New credit check system will determine EES deposit fee

  By Thomas Wilson
star staff

  Elizabethton Electric System officials hope a new credit check system exclusively for utility companies can lower bad debt losses and reward new customers with good credit scores.
  The utility's board of directors voted last month to use the ONLINE Utility Exchange, an Internet-based service that conducts credit risk assessments for power, water, cable, and wireless companies. ONLINE reviews credit scores for applicants seeking electricity service from the EES and assigns a credit ranking that determines the amount of deposit charged to each applicant.

  "Our deposit policies are to protect the EES if people leave with unpaid balances," said Gary Richards, EES administrator of the program. "It gives us more upfront information."
  Richards said EES customer service representatives log onto the ONLINE Web site when they get a new customer and using the customer's provided information. The service conducts a credit check through the national Experian credit bureau, which reveals an applicant's credit scores. Richards said the system then rated the applicant as low-risk green, medium-risk yellow, and high-risk red.
  "Anybody who comes in with a green light we won't even charge them a deposit," he said.
  Low-risk green applicants are not charged a deposit fee, yellow designations require a $100 deposit, and red or high-risk applicants pay a $200 deposit.
  EES General Manager Phil Isaacs felt the new system would help the system stymie lost debt amounting to tens of thousands of dollars each year.
  "We are hoping it will help us with our bad debt write off," said Isaacs. "If you are a customer that develops a good paying history we will refund some of that money."
  The EES previously charged a $100 deposit fee for all customers. Richards said the system averaged losing between $75,000 and $80,000 annually -- roughly 0.5 percent of its total revenues -- to customers that disconnected service without paying their full power bill.
  "We lose a lot of money when people leave with unpaid light bills," said Richards, who added the bills amount to line losses in the system. "As a distributor we purchased that power from TVA and got no money back from the service we provided."
  He said the system averaged hooking up 300 to 400 new customers each month depending on seasonal conditions such as turnover in occupancy of rental property.
  The new policy does not affect existing EES customers unless they have their power turned off for non-payment. He said EES customers who transferred their power service by moving would only be affected by the new system if they had troubles in their payments over time. Customers who have their electricity disconnected for nonpayment will have to pay not only the outstanding balance but also a $100 deposit for reconnection.
  The new service also keeps credit databases on participants that have billing histories with other utilities participating in the ONLINE system.
  "If someone left Bristol (Tennessee Electric System) owing them a light bill, we will know it here," Richards said.
  Richards stressed that all customer information gathered through the ONLINE credit check was kept confidential between them and the customer. He added that only he and EES customer service representatives had access privileges to the ONLINE service and an applicant's credit information.
  "It is not something anyone can just come in and do," he said. "There are checks and balances."
  ONLINE Exchange charges the system a fee for each credit check completed for a new connect. The Johnson City Power Board and Bristol Tennessee Electric System currently use the ONLINE Utility Exchange program.
  The credit is purely voluntary with applicants for power service not required to participate in the credit review service. Applicants that decline to participate will be charged a $250 deposit Richards said.
  The EES board of directors approved the utility's entry into the system at their November meeting. The ONLINE system goes into effect on Jan. 3, 2005. All 25,000 EES customers should receive an insert in their December power bills explaining the new program.
  EES board member and Elizabethton Director of Finance Brad Moffitt indicated that if the system works well he may recommend that City Council adopt the same system of deposit fees for applicants seeking city water and sewer services. Moffitt said the recommendation would be based on how the system performs during the first six months of operation.
  "You would want to reward your good customers," he said. "The fewer bad debts we have the more efficient our rates can be and the lower they can be for all our customers."