Businesses in Germany have a wide range of options when it comes to billing for their services. In addition to flat-rate fees and subscription-based models, the so-called meter-to-cash (M2C) billing model has grown more popular recently. This increased popularity is particularly notable in the energy supply industry, as a result of a change in the law in 2023.

In this article, we'll explain what meter-to-cash is, how it works and the benefits it offers. We'll also look at the role the process plays in Germany and how businesses can offer it to their customers.

What's in this article?

• What is meter-to-cash?
  
• Smart meters in Germany
  
• How does meter-to-cash work?
  
• What are the advantages of meter-to-cash billing?
  
• How can businesses offer meter-to-cash?
  

What is meter-to-cash?

Meter-to-cash, also commonly known as M2C, is a billing model in which customers pay only for the services that they actually consume. The model encompasses the entire process from data collection to invoicing and is mainly used in industries where consumption is regularly measured, such as:

• Energy and water supply
  
• Telecommunications
  
• Mobility and transport
  
• Rental services
  
• Cloud computing
  
• Software-as-a-Service (SaaS)
  
• Streaming
  

Smart meters in Germany

In Germany, the meter-to-cash business model plays an important role in the energy sector. It has become particularly important since the introduction of a federal act focusing on digitalising the industry. The law was passed in 2023 and aims to increase the use of intelligent energy meters, also called smart meters.

Smart meters are meant to make energy use more efficient, relieving the strain on the power grid by reducing energy consumption during peak times and distributing peak loads evenly. Unlike analogue meters, a smart meter not only displays the current meter reading but also the actual energy consumption and usage time.

To accelerate the widespread introduction of smart energy meters, the federal government has also adopted the Metering Point Operation Act (MsbG). In the future, the installation of smart meters will no longer require approval from the Federal Office for Information Security (BSI). This is because manufacturers now meet all necessary requirements for data security and data protection.

In addition, smart meter users should benefit from dynamic rates. Customers will have the option of purchasing energy when it is generated with a high proportion of renewable sources and is therefore cheaper.

When is the use of a smart meter mandatory?

According to the law, the installation of smart meters is mandatory as of 2025 for all households with annual electricity consumption of more than 6,000 kilowatt-hours or photovoltaic systems with more than 7 kilowatts of installed capacity. By 2030, all affected households will be equipped with smart meters. Households with lower electricity consumption can also opt to install smart meters voluntarily.

Cost of smart meters

The annual cost of smart meters is fairly low for the customer, as the grid operators must cover a portion of the cost. The upper limit is €30 for consumption below 6,000 kilowatt-hours and €40 for consumption between 6,000 and 10,000 kilowatt-hours. Those with heat pumps or photovoltaic systems with an installed capacity of up to 15 kilowatts pay a maximum of €50 per year for their smart meters.

How does meter-to-cash work?

The meter-to-cash process can be divided into several phases.

Measurement

Any usage-based billing must be rooted in precise measurement of the customer's consumption. Meter-to-cash billing is usually measured using meters that continuously record consumption.

Mechanical meters measure consumption through physical revolutions or other mechanical mechanisms. Electronic meters, on the other hand, offer greater accuracy and can record consumption digitally. They are easier to read and often offer the option to save and transfer data automatically.

The smart meter is the most modern form of meter. It can measure consumption in real time and automatically transmit the data to businesses, making manual reading unnecessary.

Data processing

In the second step of the meter-to-cash billing process, the data measured is forwarded to the network operators and energy suppliers. This happens automatically with a smart meter, which consists of a digital electricity meter and a communication unit, the smart meter gateway. The smart meter's communication unit acts as a secure interface between all parties involved.

Section 3 of the Metering Point Operation Act outlines detailed regulations on who can receive data for specific purposes and when this data must be erased. The data can only be transmitted for applications that are absolutely necessary for the energy industry. Metering point operators, who forward the previous day's meter readings daily, are responsible for following these regulations. Due to the high sensitivity of consumption data, personal data must be anonymised or pseudonymised, pursuant to Section 52 (3) of the Metering Point Operation Act.

The data is then checked and processed. Not only is the measured consumption taken into account, but also the rate structure and the individual pricing model. This information is then transmitted to the billing system.

Invoicing

A meter-to-cash invoice usually consists of various line items.

