How to avoid billing “spikes”
Recently, one of my connections on LinkedIn, Glenn Barnes with Water Finance Assistance, shared this article about smart meters causing water bills to increase.
Meters are like people
It’s a well-documented fact that meters, like people, slow down with age. Therefore, installing new meters, whether they are smart meters or not, will likely result in increased water bills.
It is commendable that the town plans to conduct a public hearing to address the potential impact on customers’ utility bills. Anytime a utility can be transparent and forthcoming with their customer base about upcoming changes, particularly changes which will impact their customers financially, is a positive step.
The article goes on to discuss citizen complaints about “intermittent spiking”. These spikes in monthly bills occur because bills are currently generated in thousands of gallons rather than in individual gallons. The article gives the false impression that it will take moving to smart meters to remedy this when, in actuality, these spikes are due to the TTWWADI syndrome – continuing to do something because it’s always been done that way.
Chances are, meters are still being read and billed in thousands of gallons because this is the way it was done decades ago. Back then, meters were read on paper and bills were produced manually, or with ledger card machines (if you don’t know what that is, thank your lucky stars!).
Even when reading with handhelds (or still on paper, if you’re that outdated), meters can be read and billed in individual gallons. It takes some changes to the existing database, but it’s not rocket science!
Revisiting an example
I originally wrote about this topic eight years ago, in this post where I showed examples of how truncating readings to the thousands place can impact billings.
The following issue discussed the impact of billing in thousands on conservation efforts, as compared to billing in gallons.
The examples in the original post were rates with a base rate of $25.00 for the first 2000 gallons and $4.00 per thousand gallons above the minimum. From their website, the town mentioned in the article has rates of $25.07 for the first 2000 gallons and $12.54 per thousand gallons above the minimum – quite a difference from the original example!
Let’s revisit those original examples using the rates for the town referenced in the article:
The graph at the top of the article is based on a table where the customer would be billed more by billing in gallons. It’s easy to see how a customer using just over the minimum can think their bill is higher than it should be once it “spikes” above the minimum.
For eight consecutive months (September to April) this customer would have received a minimum bill. Then, in May, when their accumulated usage rolls to the next thousand gallons, suddenly their bill is 50% higher! Imagine if they had used 110 gallons more in May – then their bill in thousands would have been for 4000 gallons, resulting in a bill double what they had been used to!
Clearly, billing in gallons provides your customer with a more accurate bill each month. Any fluctuations from one month to the next are based on actual usage, not the anomalies of whether their reading rolls to the next thousand gallons or not.
If you are in the process of replacing meters and need assistance explaining this to your customers or if you are currently billing in units greater than individual gallons, such as hundreds or thousands of gallons, please give me a call at 919-673-4050, or email me at email@example.com for more information about how a business review could help you.