Check Those Assumptions

In the spring of 2001, Reliant Energy was getting ready for the pilot program for deregulated service to small business customers in Texas. The state legislature had approved deregulation, which would go into effect state-wide on New Year’s Day 2002, but the Public Utility Commission (PUC) understood that systems and procedures needed to be tested on a limited scale, if major problems were to be avoided when the main effort began in January. So, a lot of work went into the pilot projects which would begin in June. But as often happens when a lot of resources are thrown at something all at once, the planning and preparation finished early, and after the initial 5,000 customers allowed by ERCOT were signed up, there was little for me to do. So I was assigned to help address collections of gas accounts in the Northeast.

Reliant Energy in 2001 not only operated as an electricity provider to residential, commercial, and industrial customers in Texas, but was also a provider of natural gas to customers in Pennsylvania and New Jersey. As part of preparing its deregulated electricity business, Reliant Energy decided to sell off its gas properties. This meant that Reliant Energy had to resolve or write off the outstanding balances on its gas customers; the company buying the gas properties would not take over the A/R. So, I found myself tasked to make deals to settle outstanding balances. I could make whatever deal I could to get the books closed in 90 days. The tricky part was, if and when word got around that Reliant Energy was making deals, it would be harder to collect significant portions of the debt. So, I decided to start on accounts considered hopeless. One customer, a prominent university in New Jersey, owed $800,000 and had not paid in over a year on the old debt (the account was closed but had an unpaid balance dating back to 1999). Everyone said that the university refused to even discuss the debt, and it was a waste of time to even try anymore. I thought about that, but decided that the amount certainly justified making an effort, and given my blank check, surely something could be arranged. So I called the contact person, and found a problem right away – the contact person noted on the contract had left the university and no one knew who handled gas contracts. So I just asked for someone in AP. I got a clerk, introduced myself and explained that I had an old unresolved balance, and I was just trying to get some information on the dispute. I made it clear that I was not expecting this individual to pay the bill, but wanted to see if I could find out what had happened. That led to a conversation with the AP manager, then up the chain until I spoke with a regent of the university. Now, regents don’t pay bills and frankly I am not sure how he got involved, but I do know that regents of a university have a lot of influence, and so I carefully explained how the balance was arrived at, I was careful not to make threats but did say I was trying to address the problem.

The next day, the mysterious contact representative for the university’s utility contracts called me back and asked for copies of the invoices in question. It turns out the school had closed a P.O. box and not forwarded the mail for our invoices, and no one had made sure the school got the invoices. Not surprisingly, the school would not pay bills without invoices, and wonder of wonders, two weeks after I sent the invoice copies, the whole $800,000 came in by courier.

I loved that day, not least because this was an account that – it was assumed – could not be resolved with full payment. Making sure of the situation rather than accepting assumptions that could have cost the company more than three quarters of a million dollars, was simple yet profoundly important.