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28 | 16TH - 22ND SEPTEMBER 2016 | UTILITY WEEK Customers Market view I f, as we are led to believe, the price reduc- tions and cost savings following Water Reform in April 2017 may be as little as 1 per cent, electronic data interchange (EDI) billing is likely to be the priority and the key driver in selecting a water supplier, in constrast to electricity and gas deregulation in the 1990s, when cost savings were much larger, and clearly the main priority. Multi-site organisations are already including EDI billing as a prerequisite in their water tenders and it is likely that gov- ernment procurement bodies such as the Crown Commercial Service will too. This may come as a shock to any water supplier that isn't listening to its business customers, because it could miss the oppor- tunity to tender for a water supply contract that may not be tendered again for two or three years. Just like in the 1990s with electricity and gas deregulation, competition is a wonder- ful opportunity for organisations to get what they have been asking from the water sup- pliers for many years – in other words, best practice in water billing. EDI invoicing is commonplace now. Almost all electricity and gas companies can provide this capability (see Table 1), but only one water company can – Yorkshire Water. To its credit, it has been providing this facil- ity since 2003. Currently, multi-site customers such as retailers, banks and even housing organisa- tions obtain their electricity and gas invoices through EDI. For water, most have to trawl through paper invoices or occasionally receive CSV files; each supplier has a differ- ing format that can change without notice and therefore break the process. It's important to know that EDI billing isn't a spreadsheet, CSV file, posting a PDF on a website, or even XML files despatched electronically. It's also a myth to think this is something only for large companies. EDI is the computer-to-computer transfer of invoices between two organisations using an agreed industry standard. HM Revenue and Customs accepts EDI as a "bill", but other forms are merely "billing information" and hard copies are required to satisfy tax requirements. Introduction of best practice So where did it all start and what les- sons can be learnt from electricity and gas competition? We have BT to thank for leading the way in bringing best practice into utility billing. Privatisation and deregulation brought with them competition, which resulted in consumer power and the ability to stipulate to a utility what they wanted. The power was shiing from the state-owned monopoly to the customers, which were keen to enjoy the process efficiencies they already enjoyed partnering with suppliers in other business sectors. With an eye to the future competi- tive market, in 1993, BT invited the electricity companies to produce electronic bills. The problem for the telecoms provider was it had more than 36 people processing hundreds of thousands of paper invoices for its 6,500 sites from all the regional util- ity companies. The information within the invoices was entered into its soware system for validation, checking and forwarding for payment. It was also BT's energy manage- ment database, from which it was able to carry out benchmarking, exception report- ing, waste detection, financial reporting, budgeting and accruals. In 1995, BT invited all the electricity companies to a meeting. It explained what requirements would be in their forthcoming tender, why it was asking for them, and said it would work with the electricity suppliers to provide it. The aim was to remove all paper billing and replace it with one consolidated bill for all BT's sites. It should be HM Customs and Excise compliant, to an industry standard format, and contain sufficient detail such that all elements of the bill could be checked through BT's soware system. Three electricity companies were success- ful. Manual bill entry that took two days to input was now processed in 20 minutes. The data processing function was consolidated in Reading and personnel reduced from 36 peo- ple to 12, then halved again aer gas compa- nies provided EDI billing in 1999. The lessons from electricity and gas com- petition are that water suppliers need to break away from any complacency engen- dered from a monopoly position, listen to their customers, embrace change and be quick to implement best practice. How does EDI billing work? The utility company tags the individual invoices that belong to a customer. There are then typically two choices to generate EDI bills: 1) the utility company builds the capability into the core billing system. EDI billing: a deal-breaker? Only one water company currently offers EDI billing, but with multi-site organisations increasingly stipulating this in their water tenders, other suppliers ignore this at their peril, says Paul Martin. Key points Electronic data interchange billing is the computer-to-computer transfer of invoices between two organisations using an agreed industry standard. EDI billing could be a key driver in selecting a water supplier when the market opens in April 2017. BT was a pioneer of best practice in utility billing following deregulation and privatisation of electricity and gas sectors in the 1990s. EDI processing can streamline the invoicing process, reducing administration costs for the utility company, and ensuring compliance with HM Customs and Excise requirements. Nearly all gas and electricity suppliers offer EDI invoicing but only one water company, Yorkshire Water, currently provides this facility. An EDI billing capability can be a useful tool for water companies to attract new customers as well as retaining existing ones.