2016 Benchmarking Insights Conference Boulder, CO Revenue Protection 2016 Benchmarking Insights Conference Boulder, CO This material has been optimized for the Insights Conference audience. To get the most of this material and hear a recording of this presentation go to our http://1stquartileconsulting.com/benchmarking/customer_service_b/csdocs.html and find the table for CS Insights, then click on the ”Revenue Protection” link.

Agenda Overview Coverage of the Study for Revenue Protection 2016 Key Findings/ Points of Emphasis Performance Profiles Cost/ Service 2016 Benchmarking Results Functional-specific findings (Cost, Volume, Practices) Areas of Focus and Opportunity

Overview

2016 CS Benchmark Questionnaire structure Field Service Change of Account Billing Field Orders (meter investigations) Credit Field Orders Order Management Customer Contact Contact Center Local Office Self Service Contractors Credit Inbound calls Revenue Management Credit Office and Outbound calls Credit Field and Inbound Contact Policies Revenue Protection: Office and Field Back Office Billing Billing Field Policies Payment Processing Meter Reading Manual Mobile AMR Fixed Network AMI CS Support and CS IT Employees: Safety, Staffing Customer: Customer Satisfaction, First Contact Resolution, Customer Experience, Key Account Management, Energy Efficiency , Outage Communications Areas excluded: Meter Change-out

We Track these Elements for the following Categories of Revenue Loss Energy Theft and Diversion (External/Customer) Energy theft (aka diversion, unauthorized usage): 1) Meter tampering; 2) Meter bypass; 3) unauthorized attachment. Fraud (aka identity theft): Field investigation related to fraudulent names, passing accounts, etc. to avoid bills. Inactive Accounts and Other Non-Theft (Internal/Company controls) Field investigation and back-billing for 1) usage on unmetered accounts, 2) usage on inactive accounts; 3) Meter errors (stopped or broken); 4) Not in system; unknown user; 5) Crossed meters For purposes of this survey: Do not include meter-related field work performed by Field Service or Meter Shops Do not include special contact center programs to prevent identify theft or fraud at account initiation Do not include routine billing investigations

Key Findings / Points Of Emphasis Volume The number of cases worked is up substantially over last year, with AMI enabling low-cost, effective efforts Cost Cost (spending) increased marginally this year Service (Recovery) 4 companies can demonstrate ability to confirm, bill and recover on individual cases. Use of AMI data is a growing factor in revenue protection success.

Performance Profiles

89% of the costs are labor-related Cost comparison 2016 costs are 3% of Total 89% of the costs are labor-related Total 2016 CS Cost Revenue Protection Excluding Write-offs Community Mean = $1.02 Community Composite Community Composite Costs are per Accounts * Commodity

Revenue Protection profile Revenue protection activity is up from last year, despite lower staffing. 2015YE 2014YE   Mean Q1 Q2 Q3 Bars Cost Revenue Protection Cost per Account * Commodity $1.02 $0.46 $0.85 $1.06 15 $0.98 $0.33 $0.75 $1.01 Internal Measures Revenue protection cases worked per 100,000 Accounts * Commodity 1,221 2,341 410 121 18 884 1,605 351 173 16 Revenue protection cases worked per 100,000 Accounts * Commodity - Internal Issues 838 693 287 144 10 535 271 147 11 Revenue protection cases worked per 100,000 Accounts * Commodity - Theft 668 688 348 53 527 640 336 91 Effectiveness Revenue Billed per Revenue Protection Expense 1.66 2.07 1.40 0.78 2.04 2.21 1.55 0.82 Revenue Collected per Revenue Protection Expense 1.41 2.00 1.30 0.71 5 0.90 1.35 0.74 0.42 8 Revenue Protection FTEs per 100,000 Accounts * Commodity 1.15 0.43 0.55 1.26 1.31 0.45 0.79 1.93 14

REVENUE PROTECTION Spending Mean Cost is $1.02 Utilities have invested more in revenue protection at all levels. Mean $1.02 Quartile 1 $0.48 Quartile 2: $0.85 Quartile 3: $1.06 RP Page 3 - FL5

2016 Benchmarking Results

REVENUE PROTECTION Staffing There is a 0.9 FTE difference between Q1 and Q3 The high variability in resource usage stabilized in the last year Mean 1.2 Quartile 1 0.4 Quartile 2: 0.6 Quartile 3: 1.3 SF Page 72 – SF55

Top 3 SOURCES OF REVENUE PROTECTION CASES While FSRs and Meter Readers remain the top two sources, the third highest, and fastest growing, is AMI signals Legends 21 22 23 28 29 30 31 32 33 34 36 40 41 42 43 44 49 50 51 Customers ♦ Meter signals AMI system Meter readers 3rd party vendor FSRs Data analysis Billing department Revenue Assurance group billing investigations Other RP Page 35– RP60

Number of Cases Worked by Type Companies worked more cases of all types in the past year, with a significant reversal of a multi-year decline in cases worked. 2015 Cases Worked by Type per 100K Accts * Commodity 5 Year Trend in Cases Worked by Type per 100K Accts * Commodity Mean 1,221 Quartile 1 2,341 Quartile 2: 410 Quartile 3: 121 RP Page 12 – RP15

REVENUE PROTECTION CASES WORKED Companies who track both types are working roughly similar amounts of company (internally controlled) and customer (theft) cases. Revenue protection cases worked per 100,000 Accounts * Commodity External/ Customer (Theft) Internal/Company Controls Note that companies have made very different choices in how much resource to devote to revenue protection, and the number of cases pursued. Mean 668 Quartile 1 688 Quartile 2: 348 Quartile 3: 53 Mean 838 Quartile 1 693 Quartile 2: 287 Quartile 3: 144 RP Page 14– RP15 (breakout) RP Page 13 – RP15 (breakout)

