Local Government Spotlight: Virginia Beach, Virginia
Automating Utility Bill Invoicing to Improve Energy Management and City Operations
Summary
By automating bill processing and transitioning utility accounts from paper invoices using electronic data interchange, Virginia Beach, Virginia, eliminated nearly 1,000 paper bills every month, reducing staff time required for tracking energy usage and processing bills by 85%. The city also reduced cumulative electricity consumption by 15% in city buildings in 5 years and saved an estimated $1 million in utility costs from a variety of cost-saving efforts.
Goal: Reduce electricity use in city buildings by 10% by 2013 from a 2007–2008 Fiscal Year baseline and increase the efficiency of the city's bill processing and payment system.
Barrier: Inefficient method and format of data delivered by utility and disparate management of energy and assets across organization.
Solution: Worked with utility vendors and third-party contractors to automate bill processing and transition accounts from paper invoices to an electronic exchange of utility-bill data known as electronic data interchange (EDI).
Outcomes: Reduced cumulative electricity consumption by 15% in city buildings in 5 years and saved an estimated $1 million in utility costs. The city also eliminated nearly 1,000 paper bills every month, reducing staff time required for tracking energy usage and processing bills by 85%.
Background
Virginia Beach is the most populous city in Virginia with just over 450,000 people[1] and approximately 3.3 million square feet of city-owned building space. In response to rising utility expenditures, Virginia Beach established a Joint Energy Committee (JEC) in 2008 to identify, assess, and implement energy-related activities. JEC is chaired by the deputy city manager and comprises representatives from city departments, City Public Schools, and their major electric utility, Dominion Virginia Power. Virginia Beach had a decentralized and cumbersome paper-based bill review and payment process for nearly 2,000 utility meters leading to duplicate charges, late payments, and fees.
In 2008, JEC set a goal to reduce electricity use in city buildings by 10% from a 2007–2008 Fiscal Year baseline by 2013.[2] Soaring utility expenditures, which reached a peak of approximately $22.8 million in 2012 representing an 18% increase and $4 million in additional utility costs since Fiscal Year 2010, further prompted the city to get a better handle on its utility expenditures.[3]
Implementation Strategy
City Policy and Goal
To increase the efficiency of utility-bill tracking and processing, the city manager's office set a city-wide policy requiring electronic tracking of all utility bills. Aside from grants and temporary structures, all departments were required to use EnergyCAP, a utility bill accounting and energy management software, to process their energy bills. EnergyCAP helped the city streamline and automate its utility bill management system that simplified energy monitoring and management and significantly boosted the overall efficiency of business operations. By creating a platform for long-term energy management, the city increased internal efficiencies, reduced costs by eliminating shadow systems, and reduced data entry errors and late payments.[4]
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Opportunity
Dominion Virginia Power enabled electronic data transfer between its data systems and its customers by purchasing translation software that converts bill information to a standard invoice format referred to as the EDI 810 transaction.[5] This transaction is generated for each customer account billed, in lieu of the traditional paper customer bill. Dominion Virginia Power sends EDI data files daily as billing periods end and invoices are made available. These files are converted via translation software to a file format that is directly uploaded to the city's energy management software.
Project Team and Roles
JEC established a project team consisting of members of the energy, finance, public-works, and information technology (IT) departments. The energy management administrator was responsible for overseeing the transition to electronic invoicing via EDI from project initiation through implementation.
Because the solution involved development of new IT interfaces with vendors and the Finance Department's data management system (Oracle) and ENERGY STAR® Portfolio Manager, the project required close collaboration between key city staff and outside vendors to integrate the new system and meet the city's project specifications.
- The energy manager led the project from initiation through implementation.
- The procurement buyer negotiated the EDI and energy software procurements.
- IT staff managed the project and analysis, developed the interface specifications and the interface to the financial application, and deployed the software on the city's network.
- The EDI vendor (Xebec) and the energy vendor software lead implemented and customized the software to meet the city's specifications. The software lead devoted approximately 6 months of full-time activity to this task.
- The finance lead and staff in the Finance Accounts Payable Payment Processing, and Department Invoice Processing tested user acceptance during the final phases of the project.
The Finance Department was a critical partner in the initiative. The team included a financial analyst that successfully implemented the integration of the new software into Oracle—the city's financial system. This analyst also led the testing team that identified and fixed many "bugs" before the system went live.
Prior to Implementing Electronic Data Interchange
Prior to switching to EDI, the city verified its meters with the vendor and created an accurate list of accounts by removing inactive accounts and correcting other account errors. The city performed a third-party energy bill audit on 3 years of historical data to ensure data accuracy. Virginia Beach also paid its outstanding balances to zero out all accounts. This process alone proved beneficial as it eliminated a number of hidden costs, such as charges on accounts with zero energy use, and uncovered accounts that were improperly credited by the vendor.
Streamlined Software Solution
The software solution centralized utility data, providing faster and more robust visibility into the city's energy consumption and costs. The solution combined the use of EDI and the city's energy management software, EnergyCAP, to upgrade and streamline Virginia Beach's utility management program. Virginia Beach purchased EnergyCAP software with American Recovery and Reinvestment Act funds as part of the city's energy program. EDI files containing utility-bill data were automatically translated by Xebec software and imported to EnergyCAP, which then exported the data to the accounts payable system.
