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As recession lingers, utilities' bad debt will continue to climb in 2009, Chartwell predicts
ATLANTA, July 23, 2009 – Utilities have seen losses for unpaid energy usage for two straight years and likely are headed for another year of increased write-off percentages, Chartwell found in a recent study on credit and collections.
In April and May, Chartwell interviewed 23 utilities about the recession’s impact on their current credit and collections practices as well as on revenues. The findings are reported in Chartwell’s June Customer Care Industry Update:
Current economy has changed the way many utilities operate.
“We asked utilities to predict, based on their state of collections at the time of the survey, whether or not they expected their write-offs to increase again in 2009. Though not all predictions were dire, not one of the utilities we interviewed expected the percentage of uncollected revenues to drop,” said Dennis Smith, Chartwell’s vice president of research and information delivery. “This isn’t surprising with the economic situation. But given that utilities began seeing their write-offs increase significantly in 2007, it could be an indicator that we are not out of the woods for a while.”
When looking at
utility write-offs as a percentage of revenue, the indicators were in place before last year for energy providers. Since 2002 Chartwell has interviewed utilities on their credit and collections practices, including write-off percentages. Recent studies show that utilities’ written-off revenue, which had seen a drop after the economic problems of the early decade, was once again rising. It took a sharp increase among utilities Chartwell interviewed in 2007 and was at a decade-high last year.
Certain utilities have been hit much worse than others, depending on the real estate and jobless markets in their territories, the study found. Most of those Chartwell interviewed expected their write-offs to increase “somewhat” when the fiscal year concludes; six utilities taking part in the study believed those increases will be significant. Only three survey respondents expect no change in write-offs from 2008 to this year.
The industry report also gauges other indicators, such as day sales outstanding and
service disconnections. It profiles steps many of the respondents have taken to offset revenue losses and reduce costs and found that several utilities have changed their procedures around credit and collections as a result of the severe recession.
ABOUT CHARTWELL INC.
Chartwell is a specialized information provider that facilitates knowledge exchange among utility professionals responsible for management practices and technology solutions.
Chartwell publishes best practices case studies, quantitative research and electronic newsletters, and hosts conferences and other events for utility professionals.
PRESS CONTACT
Dennis Smith
404-237-9099, ext. 31
