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National Grid - Improving collections performance through enhanced strategy

National Grid is an international energy delivery company that in the U.S.A, delivers electricity to approximately 3.3 million customers in Massachusetts, New Hampshire, New York and Rhode Island, and manages the electricity network on Long Island under an agreement with the Long Island Power Authority (LIPA).

In January 2008, the United States faced a serious economic downturn that was forecasted to become more difficult.  National Grid began to see an unprecedented shift in its customers’ behaviours.

There was a sudden and noteworthy decrease in outstanding balances collected.  Customers who had never made a late payment before were suddenly behind.  This was a set of customers who had not been candidates for collections strategies before.

National Grid did not want to treat these customers newly in arrears like those who were a higher risk. Senior executives at National Grid asked the collections team what was required to get ahead of this trend and allocated the required funds and resources to address those needs.

Before the downturn, National Grid had been using standard collections approaches.  Techniques that might have worked two years previously could no longer be relied upon to produced effective results.

National Grid is the largest distributor of natural gas in the north-eastern U.S.A, serving approximately 3.4 million customers, the organisation also owns over 4,000 megawatts of contracted electricity generation that provides power to over one million LIPA customers

National Grid have an appetite for using technology and recognised that, given the size of their customer base, they would benefit from automating processes as much as possible.  Another objective was to focus the project on predictive strategies to better serve customers. 

Given the direction that the economy was heading at the time, National Grid needed a solution that could be implemented quickly and hit the ground running.

As part of the process, National Grid collections team were open to challenging the standard approached and existing practices that were used to manage past-due customers.  They also sought collection strategies that better matched individual circumstances (in other words, matching appropriate collection action to the risk presented by the individual customer). 

This strategy was designed so that National Grid was not taking a heavy-handed approach if a customer was newly in arrears. This including acknowledging that a soft prompt, such as a phone call, would likely bring their account to current status. 

National Grid’s collections team also wanted to use its resources more effectively to impact accounts that had higher risk and work with customers earlier in the collections cycle – before their arrears grew beyond a tipping point leading to termination of service.  A key driver for this part of the project would be an enhanced behavioural scoring model. 

Increased efficiencies and savings were also an important consideration, as National Grid sought to decrease the number of customers in arrears and to decrease wasted usage.

National Grid implemented Experian’s Portfolio Management Package, an agreement was reached in February 2008 and just four months later the system was live.

Portfolio Management Package is a powerful account management and collections decisioning service that provides complex portfolio segmentation, sophisticated behavioural scoring technology and advanced decision strategies for consumer credit and utility accounts in pre- and post- charge-off stages. It provides increased control over portfolios, allowing for the automation of more decision processes to improve customer service and recovery activities. It also allows for reduction of delinquency and losses, as well as collection expenses.

To ensure expected results, Portfolio Management Package provides ongoing consulting from industry-experienced consultants who monitor performance and provide strategic recommendations for changes to cut-offs, policies and actions. Experian generic behavioural scoring models take the guesswork out of predicting the risk or profitability of existing customers by employing statistical techniques to portray consistent, objective evaluations.

Portfolio Management Package allowed National Grid to tailor collection strategies.  The business has doubled in size recently and is still growing.  National Grid’s U.S.A business relies on four legacy customer service systems. It implemented Portfolio Management Package and its Champion/Challenger analysis in one of those areas, servicing half of their customer base.

During its first month of use, Portfolio Management Package was used to score the relative risk of the customers in that system.  For each account in collections, it recommended the best way to treat that customer – calls, letters or personal visits.  The system provided tangible actions that lead to improved performance.

Results

The Portfolio Management Package and Champion/Challenger strategy impacted National Grid’s collections successes in three different ways:
1	The new scoring model reduced the number of customers with delinquencies
2	Increased cures – a decrease in the number of accounts charged off or disconnected
3	Action reduction – the reduced need for action (or applying a lower cost action) added up quickly for millions of customers

Tracey McCarthy, Vice President, Customer Financial Services, National Grid commented."We are very happy and are looking beyond this project to consider how else Experian can help us. We have begun working with Experian to assess risk on the commercial and industrial side."

“We would like to aggregate data within our large business customers to enhance risk assessment and we are also exploring implementing more sophisticated account initiation strategies using Experian tools.  We plan to further extend these strategies across the customer life cycle."