This allowed the city to move away from a decentralized billing process to a centralized system in which all utility bills from various city departments are automatically entered into a single data system. While the majority of Virginia Beach's electric and natural gas bills are received electronically, there are some bills from vendors that do not offer EDI. These bills are entered manually by respective departments.
While EDI allows electronic bill transfer, the energy software was vital for organizing and auditing the bill data, making the data visible to city departments, approving bills for payment, and analyzing cost and consumption. The software can run a number of audits and can generate reports that the energy manager reviews, including bill summaries showing invoice totals and rates; error reports showing late fees; and other anomalous data such as abnormally short bill periods, suspect values, and estimated bills.
Bill data are processed in weekly batches as outlined in Figure 1 below. While the city no longer receives paper bills, it can log into the vendor websites and retrieve original bills, if needed.
Figure 1. Streamlined process for utility bill data transfer from utility, invoice review, and payment
Third-Party Electronic Data Interchange Software Provider
The city decided to use a third-party EDI provider to acquire and maintain the EDI translation software. Virginia Beach awarded a competitive bid to the EDI vendor, Xebec Data, a company with experience in setting up EDI for city and county governments in a number of states. The request for proposal included language that allowed other cities and counties in Virginia to "piggyback" on their contract, which made the pricing more competitive for the city. Using Xebec's services was beneficial because Xebec maintained the translation software when the utility changed the EDI code interface. For a sample request for proposal, contact Virginia Beach's Energy Office.
Project Timeline
The entire project took approximately 6 months. It included developing the project plan, determining the business and project specifications, negotiating with the EDI and software vendors, system testing, training, and implementation. Once the city established the software and internal interface, it only took 2 weeks to receive the first exchange of electronic invoices from Dominion Virginia Power.
Virginia Beach pursued EDI with Virginia Natural Gas to automate data transfer for another large set of accounts but found that the vendor's electronic remittance system was not compatible with the city's electronic payment system. The vendor and city negotiated an alternate approach to invoice remittance, but this process took 1 year to finalize and required support from the city's senior officials. As a result, the city transitioned 150 additional accounts to the EDI solution.
Project Costs
Total implementation costs were approximately 0.7% of Virginia Beach's annual energy expense or approximately $177,000, including the cost of the outside IT project lead/analyst ($72,739). Ongoing costs of the EDI software were based on the number of accounts, totaling around $600 per month for the EDI software provider.
Key Success Factors
- City-wide support starting with the city manager's office; key partners included the finance, IT, and public works (building maintenance) departments
- City-wide requirement to process all city invoices electronically
- Phased implementation of the system
- Working closely with IT to develop interfaces and address IT needs—including security issues and a backup of the database
- Working with the Finance Department to understand programmatic needs and test user acceptance
Outcomes
Energy and Cost Savings
In 5 years, the city reduced cumulative electricity consumption by 15% in its city buildings, surpassing its initial goal of a 10% energy reduction by 2013 from a 2007–2008 Fiscal Year baseline. The city estimated it saved more than $1 million in utility costs from a variety of cost-saving efforts.
The Energy Office used the energy consumption data as a communications tool to "start the energy conversation" with building occupants, identified city buildings that were candidates for energy retrofits, and monitored monthly energy performance following each building retrofit.
Given energy rate fluctuations, Virginia Beach was also better able to project future energy budgets based on actual expenditures; the first year that the city did not see a rise in energy costs was 2013. In the summer of 2014, the Energy Office used the functionalities of the software to identify opportunities to correct rate schedules. As a result, the city identified pump stations and "all electric" buildings that were not on the appropriate rate schedule that was once adjusted will realize additional cost savings for the city.
In 2018, the Virginia Beach metropolitan area ranked number two in the nation among mid-sized cities and number 20 overall with 109 ENERGY STAR certified buildings.[6] Virginia Beach has four city government buildings and 22 public schools earning ENERGY STAR certification.
Comprehensive Energy Data Tracking
Prior to implementing the EDI and EnergyCAP solution, the city was tracking approximately 40% of its energy use. After implementing the solution, Virginia Beach tracks all utility bill data for all of its energy using assets (including 420 pump systems and traffic signals). All information on energy usage, fees, energy schedules, and peak usage is tracked. Tracking energy consumption has made identifying opportunities for energy efficiency upgrades easier, and the city is able to systematically increase the energy efficiency of its buildings.
Enhanced Energy Data Reporting
Virginia Beach's Energy Accounting and Management System improved the visibility of energy consumption to city leadership. The Energy Office produced more than 90 quarterly reports to raise awareness of the city's energy consumption. Each department received a commodity report, a building report, and a fuel report.
Increased City Operational and Bill Processing Efficiency
Previously, it took administrative staff the equivalent of one full-time employee (nearly 160 hours per month) to manually update energy and financial systems. The transition to EDI eliminated approximately 12,000 paper invoices annually, and as a result, reduced the staff time required to track and pay bills to 16-24 hours per month, equivalent to an 85% decrease. It also reduced invoice processing time by 2 to 10 days.
The system enabled the city to focus on management of utility bills, including skipped or missing bills, and reduced incorrect charges and past due penalties. Late fees became a rare occurrence. In 2013, Virginia Beach received the Government Finance Officers Association's Louisville Award for Innovation in Government for its approach to improving the city's utility bill management process.
Note: The information in this case study is based on primary research conducted in 2014. Learn more about the guide's research and development.
To learn more about streamlining access to utility data, see Step 4.