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How Does EDI Work for Utility Bills?


We often receive questions about integrating our energy management software in an EDI utility bill invoicing/payment process. Because EDI can be complex, we’re devoting this post to an explanation of EDI for utility bills.

NOTE: If you’re wondering if electronic utility bills are right for your organization, read this earlier post.

First, EDI does not refer to all electronic utility bill information sharing. Rather, EDI refers to a very specific closed-loop invoice and payment exchange between the vendor and the customer. There are a lot of EDI standards out there, but EDI 810 is the standard for invoicing and paying utility bills.

EDI History

EDI was originally developed in the 1990s by the National Institute of Standards and Technology (NIST), an agency of the U.S. Department of Commerce. Today, there is a parent standard ANSI X12. ANSI stands for American National Standards Institute. Another important player in the development and maintenance of EDI standards relating to utility data is the Utility Industry Group (UIG). This is a group of utility industry experts that meets periodically to review and recommend updates to the existing standard.

One of the problems with EDI 810 is that it is a rather loose standard. As a result, not all utility companies implement it in the same fashion. This is understandable considering the history of the standard. At the time of its development, there were perhaps a dozen or so large vendors that worked together to fashion the standard.

Each vendor had its own billing system in which the company was heavily invested. None of the companies desired to make sizeable investments to change the way they were creating utility bills in order to meet the new standard. So the resulting standard was intentionally designed to be flexible enough to accommodate a number of different approaches. That lack of standardization can create challenges for EDI implementation, especially with multiple vendors.

EDI Process

The first part of the invoice process is transmission of the EDI 810 invoice by the vendor. The typical EDI process has several requirements. One is the EDI 997 Functional Acknowledgment. After the vendor transmits the EDI 810 invoice, the recipient is required to post an EDI 997 as a response. This confirms that the file was received and was intact. This is the vendor’s proof that the bill was received.

Note that these sorts of transmissions will often occur over a Value Added Network (VAN), which is a kind of commercial internet site that provides a higher level of security and control than might be available on the public internet.

Once the bill has been received, the actual funds transfer is often coordinated through the Automated Clearinghouse (ACH) system. A required EDI 820 Payment Order/Remittance Advice (an electronic document that specifies all pertinent elements of the electronic transaction) may be effectively wrapped in the ACH banking transaction. The EDI 820 closes the loop on the transaction, providing verification of the completed electronic exchange.

In summary, here is a sample EDI workflow process:

  1. Vendor generates the EDI 810 invoice.
  2. Vendor transmits the invoice via the VAN.
  3. Recipient (or proxy) returns the EDI 997 receipt.
  4. Proxy delivers the EDI 810 invoice to the customer.
  5. Customer imports the relevant EDI data, often into an energy management software application.
  6. Customer passes appropriate data to the internal A/P system. Customer also generates the EDI 820 electronic payment stub and payment via one of several methods (e.g., ACH) to the utility company.

The utility company ought to have an implementation guide that spells out exactly how the 810 transaction will be implemented through their billing system. The guide might easily be a hundred pages long. It will explain what the EDI codes mean and what the billing conventions are.

Integration of Energy Management Software

Energy management software can play a valuable role in the EDI process. For example, EnergyCAP energy management software can import the EDI file data and then audit the bills automatically before the data is even transmitted to the customer A/P department.

The software can be configured to integrate with existing departmental approval processes. When the bills have been audited and approved for payment, they can be exported from EnergyCAP to the accounts payable system with any required file formatting and general ledger data for each transaction. In this case, EnergyCAP essentially becomes a smart front-end for the customer accounting system.

Third Party EDI Services

Because of the complexity involved in managing EDI communications, some companies prefer to work with an experienced third party provider. Essentially the provider is a middleman between the business and the utility. The middleman receives the EDI invoices, formats them in the customer’s preferred file format, sends the 997 confirmation, and even creates an image of the bill for archive purposes. Third party services can be very valuable, especially if your organization is working with multiple EDI vendors, each with different processing requirements.

Many EnergyCAP clients subscribe to EDI services. For those clients, the low per-bill fee is well worth the cost when balanced against the challenges of dealing with multiple EDI vendors and file formatting requirements.

EnergyCAP has a service called Bill CAPture, which converts PDF, XLS, TXT, CSV, and/or EDI file formats, and even your paper bills, to a format that can be electronically imported into your EnergyCAP database.

Want to learn more?