RP Sanjiv Goenka Group

Storm clouds are gathering in utilities debt recovery. Here’s how to prepare

Arjun Mitra
Head - Collections
Estimated reading time : 4 Minutes

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I see a perfect storm forming in debt recovery in the utilities sector because of a convergence of trends and events. I forecast stress-filled times for public and private companies and municipalities.

The pandemic disrupted the economy and created global supply chain issues while driving prices up, including in the energy sector. Coal, oil and natural gas shortages arising out of the Ukraine war are sending prices soaring and markets scrambling for supply. Climate extremes create extraordinary energy demand — remember the Texas energy shortage of February 2021 and the power grid failures? Inflation is eating into household incomes, forcing some families to prioritize spending for even basic needs.

As the saying goes, we live in interesting times.

I recently read about a meeting between the Business, Energy and Industrial Select committee and major energy providers in the UK, which pointed to 30-40% of Brits facing fuel poverty and bad debt for energy firms increasing 50%.

Across the pond, the US Census revealed that 21% of adults lived in households unable to pay all their utility bills in the past year. At the height of the pandemic, I read that aggregate utility sector debt rose to $30B, a 33% increase in one year.

Quite rightly, all eyes are on the energy sector and what it does to balance debt recovery with consumer assistance over the coming months and years. I hope the collections experience weighs heavily in the balance.

Here are some of the things I think the utilities sector can do based on successes we have enjoyed in omnichannel debt collection for other industries, such as healthcare and finance.

Put down the telephone

Outbound calling in utility company debt collection should be stopped. Changes to price caps are already triggering a massive uptick in inbound traffic and I think utility debt collection services would be far better served focusing on how best to manage inbound traffic rather than chasing down debts over the phone.

Channels, like text, email and social media, are rapidly becoming the preferred way to reach consumers in digital debt collection services. I understand most calls from unknown numbers go unanswered. Why? Because we have all become accustomed to using channels that are convenient and less intrusive. Consumers in debt particularly disdain incoming phone calls, as they want to avoid confrontation.

Adopt a self-service debt recovery model

Consumers can be steered towards websites that enable them to understand their obligations and to opt into repayment programs they are comfortable with. Optimizing the customer journey with digital debt collections practices can take a significant chunk of traffic away from the phones and still enable customers to manage their accounts.

The more you can enable the customer to pay something by selecting the option that works best for their circumstances, the more likely funds will be recovered.  You’ll also lower the risk of repeated delinquency.

To my way of thinking, this approach has a higher probability of succeeding because consumers participate in creating their own recovery plan. It’s appealing because it is non-confrontational and provides consumers choice and control, qualities not often featured in legacy collection practices but common in digital collections.

Set an empathetic tone

Empathy should reflect in how customers are treated on the telephone and over digital channels and how they are guided in their journeys. If consumers feel they are being guided and supported rather than pushed along a path, it can prove helpful restoring customers’ standing while retaining their loyalty and satisfaction long-term.

One size does not fit all

We are used to being treated as individuals when we shop, in banking and when using social media. We are turned off by generic messaging, like “Dear customer.”  Your communication should be informed by your customers’ situation, circumstances and their past dealings with you. It should convey that you know your customers and are speaking directly to them.

Address past-due balances quickly

We’ve learned that treating past-due balances when they are in their infancy can reduce the likelihood that they will grow if successive payments are missed. Don’t let debt get out of reach—it’s disheartening for your customer and risky for you. Encourage customers to resolve overdue balances while they are still manageable.

Focus debt recovery efforts on the best candidates

In commercial debt recovery, we use propensity to pay models to predict which customers are likely to resolve outstanding debt. This makes best use of your resources and maximizes the effectiveness of your efforts. This strategy requires account and demographic data about your customers, which can be used to train and apply a custom model. But the effort is worth it and will pay off in higher utility debt recovery.

Know your customer

Several of the strategies we’ve discussed (flexibility in payment programs, individualized treatment and propensity to pay, for example) require demographic and behavioral data about your customers. This data can inform conversations you have, assumptions you make and repayment program options you offer. It also enables personalization, which makes customers feel good about their worth in a relationship.

Promote conservation

In some debt recovery situations, consumers can take steps to lower their spending and reduce their debt load. In retail trade, that action is obvious: stop buying on credit. In the utilities sector, halting use is not practical or even possible. However, you can encourage and reward conservation. Promoting specific conservation measures empowers customers and can help them lower their payments to more manageable levels.

Optimizing the collections customer journey can allow customers to better manage their accounts while making the journey a pleasurable one. Digital channels are critical, especially in delivering services at scale.

The positive for energy providers in this scenario is that getting digital debt recovery solutions configured and optimized is not complex. It can take days rather than years. Making these moves now, when customers need it the most, will lay the foundation for a future-proofed operation.

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