Staff Report Item 7
To: Ava Community Energy Authority
From: Chris Davis, Customer Operations Manager
Subject:
Seeking feedback from the Board on a proposal to contract an accounts receivable recovery agent.
Date: March 12, 2025
__________________________________________________________________ Recommendation
Staff is seeking feedback on a proposal to implement account receivable recovery through an agreement with Sacramento Municipal Utility District (SMUD) in partnership with IC System (ICS) for their cost-effective pricing, positive customer feedback, and existing integration. ICS was selected by SMUD, through a formal Request for Proposals (RFP) process, to manage collections for their customer debt. Staff recommends contracting with SMUD in partnership with ICS until December 2026, with a performance assessment after 12 months, aligning the contract with Ava’s current SMUD agreement.
Summary
The initial policy regarding Delinquent Accounts and Collections (Accounts Receivable Recovery Process) was adopted as part of the February 7, 2018, staff report covering Administrative and Operational Policies. The Board of Directors (the “Board”) received an informational review of this policy at the November 20, 2019 meeting. At that time, staff planned to implement the policy into operation by the end of the 2019-2020 fiscal year. However, the policy was put on hold in response to the State’s emergency customer protections, which were introduced to support customers impacted by the COVID-19 pandemic. The State’s COVID-19 State of Emergency terminated on February 28, 2023.
Staff updated the Accounts Receivable Recovery Policy, and the Board of Directors approved it on March 20, 2024. Staff then took steps to implement the policy, starting with issuing a request for proposals for collection agencies in September 2024.
Ava is able to collect unpaid bills after the customer’s Ava account has closed, or terminated, and the debt is at least 61 days old. After this period, the debt being collected by PG&E on Ava’s behalf is reversed, and it becomes eligible for Ava’s own collection activities. Over the past four years, Ava has accumulated nearly $20 million in uncollected billings eligible for recovery, with approximately $5 million becoming eligible for recovery annually, stemming from over 300,000 customer accounts. Residential customers account for 59% of the total outstanding bills ($11.5 million) and 95% of total accounts (~287,000). Approximately $400,000 becomes eligible for collections each month.
Residential C&I Total
Monthly Average
Uncollectibles $241,050 $167,840 $408,890
Monthly Average
Customer Count 5,970 315 6,285
Average Uncollectibles
per Customer $40 $533 $65
Yearly Average
Uncollectibles $2,892,600 $2,014,080 $4,906,680
Table 1: Average Uncollectibles, 2020-2024
Financial Impact
SMUD will assess both an initial set up and an ongoing fee to administer recovery services. The initial setup includes integrating systems and processes across agencies configuring, compiling and updating reporting's and data, and customer service representative training. The initial fee is $100,000. The monthly administrative fee, $5,000, will support researching and responding to customer inquiries and disputes, managing and analyzing data and resolution of data discrepancies. Additionally, SMUD’s partner, ICS, will retain 10% of the recovered amount. Ava anticipates the monthly administration fees will be covered by ongoing past-due payments received through the recovery efforts.
Based on other CCA collections activities, Staff estimates 2-15% of past due balances will be recovered., Based on $400,000 in past-due balances eligible for collections monthly, staff expects to recover $8,000- $60,000.
Collections Rate
Total
Collected Net to Ava
2% $8,000 $7,200
10% $40,000 $36,000
15% $60,000 $54,000
Table 2: Estimated range of monthly recoveries
Analysis and Context
Following Board approval for Ava’s Accounts Receivable Recovery Policy, Ava issued an RFP in September 2024 for an Accounts Receivable Recovery Agent to implement the approved policy.
Three agencies responded to the RFP; none are local to Ava’s service territory. The top two agencies were selected for interviews: SMUD, in partnership with ICS, and Harris & Harris (H&H). These agencies were evaluated based on the following key criteria: experience, recovery rates, cost, and customer communications and recovery methodology. Both agents had extensive experience, but SMUD was deemed more suitable due to costs and its existing relationship with Ava and managing this same process with another CCA, Valley Clean Energy.