• Consumption-dependent costs: The costs for consumption are calculated according to the agreed rate. For example, an electricity bill will be calculated according to a fixed price per kilowatt-hour.
  
• Base fee: Some providers also charge a base fee that is unrelated to a customer's actual consumption.
  
• Special rates or discounts: If a customer has a special rate or is entitled to a discount, this will also be included in the bill.
  
• Additional fees: Depending on the contract agreement, additional costs might apply, such as service, setup, or network usage fees.
  

In modern meter-to-cash processes, invoicing is usually automated through the use of software solutions like Stripe Billing. With Billing, businesses can reduce manual processes and tailor their invoicing to the customer – from simple recurring billing to usage-based billing. Businesses can also manage their accounts and access detailed financial and sales reports directly in the dashboard.

Payment

After the invoice has been sent to the customer, the final step of the meter-to-cash process follows: payment. To ensure the smoothest payment process possible, businesses can find it useful to get support from third-party providers. With Stripe Payments, for example, businesses can offer their customers more than 100 different payment options and a fast one-click checkout.

What are the advantages of meter-to-cash billing?

The meter-to-cash billing model has numerous advantages for customers and businesses alike. Let's look at some of the most important benefits.

Advantages for customers

• Transparency: With meter-to-cash, customers have a precise record of their consumption. They can view their current consumption at any time and reduce it if they wish. In addition to greater awareness, this high degree of transparency has another advantage: customers do not have to worry about businesses issuing incorrect invoices.
  
• Cost savings: Through detailed insight into their own consumption and the ability to adjust consumption behaviour in a targeted manner, customers can increase their energy efficiency and save money in the long term. Dynamic rates also make it possible to purchase electricity at lower prices when renewable energy is more available.
  
• Automatic reading: Smart meters transmit consumption data automatically. This reduces reading errors and also means less effort for customers, as they don't have to schedule meter reading appointments or wait for technicians. Plus, the cost of manual readings is eliminated.
  
• Security: Data transmission via smart meters is usually encrypted and subject to strict data protection regulations. This means that customer data is well protected from unauthorised access or manipulation.
  
• Control: Since customers have the opportunity to view and control their consumption data, discrepancies in billing can be identified and corrected more quickly.
  

Advantages for businesses

• Error reduction: Automated systems and the digital recording of consumption data minimise reading and calculation errors. This means meter-to-cash promotes reliable data processing and invoicing.
  
• Cost savings: The meter-to-cash process automates many steps, such as meter reading, data processing and billing. This reduces manual effort and can lower operating costs.
  
• Real-time data: By collecting real-time consumption data, businesses gain valuable insights into customer behaviour. This data can be used to optimise product offers, rates and services. In addition, businesses can better adapt their capacities to demand and refine their resource planning.
  
• Compliance: The meter-to-cash process helps businesses meet all relevant legal requirements and regulations, such as those regarding metering accuracy, data protection and billing processes.
  
• Customer satisfaction: Transparent billing, flexible rates and a convenient process for customers can increase customer satisfaction. For businesses, this can mean high customer loyalty and long-term contractual relationships.
  

How can businesses offer meter-to-cash?

Data collection

Businesses in Germany that want to offer meter-to-cash billing to their customers must first ensure reliable data collection. What consumption data is measured depends on the business model. It can range from clicks and downloads, to minutes and bandwidth usage, to kilowatt-hours of electricity. In some cases, such as energy metering, additional metering equipment is required and must be installed at the customer's premises.

Pricing model

There are various pricing models that businesses can use for billing. One option is a tiered pricing structure: those who use more pay either less or more per unit, depending on the model. Another is unit pricing, where each unit consumed costs the same amount. When setting prices, businesses should consider customer value, as well as competitor pricing.

Invoicing

Once the consumption levels have been processed, the business can issue an invoice based on the chosen pricing model. Businesses must have an adequate software solution for invoicing in a timely and accurate manner. Such software solutions should ensure that the data is processed securely and in compliance with data protection regulations. To make the best use of the technical infrastructure, businesses should train their employees to use the systems.

Outreach

In addition to internal communication, the implementation of meter-to-cash also requires external communication. Customers should be provided with comprehensive information – including the basic meter-to-cash process, privacy, billing and potential savings. Finally, customer portals or mobile apps can provide easy insight into consumption at any time.