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Should Metering Stay at the Stand-Alone Disco?

Fortnightly Magazine - February 1 1998

(2) operating the call center and (3) managing credit and collection activities. Meter operations would include: (1) meter reading, (2) installation and (3) corresponding operation and maintenance.

3 The disco that has a track record in providing efficient metering and billing services has the best probability of providing more sophisticated billing and metering systems to accommodate the expected growth in this area. An efficient provider will finds ways to meet the technological hurdles while pricing for a profit. A poor performer historically might be entering an expanding market where its costs are too high and regulatory lag prevents full recovery of these expenses.

4 The cost of reading one more meter within a neighborhood is very small, since the disco already must read every meter for any new installation. The cost of processing one extra bill is minuscule because of mainframe processing capability required to meet the needs of hundreds of thousand of customers.

5 Bad-debt expenses, depending on service territory demographics, can be a significant portion of the traditional utility's billing costs.

6 For a discussion of competitive wires pricing, including the idea of a fixed charge for wires access service, see George R. Pleat, "Pricing and Profit Strategies for a Stand-Alone Electric Distribution Company," Public Utilities Fortnightly, Jan. 15, 1997, p. 23.

7 It's presumed under a regulated disco billing and metering services market. The disco would have to provide the customer with the generation supply bill.

8 For instance, an electric utility may be estimating a significant number of meters because it can't access in-the-house meters, and/or because it didn't have remote meter reading. Consequently, this condition will add to operating costs because of annual true-up activities with actual meter reads.

9 The definition of cost-effective customers may go beyond the traditional price-greater-than-cost parameter. Some delinquent customers may prove to be positive assets for the disco. Annual bad debts bring tax benefits. Also, for newly acquired accounts, some customers might be first-time non-payers because of the confusion caused by the complexity of retail choice. A simplified billing process may correct these bill payment defaults.

10 There are several incentives for the disco to move to a fixed-charge recovery of wires costs. See note 6. For added analysis of fixed versus variable charges, see Ronald Rudkin and David Sibley, "Optional Two-Part Tariffs: Toward More Effective Price Discounting," Public Utilities Fortnightly, July 1, 1997, p. 32.

11 This disco could prevent long-run entrants by acquiring technically advanced efficient equipment. The failure to pursue this goal could mean a reversal in market share.

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