Recovery rates for both agencies are expected to be similar, given the unique challenges of CCAs such as low brand recognition, the inability to have debt affect customers credit rating due to lack of having key customer information such as social security number and complex billing structure. Regarding costs, SMUD proposed a $100,000 initial setup fee and a $5,000 monthly management fee to cover ongoing administrative costs. Due to the role SMUD plays in Ava’s ongoing billing operations, SMUD would be involved in both the data integration and ongoing administrative work; therefore, the fees described earlier in this memo apply to both agencies.
Although proposals were comparable, SMUD presented a more cost-effective option due to its lower primary recovery fee of 10%. SMUD's lower primary recovery fee and customer-centric approach—offering multilingual support, customizable here-to-help outreach letter, longer duration engagement, and flexible payment options—align more closely with Ava’s priorities.
Staff will collaborate with SMUD to develop standardized language for use across all customer communication channels. H&H, while effective, takes a more data-driven approach, a shorter engagement period, and focuses less on person-to-person interaction.
Ava has contracted with SMUD since 2018 to handle our billing operations and customer service duties. SMUD is the nation's sixth largest community-owned electric utility, committed to sustainability, innovation, and exceptional customer service. SMUD is well-regarded for its customer service; their team is praised for being knowledgeable and friendly, often going above and beyond to assist customers with billing inquiries, service issues, and energy-saving tips.
SMUD also reinvests profits back into their local area, funding programs for low-income residents, energy efficiency initiatives, and education around sustainability.
Staff recommends contracting with SMUD, in partnership with ICS, through December 2026, with a performance assessment at 12 months.
Attachments
Accounts Receivable Recovery Policy
PowerPoint
Attachment Consent Item 15B
ACCOUNTS RECEIVABLE RECOVERY PROCESS
Policy Number: P-2024-4.1
Approval Date: March 20, 2024
Agenda Item: Consent Item 15
Approved by Resolution: R-2024-22
Delinquent Accounts:
Pursuant to Electric Rules 8 and 11, Pacific Gas & Electric (PG&E) uses the following process to determine past due accounts and the necessary action:
Residential Accounts Non-Residential Accounts
Day 0 Bill is completed and
issued. Day 0 Bill is completed and issued.
Day 21 Bill is due Day 17 Bill is due
Day 22 Past due Day 18 Past due
Day 27-
34 A new bill is issued for
current charges and a 15-
day notice is included for
past due charges.
Day 21-
34 A new bill is
completed for new
charges and any
unpaid charges and a 7-day
notice is issued for past due
charges.
Day 42 96-hour notification sent
Day 44-47 48-hour notice via mail
Day 48 Outbound phone call
Day 51 Account is eligible for
disconnection Day 43 Account is eligible for disconnection Day 60 Final letter is sent Day 52 Final letter is sent Day 95 Reverse debt to CCA Day 87 Reverse debt to CCA
Aging Accounts:
All Ava Community Energy accounts, whether Residential or Non-Residential, identified in the month aging accounts receivable report, as provided by PG&E, are eligible to be returned to PG&E for continued non-payment.
Accounts Receivable Recovery Process:
Closed Ava accounts with overdue amounts may be recovered by Ava or referred to a collection agency and are subject to the recovery process established by this policy.
This policy replaces the existing policy for Delinquent Accounts and Collections (P-2018-4).
Accounts Receivable
Recovery Process
Chris Davis | March 12, 2025
Recommendation:
Staff recommends contracting with SMUD in partnership with ICS until December 2026, with a performance assessment after 12 months, aligning the contract with Ava’s current SMUD agreement.