Cost Versus Volume There is an inverse relationship between volume and cost per case. The companies who work high volumes of cases, with one exception, are among the lowest cost per case. 2015 Cases Worked by Type per 100K Accts * Commodity Cost Per Case Reported Mean $278.27 Quartile 1 $73.71 Quartile 2: $112.77 Quartile 3: $439.92 Mean 1,221 Quartile 1 2,341 Quartile 2: 410 Quartile 3: 121 RP Page 12 – RP15

Tracking OF THEFT CASES Three companies were able to track theft cases all the way from reporting through collection from customers, and a fourth can track all stages from investigation through collections. RP pages 23-27, RP35

Tracking Theft Case Activities There is a wide variation in the ability to track theft cases all the way through to collections. Most companies cannot track the $ collected. Electric Gas RP pages 23-27, RP35

Tracking of Non-Theft Cases The same three companies were able to track non-theft cases all the way from reporting through collection from customers. Company Reported Investigated Confirmed Billed Collected 21 X 22 28 31 33 34 43 44 RP pages 28-31, RP40

Revenue collected To Expense Ratio For those companies able to report revenue, two - 21 and 31 - exceed the expense to collect, two others are below Working to collect revenue from internally controllable sources (e.g. UOI, stopped meters, crossed meters) appears to be a worthwhile investment based on this set of reporting companies Matching revenue collected has been challenging Mean 1.41 Quartile 1 2.00 Quartile 2: 1.30 Quartile 3: 0.71 RP Page 6 – RP25+RP30 divided by FL5

Focus of Revenue Protection Efforts The majority (13 of 19) of utilities work on both internal and customer- driven revenue losses. Only 32% (6 of 19) companies note that they focus all their revenue protection efforts on theft, but 100% devote some effort to customer theft. None focus entirely on internal revenue loss. Companies 21 22 23 28 29 30 31 32 33 34 36 40 41 42 43 44 49 50 51 Fraud ♦ 68.% Usage on inactive meters 74% Meter tampering 100% Tap ahead of meter 84% Stopped meters 68% Theft of energy 95% Theft of assets 16% Crossed meters 42% Incorrect meter constant 47% Defective meters Other 21% RP Pages 9, 10 – RP5, RP10

TOP METHODS FOR IDENTIFYING CASES AND FACTORS MAKING THEM SUCCESSFUL: THEFT Field Investigation remains the most-used activity, with more cost-effective AMI meters and Data Analytics growing fast. RP Page 37– RP65.1

TOP METHODS FOR IDENTIFYING CASES AND FACTORS MAKING THEM SUCCESSFUL: Non-Theft Cases Non-theft cases are investigated quite differently from theft – with less work in the field and more office-based analysis RP Page 38– RP65.2

Practices Used to Prevent Theft or Fraud The key practices highlighted include rigorous sealing/locking programs, and training employees to identify theft. Locks and Seals 11 reporting companies listed locking and sealing programs Employee Training and Awareness 10 reporting companies identified training of employees in identifying theft and fraud as their key practice. Other Practices Noted Field worker incentives Thermal imaging Performance indicators RP Page 39– RP75

USE OF DATA MINING AND ANALYTICS FROM ADVANCED METERS Essentially all companies with significant AMI are using the meters to support data analysis, with ever more sophisticated tools. All but 2 report using the data to better target investigation efforts, more quickly. RP Page 48 – RP120 RP page 52, -- RP140

Prosecution of Energy Thieves Utilities are more aggressive about prosecution than in the past, with only two companies stating they don’t prosecute ordinarily. RP Page 47 – RP115

Fun Facts About Revenue Protection The average utility is allowed to back-bill for 3.2 x as many months for theft as for internal errors. Theft cases can be billed for a range of 6 months to unlimited, with an average of 62 months Non-theft cases can be billed for a range of 3 to 48 months, with an average of 17 months Half of the companies track the turn-around time to the initial field visit for investigation of theft and non-theft cases. 9 companies report that they track, 9 say they do not Of the 12 companies who reported a value, the mean time is 6 days Organizational location for analysis of advanced meter data has not yet become consistent across companies 5 companies with Revenue Protection leading the efforts 5 companies with a dedicated team in the AMI organization 2 companies with internal meter data analytics groups RP Page 34 – RP50 RP Page 41, 43 – RP85, RP 95 Rp Page 49 – RP 125

areas of Focus and Opportunity

areas of Focus and Opportunity Volume Understand the volume of work being done in both Energy Theft (External/Customer) and Inactive Accounts and Other Non-Theft (Internal/Company controls) areas Are there opportunities to focus on internally controllable (e.g. UOI) loss volumes? (Companies able to report show benefits in this area) Cost Activity Cost is less important than finding and preventing revenue loss Service Manage the efficiency and effectiveness of your labor and technology investment As AMI and data analytics grow, are you leveraging all of the Rev Pro opportunities made possible through using and learning from these technologies?

Thank You for Your Input and Participation! Your Presenters Ken Buckstaff Ken.Buckstaff@1QConsulting.com 310-922-0783 Debi Cook Debi.Cook@1QConsulting.com 760-272-7277 Gene Dimitrov Gene.Dimitrov@1QConsulting.com 301-535-0590 Rob Earle Rob.Earle@1QConsulting.com 315-944-7610 About 1QC First Quartile Consulting is a utility-focused consultancy providing a full range of consulting services including continuous process improvement, change management, benchmarking and more. You can count on a proven process that assesses and optimizes your resources, processes, leadership management and technology to align your business needs with your customer’s needs. Visit us at www.1stquartileconsulting.com | Follow our updates on LinkedIn