Updated September 12th, 2024
The idea behind utility-consolidated billing is to make the community solar experience easier for subscribers. Before we dive into how this approach could disrupt the industry, it’s important to first understand how community solar billing works today. In this blog, we break down the key roles of a subscriber management partner and explain how they connect to both the value and risks in a community solar project.
The Subscriber Experience Is Inextricably Tied to Project Risks
The primary role of a community solar subscription management company is to handle billing and payment collection from subscribers. For financial investors who fund the building and ongoing operation of a community solar farm, subscribers and their payments are crucial to the project's success. Poor management can negatively impact revenue projections and, in the worst case, prevent the project from operating in a community solar program at all. This is why, even before a project is developed and financed, investors want to ensure that their project has reliable subscribers, effective revenue collection systems, and managers who are prepared to handle subscriber turnover if someone leaves their contract. Here is how that is done today:
Acquiring reliable community solar project subscribers, quickly
Subscriber sign-ups for community solar projects depend on the stage of the project, and timing is crucial to meeting program or financing requirements. Marketing companies have created a special industry to inform the public about community solar and the nearby available projects and products. These companies may have experience in selling energy directly, but local sales teams often do a lot of direct selling to find subscribers.
The target audience of these acquisition companies is expanding as the definition of “reliable” subscriber matures, and the market for subscribers becomes saturated. While credit score is still considered the gold standard of a good subscriber, asset owners are beginning to open up to larger pools of the public. In any case, the key to accelerated subscriber acquisition is to make an asset owner comfortable with the idea that a subscriber will pay their secondary community solar bill, highlighting the importance of function two: mechanisms to collect revenue.
Effective Revenue Collection Systems
Once a subscriber is onboarded with a community solar project, subscriber management companies have to collect the revenue for the project. It is a complex dance of accounting, marketing, and customer service.
Each month, a community solar subscription manager has to make sure that the bills they send to subscribers are accurate and match what the utility company says about how much solar power was produced and how it was distributed. It’s not as simple as the utility company telling us and then us sending a bill to subscribers for the credits. It’s more complicated.
For instance, if the utility company takes weeks or months to provide the report, or if the report has mistakes, how should the billing be handled? Should subscribers be billed for multiple months at once? Additionally, if a subscriber's energy usage changes during the year, due to suddenly working from home, the manager must adjust the portion of solar energy assigned to their subscription to ensure that the solar credits match the subscriber's actual usage. Failing to do so could lead to subscribers having too many unused credits or deciding to leave the program due to not understanding their billing. It requires a careful balancing act to keep the operations running smoothly.
During the project, the community solar subscriber manager consistently communicates with subscribers primarily through emails as part of customer engagement. It is crucial to run campaigns to educate subscribers about the value of their participation, encourage them to refer friends, and remind them to pay their bills in order to ensure that subscribers are satisfied and pay on time.
Churn Management
A community solar project experiences churn when a subscriber stops paying on time, decides to cancel a contract, or no longer resides in an eligible territory. Depending on the community solar program, industry trends tell us that natural churn rates are about 1-2% once a community solar project is operational. However, poorly managed projects with little subscriber engagement can experience much higher churn rates. Even when churn is in the low single digits, it can cause significant disruptions to project revenues. Community solar subscriber management companies are constantly monitoring, preventing, and replacing subscriber turnover.
Before managers can handle subscriber turnover, they need to monitor and anticipate any spikes. This means regularly tracking metrics like payments and engagement to predict turnover trends and respond quickly to replace subscribers who leave. However, community solar program rules regarding subscriber replacement and contract terms can limit how and when new subscribers can be added or removed from a project. It’s a delicate balance that requires ongoing attention and proactive marketing to prevent subscriber turnover.
Subscriber servicing is only half of the equation
While subscriber call centers and eye-catching marketing campaigns are the most visible parts of community solar management, they only scratch the surface of what's involved. The real key to success lies in managing relationships with the utility companies. This requires a solid understanding of program rules, maintaining consistent communication with utility partners, and having a deep knowledge of the community solar project's performance goals.
Each month, the utility adds credits to subscribers' utility bills based on their records of how much solar power the project produced and the number of current community solar subscribers on the project. The value of these credits varies depending on program rules and might be influenced by factors like tariff class, set program rates, or real-time data. The utility provides reports on these credits, but the level of detail can differ. Some reports are straightforward, showing just the production amount and total credits, while others are more complex, breaking down the exact value each subscriber received on their bill that month.
It's the job of a skilled subscriber manager to analyze these reports and issue invoices accordingly. This reconciliation process requires a deep understanding of how the credits are calculated and how different factors can affect the charges for each subscriber. Without a strong grasp of the policies and program details, these reports can be confusing and difficult to interpret accurately.
Additionally, the utility may sometimes issue reports that don't align with the project's expectations. They might delay posting credits, miscalculate them, use outdated subscriber lists, or take months to provide reports. When utilities credit subscribers incorrectly, it can harm the customer experience and hurt the project's profitability. Managers need to understand the project's performance well and use software that flags any major discrepancies. It's also crucial for them to maintain a strong relationship with the utility; when issues arise, having reliable contacts at the utility allows managers to resolve disputes quickly before they disrupt billing and revenue collection.
Is a utility consolidated bill the answer?
Managing community solar today is a hands-on, manual process. Subscriber acquisition companies, which often have no prior connection to utility customers, need to scale their operations quickly. Once subscribers are onboard, management companies are responsible for ongoing tasks like accounting and customer service to ensure subscribers receive and pay two separate bills. Finally, these companies must continually search for new subscribers to keep projects in compliance.
It's easy to see how a utility could handle these tasks more efficiently and smoothly. Utilities already have a built-in customer base, can provide credits and charge for subscriptions on the same familiar bill sent to customers, and have lower turnover rates since most customers don't cancel their utility service.