Executive Summary
● Ava has accumulated $20M in uncollected billings over the past 4 years ● $400k in eligible collections per month from 300K+ customers ● The Board adopted new write-off and collections policies in 2024; staff seeks to implement these into operations
● Recommended Vendor: SMUD (partnership with ICS)
● Key Benefits of SMUD: Cost-effective, positive client feedback, seamless integration with our billing system
2 Background
Uncollected Billings:
• $20M in total, with $5M becoming eligible for recovery annually • 300,000+ customers with eligible accounts (61+ days overdue) • 59% of debt is residential
Ava’s Policy History:
• 2018 policy adopted, paused in 2020 due to COVID-19 protections • The State’s COVID-19 state of emergency terminated on February 28, 2023 • Staff issued an RFP September 2024 for debt collection services 3 Accounts Receivable Recovery Process Policy
• Delinquent Accounts:
▪ Pursuant to Electric Rules 8 and 11, Pacific Gas & Electric (PG&E) uses the following process to determine past due accounts and the necessary action: (Refer to the chart on the following slide for more details.)
• Aging Accounts:
▪ All Ava Community Energy accounts, whether Residential or Non-Residential, identified in the month aging accounts receivable report, as provided by PG&E, are eligible to be returned to PG&E for continued non-payment.
• Accounts Receivable Recovery Process:
▪ Closed Ava accounts with overdue amounts may be recovered by Ava or referred to a collection agency and are subject to the recovery process established by this policy. 4 Accounts Receivable Recovery Process Policy
5 Residential Accounts Non-Residential Accounts
Day 0 Bill is completed and issued. Day 0 Bill is completed and issued.
Day 21 Bill is due Day 17 Bill is due
Day 22 Past due Day 18 Past due
Day 27- 34 A new bill is issued for current charges and a 15-day notice is included for past due charges.
Day 21-34 A new bill is completed for new charges and
any unpaid charges and a 7-day notice is
issued for past due charges.
Day 42 96-hour notification sent
Day 44-47 48-hour notice via mail
Day 48 Outbound phone call
Day 51 Account is eligible for disconnection Day 43 Account is eligible for disconnection Day 60 Final letter is sent Day 52 Final letter is sent Day 95 Reverse debt to CCA Day 87 Reverse debt to CCA
Customer Timeline - PG&E Delinquencies:
RFP Process
In September 2024, Ava issued an RFP for Debt Collection Services. Three agencies responded to the RFP. Proposals were evaluated by a team, and the top two agencies were selected for interviews:
Vendors Considered:
• SMUD- Partnered with ICS
• Harris & Harris (H&H)
6 Comparison of Collection Methodology
SMUD vs. H&H Key Differences:
• ICS: 24/7 inbound IVR, manual skip tracing, persistent communication even after 90 days • H&H: Focus on analytics, text campaigns, credit score filtering, more frequent call attempts for smaller balances
Customer Journey Highlights:
• SMUD prioritizes customer experience through multiple communication channels, a "here-to-help" letter, and longer recovery timeframes • H&H utilizes advanced analytics and quicker outreach but lacks long-term engagement tools 7 Average Uncollectibles Breakdown, 2020-2024
8 Residential C&I Total
Monthly Average
Uncollectible $241,050 $167,840 $408,890
Monthly Average Customer
Count 5,970 315 6,285
Average Uncollectible per
Customer $40 $533 $65
Yearly Average
Uncollectibles $2,892,600 $2,014,080 $4,906,680
Vendor: SMUD
Determining Factors:
• Lower primary recovery fee (10%)
• Integration with SMUD will streamline implementation
• Favorable customer feedback and cost-effectiveness
Recommendation:
Staff recommends contracting with SMUD in partnership with ICS until through December 2026, with a performance assessment at 12 months.
Recommended Vendor
9 AvaEnergy.org
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AvaEnergy.org
+1 833.699.3223
[email protected]
PoweredWithAva
Online
Phone
Email
Social
AvaEnergy.org
+1 833.699.3223
[email protected]
PoweredWithAva
Online
Phone
Email
Social
10