Recently, on one of the listservs I follow, a question was asked about billing for multiple units served by a master meter.
There are two common ways of billing for multiple units, the Average Bill and Multiple Minimums methods. Let’s take a look at each of them.
Average Bill method
The Average Bill method is based on calculating a bill for a single unit using the average usage of all units. To do this, divide the total usage by the number of units served by the master meter and calculate a bill for the resulting usage. Then, multiply the bill for a single unit by the number of units to arrive at the total bill.
Multiple Minimums method
The Multiple Minimums method involves multiplying both the base charge and included usage by the number of units. To calculate a bill using this method, multiply the base charge by the number of units. Then multiply the usage included in the base charge by the number of units, deduct that usage from the total usage, and calculate a bill for the remaining usage. Finally, add the multiplied base charge to the usage charge for the total bill.
Is there a difference?
There can be, depending on your rate structure. If you have rates with uniform blocks, both methods yield the same result. However, if you have increasing or decreasing block rates, there can definitely be a difference.
If you are considering implementing either of these methods, I recommend performing test calculations before deciding on which method to use. If you are unsure if you should change from one method to the other, please feel free to e-mail me at email@example.com. Also, be sure your billing software can accommodate the algorithm you choose.
Utility Billing Mailbag
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You can ask your questions at the Mailbag page on my website and I’ll post the answers on my social media. So be sure to follow me on Facebook, LinkedIn, or Twitter.
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