Proposed Project for the MSU Industrial Math Students
Problem 1: Revenue Operations Process Review and Enhancement – Bill Print and Delivery
Background: Consumers Energy's revenue operations process consists of five key process steps: Bill Production, Bill Presentation, Revenue Collection, Uncollectible Account Forecasting, and Assistance Agency Impact on Uncollectible Accounts. In the first stage of Bill Production, typically, each bill is based on a meter read obtained at the customer's premise. On those occasions when a read cannot be obtained due to weather or other factors, the bill is estimated based on previous consumption history. Factors that may compromise this historical data include weather, customer occupancy, energy efficiency measures, etc. Customers have a payment option to equalize payments throughout the year. The payment plans are established on an annual basis with the intent that, at the end of the plan year, the customer's net balance is zero. As above, factors that may compromise the plan include weather, occupancy, energy efficiency, etc. During Bill Presentation, we continue to encourage customers to receive and pay their bills electronically due to reduced costs for both of the company and the customer as well as the obvious environmental benefits. While about 550,000 customers subscribe to eBilling, we would like to increase that number.
Project:
The objective of the project is to assess the accuracy of these estimates and provide recommendations to improve the estimating process, as well as the accuracy of past payment plan amounts in the bill production in order to define opportunities to improve the accuracy such that customer balances are as close to zero as possible at the end of the annual plan period. The project deliverable also includes the analysis of our customer base associated demographics to define segments that represent the greatest potential for eBill subscription. For example, what is the subscription rate of students who live in apartments, how does that compare to our customer base overall and what types of communication channels would increase subscriptions?Problem 2: Revenue Operations Process Review and Enhancement – Dunning and Collections Activities
Background: In the stage of Revenue Collection of Consumers Energy's revenue operations process, we have, on a daily basis, a number of customers who are delinquent in their payments. We have a well-defined dunning process and time frame to alert those customers of their delinquency through telephone and postal communication channels. In that process, all customers, regardless of previous payment practices are treated identically. We are considering a more flexible process that recognizes previous payment history. For example, a customer who has a history of paying on time might follow a different process than one who is habitually late with their payment. It is challenging for the Uncollectible Account Forecasting: As customers progress through the dunning process, some reach a point where it is clear that the payment is uncollectible and must be written-off. Forecasting of future write-off amounts is a key component of the Company's financial reports and needs to be as accurate as possible. The forecast can be influenced by economic indicators such as employment rates, home foreclosures, apartment churn, etc. Assistance Agency Impact on Uncollectible Accounts are important, for instance, Low Income Customers (those generally at or below 200% of poverty level) often rely on help from Assistance Agencies such as the Department of Human Services, Salvation Army, United Way, The Heat and Warmth Fund and others for help in paying their utility bill.
Project: The objective of the project is to conduct the analysis of customer payment practices to define potential customer segments for differentiation in the dunning process. Determine the impact that credit reporting has on accounts receivable aging. It is necessary to review past uncollectible write-offs, define influence factors such as those mentioned above or others that provide better correlation and develop a process to more accurately forecast future write-off amounts. The project deliverable includes determining the correlation between increases or decreases in Federal (LIHEAP) and State (LIEEF) low income assistance funding and its impact on uncollectible accounts.