Businesses in deregulated energy markets may choose between consolidated billing and dual billing when purchasing electricity or natural gas from a retail energy supplier. Each option handles supply and delivery charges differently.
For energy brokers, understanding these billing structures helps you explain the available options to customers. Businesses can also use this information to choose a billing method that fits their accounting needs and payment preferences.
This guide explains how utility consolidated billing and dual billing work, the main benefits and drawbacks of each option, and what businesses should consider before choosing a billing arrangement.
What Is Utility Consolidated Billing?
Utility Consolidated Billing (UCB), also called single billing, allows a local utility to include retail energy supplier charges on the customer’s regular utility bill. In a deregulated energy market, customers may choose a retail supplier for electricity or natural gas while the local utility continues to deliver the energy. With UCB, the utility combines these charges into one bill.
This arrangement can make billing easier because customers do not need to manage separate bills for energy supply and delivery. However, UCB rules, fees, and billing options vary by state and utility.
How Does Utility Consolidated Billing Work?
When a customer chooses a retail energy supplier, the supplier provides the electricity or natural gas supply. The local utility continues to handle delivery through its distribution system. Under UCB, the utility adds the supplier’s supply charges to the customer’s utility bill. The customer then makes one payment to the utility.
The utility collects the payment and sends the applicable supply amount to the retail supplier based on the billing arrangement. The utility may charge the supplier a fee for providing this service.
Why Do Utilities Offer Consolidated Billing?
Utilities may offer consolidated billing as a service to retail energy suppliers. It gives customers a simpler way to manage their energy bills. The cost of UCB varies by utility and market. Suppliers may also consider these costs when setting their pricing or choosing a billing option.
Some utilities also offer Purchase of Receivables (POR) programs. Under a POR arrangement, the utility purchases eligible customer receivables from the supplier at a discount. The utility then collects the full amount from the customer. This can reduce the supplier’s collection risk and simplify the payment process.
What Are the Pros and Cons of Consolidated Billing?
Benefits | Potential Drawbacks |
One bill to manage | Billing fees may affect supplier pricing |
Easier accounting | Unpaid bills can create service issues |
Simple payment process | Supplier charges can be harder to separate |
Utility handles collection in some arrangements | Rules vary by utility and state |
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Benefits of Consolidated Billing
Utility consolidated billing can make energy billing easier for both businesses and retail energy suppliers. Instead of managing separate invoices for energy supply and delivery, customers receive these charges on one utility bill. This can simplify accounting, reduce administrative work, and make it easier to track total energy costs.
Simplifies Energy Bill Management
Consolidated billing reduces the number of energy invoices a business needs to review and pay. Customers can see supply and delivery charges on one statement rather than managing separate bills.
Makes Payments Easier
A single bill gives customers one payment date and one payment process to manage. This can reduce the chance of overlooking a separate supplier invoice.
For businesses with multiple locations or high energy usage, simpler payment management can make accounts payable processes easier.
Improves Billing Visibility
A consolidated energy bill can show both utility delivery charges and retail supplier supply charges. This gives customers a clearer view of how their total energy bill is structured.
Businesses can review these charges to understand their energy costs and identify unusual changes or billing issues.
Reduces Administrative Work
Managing multiple energy invoices can take additional time. Consolidated billing places eligible charges on one utility statement, which can reduce the number of invoices that accounting teams need to process.
Supports Supplier Payment Collection
Under a consolidated billing arrangement, the utility may collect the supplier’s charges along with its own charges. The utility then sends the applicable supplier amount according to the billing agreement.
Makes Energy Costs Easier to Review
Businesses can use consolidated bills to review supply costs, delivery charges, taxes, and other applicable fees together. This can help energy managers and finance teams better understand their overall energy expenses.
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Potential Drawbacks of Consolidated Billing
UCB can make it harder to identify or dispute individual supplier charges. Customers may need to work with both the utility and supplier when they find an incorrect charge.
Unpaid utility bills can also create service risks. Depending on the applicable state and utility rules, failure to pay required charges may lead to collection activity or service interruption.
Businesses should review their utility and supplier agreements carefully before choosing a billing arrangement. They should also understand how disputes, late payments, supplier charges, and billing fees are handled.
- Important: UCB is not available or structured the same way in every deregulated energy market. State rules, utility tariffs, and supplier agreements determine how consolidated billing works.
What Is Dual Billing for Energy?
Dual billing is an energy billing arrangement where the customer receives separate bills for energy delivery and supply. The local utility sends one bill for delivery and other utility charges. The retail energy supplier sends a separate bill for the electricity or natural gas supply.
This differs from Utility Consolidated Billing (UCB), where the utility combines supplier charges with its own charges on one bill.
Why Do Suppliers Offer Dual Billing?
Dual billing can help suppliers avoid some utility consolidated billing fees. Depending on the market and agreement, these savings may influence supplier pricing. It can also give suppliers and customers more flexibility when setting payment terms. This can be useful for larger commercial and industrial customers that have higher energy volumes.
Larger businesses may negotiate payment terms directly with their supplier. The agreement may include terms such as net 30 or net 60 days when the supplier and market rules allow them.
Separate supplier invoices can also provide more detail about energy supply charges. This can help businesses review their energy costs and evaluate efficiency opportunities.
What Are the Pros and Cons of Dual Billing?
Benefits | Potential Drawbacks |
Separate supply and delivery charges | Two bills to manage |
Potentially more flexible payment terms | More complex accounting |
More detailed supply billing | Requires careful invoice review |
Can support certain complex energy products | Billing practices vary by supplier |
How Does Dual Billing Affect Commercial Customers?
Larger commercial customers may choose dual billing to improve cash flow and gain more control over payment arrangements. A separate supplier bill can also make it easier to review the cost of energy supply. However, customers must manage multiple invoices and understand which charges appear on each bill.
Businesses should review the payment terms and billing responsibilities before selecting this arrangement.
Is Dual Billing Used for Complex Energy Products?
Yes. Dual billing can be used with certain complex energy supply products, including block and index plans. These products may use market index prices, hourly usage data, and other pricing components. As a result, the supplier invoice can contain more detailed calculations than a standard fixed rate bill.
However, billing practices vary by supplier and market. Customers should review the contract to understand how supply charges are calculated and billed.
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Conclusion
Utility consolidated billing and dual billing offer different ways to manage energy supply and delivery charges. Consolidated billing combines charges into one utility bill, while dual billing separates supplier and utility invoices. Each option has benefits and drawbacks depending on the business, energy contract, payment terms, and local market rules.
Businesses should compare both options before choosing a billing structure. Understanding how each arrangement handles payments, supplier charges, and billing details can help businesses manage energy costs and accounting more effectively.
Frequently Asked Questions
Can businesses choose between consolidated and dual billing?
In some deregulated energy markets, customers may have billing options. Availability depends on the local utility, retail energy supplier, state regulations, and energy contract. Businesses should confirm the available options before selecting a supplier.
Is dual billing better than consolidated billing?
Neither option is always better. Consolidated billing offers convenience and simpler accounting. Dual billing may provide more detailed supplier charges and greater flexibility with payment terms for some businesses.
What is dual billing?
Dual billing means the customer receives two separate energy bills. The utility bills for delivery services while the retail energy supplier bills for electricity or natural gas supply.
What is utility consolidated billing?
Utility consolidated billing combines retail energy supplier charges with the local utility’s delivery charges on one bill. The customer makes one payment to the utility.