are up by 20 percent over
previous years, according to companies surveyed.
* Nearly 33 percent of all utilities say the mobile payment option is rapidly
emerging, with customers increasingly demanding the service.
* Utilities` outsourcing of payment services is slow to gain momentum, largely
because the process is so complex. Only about one in three utilities outsource
any part of their payments processing today.
The need to modernize receivables processing technology is clear. From its peak
in 1995 (according to the Federal Reserve), the number of paper checks has
diminished as electronic payments transform payment operation requirements and
economics. According to Aite Group, paper checks and money orders` share of bill
payments are projected to fall from 54 percent in 2006 to 37 percent in 2010.
Meanwhile, trying to manage many payment channels without a resource to
seamlessly integrate them results in negative financial consequences, the survey
shows.
A single receivables solution - sometimes known as a hub - can collect all types
of payments including check, cash, card and electronic, plus automate imaging,
routing and validation. Such a process takes hours rather than days, and lessens
the demands on information technology resources.
The survey found that given the economic environment and increasing regulatory
pressures, utilities are more likely to buy or switch to a new system if it met
certain qualifications. These include guaranteed lower transaction costs; lower
costs than the existing system or other vendors competing in a bid process; a
quality system; a system that meets all RFP requirements that is easy to use,
has low maintenance costs and requires minimal changes to the overall system.
WAUSAU Financial Systems, which serves for more than 45 utility companies,
processing more than 500 million annual transactions each year, offers the
UtiliWorksTM solution. It`s a hub that has delivered significant benefits to
customers willing to change course. For example, American Electric Power in Ohio
reduced staff by more than 40 percent, including full-time and part-time
employees.
Meanwhile, CenterPoint Energy of Houston eliminated Pass 2 operations with ARC,
decreasing the use of hardware and staff by more than 26 percent while
significantly improving daily investible cash.
PSE&G of New Jersey, a top-10 utility, was burdened by legacy systems and
processes that delayed payment processing, required significant labor to
maintain and limited the system`s performance metrics.
Since adopting UtiliWorks, PSE&G has reduced employment, provided the ability to
process 100 percent of payments within 24 hours, eliminated courier costs,
raised the level of security and increased daily investible dollars by 31
percent - to $8.8 million. In all these cases, electronic deposit has
accelerated funds availability.
"What these successes demonstrate is that utilities that decide to adopt the hub
concept can enjoy very real, immediate benefits. Such positive results can help
alleviate the anxiety that we all experience within today`s rapidly-changing
utilities industry," said Tallitsch.
WAUSAU Financial Systems has set up a new Website, www.utilityreceivables.com,
to provide details about challenges utilities face as well as solutions that can
make a difference. To learn more about the research, email
utilities@wausaufs.com.
About WAUSAU Financial Systems:
WAUSAU Financial Systems (WFS) is a premier provider of payment and receivables
processing solutions, helping businesses of all types move money faster. With
its products, services and consulting, WFS works with customers to speed check
processing, electronic presentment, ACH payments, transaction processing,
distributed capture and enterprise content management. WFS holds the No. 1
market share position in retail and wholesale remittance processing solutions.
WFS processes more than $1 trillion in payments each year through its work with
more than 650 organizations, and maintains more than 30 percent of all U.S.
lockbox volume. The company works with 13 of the 25 largest financial
institutions, 42 percent of insurance companies with more than 5 million
customers and 24 percent of utilities with more than 100,000 customers. More
than 200 financial institutions use WFS` remote deposit capture service, and
industry consultants Celent and Aite have ranked WFS` remote capture
functionality above all competitors. For more information, visit
www.wausaufs.com.
Don Klein
for WAUSAU Financial Systems
(414) 319-5700
donklein@zizzogroup.com
Copyright Business Wire 2009
