EDI Technology in Deregulated Utility Industry
The United States Government has introduced competition in various industries for the ultimate benefit of the consumer. In most industries deregulation has been successful. Examples are the Airline, Telecommunication etc. industries where prices have appreciably gone down over the years with the introduction of many players in the market.
The Utility industry is no exception. In the past utilities have had no competition as there was only one utility servicing a particular geographic area. The government passed legislation to deregulate the utility industry with the objective of providing electricity and gas at a cheaper price along with improved service. This introduced a new entity called Energy Service Provider ( ESP ) or Energy Service Company ( ESCO ) which is an Energy Marketer entrusted with the job of selling energy to the consumer. Hitherto only utilities provided energy to the consumer. With deregulation the utility now can only transport the energy ( electricity or gas ) to the consumer over its electric lines or gas pipes but can not sell the energy to the consumer. The ESP now performs this function of selling energy. Typically there are anywhere between 5 to 50 ESPs operating in any utility territory. It may be pointed out that the utility is still the provider of last resort in cases where the consumer does not chose an ESP to service it’s account. In such cases the utility is allowed to sell electricity and gas to the consumer.
Implementing the legislation is carried out by each individual state’s Public Service Commission ( PSC ). Each state PSC lays down the rules of the road for all participants in the deregulated utility industry. It sets the standards for ESPs and Utilities to operate on a level playing field. It also sets the standards for exchanging business transactions electronically between the ESPs and Utilities using a technology called EDI ( Electronic Data Interchange ). EDI is the sending and receiving of business transactions from computer to computer in a standardized format. It is also referred to as A2A ( Application to Application ) transaction technology operating in a B2B environment ( Business to Business ). EDI has been in existence for over 20 years. There are two major EDI standards in place today. They are ANSII ( American National Standards Institute ) and EDIFACT ( EDI for Administration, Commerce and Trade ). The ANSII standard is predominantly used in America whereas EDIFACT is more widely used in Europe, Asia and the rest of the world.
Most deregulated state’s PSC mandates the use of EDI Technology in exchanging business transactions between ESPs and Utilities. While EDI standards are very similar throughout all states they do have minor differences. Some states have adopted the GISB ( Gas Industry Standards Board ) Standards that transmit EDI transactions over the Internet in a secure environment. Other states require EDI transactions to be sent over a VAN ( Value Added Network ) which transmits EDI transactions via private telephone line networks.
The deregulated energy market is quite complex and implementing all transactions using EDI would have been a daunting task. Therefore it was decided that only transactions taking place between the utility and ESP would be implemented via EDI. These include Customer Setup, Billing and Administrative transactions. Other business transactions between Power Generation Plants, Energy Wholesalers, End Consumers would be left untouched for the time being. Examples are purchasing of electricity or gas from energy wholesalers, nominations, bringing gas to the city gate etc.
Deregulation in the Utilities Industry has opened up many opportunities for ESPs that wish to provide services to the end consumer. As a result of deregulation there is a dramatic increase in the flow of business transactions between the Utility and ESPs. A large number of ESPs do not have the capability to send and receive EDI transactions to and from Utilities and therefore outsource their EDI Transaction Processing to EDI Service Providers.
Let us take a look at the business processes that enable ESPs and Utilities in carrying out their functions.
The process starts by the ESP knocking on a prospective customer’s door and telling them that it can sell them electricity or gas at a cheaper price than the utility. If the customer decides to accept the offer the ESP sends an EDI 814-E Enrollment Request to the utility. The utility in turn sends an Enrollment Acceptance or Enrollment Rejection back to the ESP within one to two business days. This Enrollment Response is also sent via an EDI 814-E transaction.
If the customer does not pay ESP’s bills, the ESP can send a Drop Request to the utility via an EDI 814-D transaction. The utility processes the request and sends back a Drop Acceptance or Drop Rejection to the ESP via an EDI 814-D transaction. If a customer does not pay the utility’s bills, the utility can send similar transactions to the ESP.
Customers are free to choose any ESP operating in their area. Customers are also allowed to change their mind within 7 days of switching to another ESP. If they do change their mind they just have to notify the utility that they want to go back to the old ESP. In this case the utility sends a Reinstatement transaction to the ESP via an EDI 814-R transaction. The ESP gladly processes the request and sends back a Reinstatement Response transaction to the utility via an EDI 814-R transaction.
If the customer moves to a different location within an ESP’s service area the ESP sends a Change transaction to the utility via an EDI 814-C transaction. The utility processes the request and sends back a Change Acceptance or Change Rejection to the ESP via an EDI 814-C transaction. The process is similarly reversed if the utility sends a Change Request to the ESP.
Historical Usage Profile
Some ESPs are interested in signing up only specific sized customers. The ESP can request the utility for a Customer Historical Usage Profile via an EDI 814-HU transaction. The utility processes the request and sends back a Historical Usage Profile via an EDI 867-HU transaction.
Monthly Meter Readings
Utility personnel read the customer’s meter on the cycle read date. Customer’s electricity or gas usage is transmitted via an EDI 867-MU transaction.
Utilities can bill customers for energy usage in two different ways.
In the Dual Billing method utilities bill the customer for only for their Transportation & Delivery portion and expect the ESP to bill the customer for its energy commodity portion of the bill. In this scenario the ESP receives monthly meter readings from utility via an EDI 867-MU transaction. The ESP calculates the bill based on customer’s energy usage and mails the bill to the customer.
In the Consolidated Billing method, the utility sends one combined bill to the customer. This bill contains the utility’s Transportation & Delivery portion as well as the ESP’s energy commodity portion. There are two bill calculation scenarios in this situation. They are Bill Ready Billing and Rate Ready Billing. In Bill Ready Billing scenario the ESP calculates their commodity portion of the bill and sends it to the utility via an EDI 810 transaction. In Rate Ready Billing scenario the ESP send the billing rate to the utility at customer signup time. It then expects the utility to automatically calculate ESP’s commodity portion of the bill based upon the customer’s energy usage.
In both the above billing scenarios the utility receives payments from the customer. The utility splits the payments into their and ESP’s portions. It deposits the amount due the ESP into their bank account and sends an EDI 820 Remittance Advice to the ESP. This transaction contains details of amounts deposited by the utility into the ESP’s bank account.
A collection process is usually started when a customer does not pay their bill. Upon receiving customer’s payment the utility sends an EDI 568 transaction to the ESP notifying them of receiving customer’s payment.
If a customer does not pay their bill and collection becomes impossible the utility sends an EDI 248 Write Off transaction to the ESP. This is usually the case when the customer declares bankruptcy or moves to an unknown location etc.
If a utility finds errors in the EDI data sent by the ESP it can send error notifications to ESP via an EDI 248 Application Advice transaction. The ESP can also send error notifications to the utility via EDI 824 transactions.
EDI Process Flow
A typical hardware / software setup at a utility is shown in this diagram.
The success of deregulation in states where it has been introduced has been very encouraging. It is only a matter of time until more states will adopt deregulation of energy. The process is consistently gathering steam as is evidenced by lower commodity prices and increased consumer satisfaction.