Competition: When Customer Care is Key

The global liberalization of electricity markets is forcing utilities to cut costs while improving customer care. Vergilio C. Flordeliza of the Manila Electric Company, Meralco, explains how the use of the right IT systems can do both.

Vergilio C. Flordeliza

Meralco Electric Company

Manila, Philippines

As early as 1992, top management at Meralco, the electricity distributor for Manila and second biggest Philippine company in terms of gross revenues, began to anticipate worldwide trends towards greater liberalization and competition in electricity markets. Led by President Manuel M. López, Meralco executives searched for a formula to transform and set the foundations that would allow the company to become a world-class utility by the end of the century and keep its 60 per cent share of the Philippines electricity distribution market.

On a business trip to Spain in 1994 with Philippine President Fidel V. Ramos, Manuel López was introduced to Unión Fenosa, a private Spanish utility that transformed its own internal management during the 1980s on the basis of creating a new business philosophy supported by in-house developed management systems. Since 1988, Unión Fenosa, through its international operations subsidiary Unión Fenosa ACEX, has been acting as a consultant for utilities, with modernization and technology transfer projects underway in more than 25 countries over four continents.

In May 1995, Meralco and Unión Fenosa began collaborating on the Meralco Transformation Project (MTP) with the aim of improving quality of service to customers and cutting costs. This involved an in-depth analysis of the business processes of the company and the implementation of Unión Fenosa`s IT management systems.

Customer management

One of the first areas analysed at the start of the MTP in 1996 was the customer service business process. At that time, Meralco was dependent on close to ten different system applications covering different functions. This was the result of a policy of decentralization in the early 1990s. In 1996, the MTP team decided to reverse this decision, opting for re-centralization and consolidation of the IT platforms in an effort to reduce costs and improve the quality of information.

At the same time, the commercial processes had to be refocused towards the customer in an attempt to improve service and anticipate the new demands from consumers in a more competitive market.

In terms of management, the MTP team also wanted to provide new capabilities for Meralco to follow up on unpaid bills and control fraudulent activity among non-automated procedures, such as meter reading and door-to-door collection services.

After negotiations, the MTP leaders decided to implement a customized version of the Customer Management System (CMS) developed by Unión Fenosa ACEX. CMS is an integrated system covering all functions of commercial management: meter reading, billing, collection, field orders, service applications, customer assistance, meter management and non-technical system losses.

This system could also provide Meralco with a series of new competitive capabilities including:

– On-line handling of bills and complaints

– On-line establishment of contracts

– Definition of billing conditions and individual payment terms for each contract

– Customer service hotline with on-line information

– Meter reading, productivity monitoring

– Daily billing (with real and estimated consumption, arranged with or reported by the customer)

– Payment handling via collection agents

– Automatic generation, scheduling and follow-through of field orders

– On-line information for management decision-making, based on real-time graphical queries with flexible searching and sorting criteria (this information can be visualized and analyzed by time period, organizational unit, kind of customer, payment terms and other areas of customer service concern).

CMS in Meralco

To take advantage of new capabilities offered by the CMS, the implementation in Meralco had to be backed up by a series of herculean tasks. For example:

* In the Meralco distribution area, there was still a high proportion of unnumbered homes and unnamed streets. As the new CMS required each customer to have an address which was easily located, Meralco decided to launch a campaign to number customers` homes or businesses with stickers. By the end, more than 250 000 numbered stickers, all with the Meralco logo, had been applied to houses, small businesses and other customers, largely in rural areas.

* Preparing the new customer database was another difficult task. To start with, there were the complexities of converting the information already existing in different databases supporting Meralco`s 30 application systems to create a single database for the customers. Following this process, numerous data duplications and errors were detected. As a result, the MTP had to send more than 900 trained data-gathering field workers out on the streets, in a campaign that involved filling in hundreds of thousands of data sheets and the co-ordination of more than 25 000 maps. Back in the office, a task force of 300 people worked for months on data entry to cover all 3.4 million of Meralco`s customers.

* Following the decision to eliminate door-to-door payment collection, it was necessary to provide new payment options for customers. In the end, more than 250 outside agents were chosen to provide Meralco collection services, including commercial banks, rural banks, and even supermarkets and pharmacies. These collection agents are now fully automated and connected to the CMS. Meralco customers can now pay as well through automatic teller machines (ATM), automatic debit arrangements (ADA), credit cards and telephone banking.

* More than 2000 users within the organization had to be trained to use new hardware and the close to 2000 PCs at Meralco and third party agencies. In addition, an elaborate communications system had to be set up for the 160 Meralco offices and 250 third party collection agencies working in customer service.

* On a human level, the MTP had to handle the language barrier and cultural differences between Filipinos and employees from Unión Fenosa ACEX and international subsidiaries of the Unión Fenosa Group. This meant Filipinos, Spanish, Uruguayans, Venezuelans and Slovakians all working together.

Despite these problems, implementation of the CMS moved very quickly. A pilot zone for 200 000 customers in two selected branch offices was up and operating by May 1997 and 12 branch offices serving more than a million customers went on-line by November of that year. In March 1998, 2.1 million additional customers went on-line in a single block, bringing the total to more than 3.4 million customers served.

The new system allows Meralco customers to solve complaints or request information concerning billing, collection or past history from the company at any of the 160 Meralco commercial offices and 250 payments centres connected to the information in the central database. In addition to a more personalized service, the improved information enables Meralco to provide more accurate electricity bills as well as re-billing of customers.

Meralco`s management sees great benefits from the implementation of the system. Though it has been on-line for only a few months, immediate benefits include:

– The integration of the databases has greatly improved the quality of information

– A single integrated system promotes multi-skilled employees, previously assigned to only one customer service task

– Numerous manual files and documents have been eliminated

– The meter reading process is now more flexible, both for employees and customers

– Many manual controls for billing have been eliminated and new controls have been added to avoid errors

– Real-time data now exists for decision-making by managers.

While the implementation of the CMS clearly forms the bulk of the Meralco transformation project for now, the new system is being interfaced with other systems developed by Unión Fenosa ACEX. This includes the Distribution Management System (DMS), aimed at modernizing the distribution side of the business, as well as the Stock Management System, which has greatly assisted in the control of stocks and warehouses. The fourth system to be installed will be the Financial Management System (SIE).

Expansion outside Meralco

As early as 1995, Meralco and Unión Fenosa ACEX believed that other businesses could benefit from the consulting expertise gained by both companies during the Meralco transformation project.

Accordingly, they set up a joint-venture company (50 per cent for each partner) based in Manila, with an aim to support the MTP and look for outside business. Over the past three years, this new company, Iberpacific, has increased its participation in the MTP and achieved real success as a consulting company, with contracts from clients such as National Power Corporation (NPC) of the Philippines, Sky Cable, the Benpres-Lyonaisse des Eaux Waterworks Project, University of La Salle and Meralco Stock Transfer.

In parallel, the 100 Iberpacific consultants, all Filipinos, have begun to work on other international projects of Unión Fenosa ACEX. These include projects for KPLC in Kenya, the Ministry of Electricity of China, Lusitania Gas in Portugal, ACEGAS in Italy, etc.

Iberpacific recently begun to diversify its activities, signing collaboration agreements with the software giant SAP (for the implementation of SAP`s R/3 Systems), with SCAP Europe (a software company specializing in the control and automation of processes, as well as intelligent buildings). It is also entering into increasing collaboration with IBM`s Utility division.

The Meralco project is a perfect example of how a single project has resulted in multiple projects, and endless opportunities.

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