In this issue let’s take a look at some best practices associated with the application for service process.

Require a copy of rental agreement or closing documents

Have you ever been faced with a new customer wanting to initiate service at an address where the service has been disconnected for non-payment and were pretty sure that the new applicant had been living there all along but you couldn’t prove it?

One way to avoid this predicament is to require a copy of the rental agreement (or closing documents when the customer is purchasing the property). If the customer who is applying for service can’t provide a new rental agreement, then most likely your suspicions are accurate and this person has been living there all along.

List all names on the rental agreement on the service application

A best practice is to include the names of everyone on the rental agreement as co-applicants for service in your billing system. This serves as an additional precaution to ensure that you don’t find yourself in the situation described in the previous section. In the event that the account ends up with an unpaid final bill, it also provides additional individuals for you to try to collect from.

Require a photo ID for each applicant

Red flag rules require that you verify that an applicant for service is who they claim to be. The best way to accomplish this is to require that each applicant provide a photo ID. A best practice is to retain a copy of the photo ID, preferably a color scanned image rather than a black and white photocopy.

Perform a bad debt search for each applicant

Another best practice is to perform a bad debt search of closed accounts for each new applicant. Many times a previous customer who left and never paid their final bill will try to move back to your service area and apply for service using a different name. Retaining the applicant’s social security number, driver’s license number and date of birth that can be searched in the future is the best way to catch deadbeats that try to reapply for service from your utility.

Hopefully, your software does this search automatically as you process each application for service. However, if your software isn’t this sophisticated, it is still worth the time to manually perform the search multiple times, using the applicant’s name, social security number, driver’s license number and date of birth.

Charge an application fee

In this post dealing with cut-off policies, I referenced the Government Finance Officers Association’s (GFOA) Best Practice for Measuring the Full Cost of Government Service that states:

“The full cost of a service encompasses all direct and indirect costs (both operating and capital) related to that service. Direct costs include the salaries, wages, and benefits of employees while they are exclusively working on the delivery of the service, as well as the materials and supplies, and other associated operating costs such as utilities and rent, training, and travel. Likewise, they include costs that may not be fully funded in the current period such as compensated absences, interest expense, depreciation or a use allowance, and pensions, and other postemployment benefits.

Indirect costs include shared administrative expenses within the work unit and in one or more support functions outside the work unit, the entity-wide indirect costs (e.g., legal, finance, human resources, facilities, maintenance, technology).”

There are costs associated with processing an application for service and collecting the initial reading for the new account. In keeping with the GFOA policy, a best practice is to charge a non-refundable application fee, over and above any security deposit, to recover these costs.

Print an application form that the applicant(s) sign

As the last step in the application process, you should print an application form that includes all of the customer’s relevant information and a paragraph, or paragraphs, outlining your policies that the new customer is agreeing to. In some states there are few state laws defining the relationship between utility and customer. Absent state laws to the contrary, the signed service agreement forms the legal basis that governs your relationship with your customers. Having the customer sign an application form that includes their personal information and your terms and conditions ensures that your utility is protected in the event of a lawsuit.