Unbilled revenue at utilities

A utility with millions of customers cannot read every meter on the last day of the month, so at any reporting date a large slice of the energy it has supplied is unbilled. Estimating it is one of the most significant judgements in a utility's accounts, and one that auditors test closely, because it depends on assumptions about losses, weather and customer behaviour. This guide explains the methods, works through an energy balance, and covers network losses, estimated bills, smart meters and credit risk.

By Muhammad Bilal, Chartered Accountant. Reviewed by Awais Jameel, Chartered Accountant. 3 minute read.

Short answer

Unbilled revenue at utilities is revenue for electricity, gas or water delivered to customers but not yet billed at the period end, because meters are read in cycles. Under IFRS 15, revenue is recognised as the energy is delivered, so utilities estimate the unbilled amount, either from each customer's consumption pattern since the last reading or by an energy balance: energy put into the network, less losses, less amounts already billed. Because the right to payment needs only the passage of time to bill, the balance is usually an unbilled receivable, subject to expected credit losses. In this guide's example, 100 GWh put into the network, with 8% losses and 60 GWh billed, gives unbilled revenue of US$ 4.8 million.

At a glance

When
Energy delivered but not billed
Standard
IFRS 15, revenue as delivered
Method 1
Customer consumption since last read
Method 2
Energy balance
Key estimate
Network losses
Presented as
Unbilled receivable, with credit losses
Unbilled revenue at utilitiesWhen: Energy delivered but not billed; Standard: IFRS 15, revenue as delivered; Method 1: Customer consumption since last read; Method 2: Energy balance; Key estimate: Network losses; Presented as: Unbilled receivable, with credit losses.KEY FACTS AT A GLANCEUnbilled revenue at utilitiesWhenEnergy delivered but notbilledStandardIFRS 15, revenue asdeliveredMethod 1Customer consumptionsince last readMethod 2Energy balanceKey estimateNetwork lossesPresented asUnbilled receivable, withcredit lossesTax BakersUnbilled revenue at utilitiesWhen: Energy delivered but not billed; Standard: IFRS 15, revenue as delivered; Method 1: Customer consumption since last read; Method 2: Energy balance; Key estimate: Network losses; Presented as: Unbilled receivable, with credit losses.KEY FACTS AT A GLANCEUnbilled revenue at utilitiesWhenEnergy delivered but not billedStandardIFRS 15, revenue as deliveredMethod 1Customer consumption since last readMethod 2Energy balanceKey estimateNetwork lossesPresented asUnbilled receivable, with credit lossesTax Bakers
Key facts at a glance, as set out in this guide.

Why does unbilled revenue arise?

Customers are billed on cycles, monthly or quarterly, after their meters are read or estimated. Energy delivered between the last reading and the period end has been supplied, so it is revenue under IFRS 15, but no bill has been issued. The utility must estimate it. The same applies to water and gas utilities and to telecoms operators with usage-based billing.

How do utilities estimate unbilled revenue?

  • Customer-level estimates: the days since each customer's last reading multiplied by its expected daily consumption, adjusted for weather and season, priced at its tariff.
  • Energy balance: the total energy put into the network in the period, less technical and non-technical losses, less the energy already billed, priced at the average tariff.

Many utilities use one method and check it against the other. The estimate is trued up when actual readings arrive, and the size of those true-ups is a useful test of how good the method is.

Unbilled revenue: an energy balance

In December, a distribution company puts 100 GWh of electricity into its network. Losses are estimated at 8%, so 92 GWh reaches customers. Bills covering December consumption total 60 GWh. The average tariff is US$ 0.15 per kWh.

December energy balance (GWh)December energy balance (GWh)100Energy intonetwork-8Networklosses-60Alreadybilled32Unbilledenergy
Unbilled energy is what customers used but have not yet been billed for.
GWhUS$ million
Energy put into the network100
Less losses at 8%(8)
Energy delivered to customers92
Less energy already billed(60)
Unbilled energy and revenue324.8

A one percentage point error in the loss estimate changes unbilled energy by 1 GWh, or US$ 0.15 million, about 3% of the unbilled balance. That sensitivity is why the loss assumption is disclosed and tested against historical data.

How are network losses estimated?

Technical losses arise as electricity heats wires and transformers, and depend on load and network design. Non-technical losses come from theft, meter faults and billing errors, and in some markets are very large. Utilities estimate both from historical patterns, network studies and audits of meters. Energy that is lost or stolen is not revenue, and energy delivered to customers who will not pay is revenue only if collection is probable when the contract is assessed, a judgement for customer groups with very high default rates.

How is unbilled revenue presented?

Because the utility has delivered the energy and only needs to issue the bill, its right to payment is unconditional except for the passage of time, so the balance is usually presented as unbilled receivables within trade receivables, rather than as a contract asset. It is subject to expected credit losses under IFRS 9, usually through the same provision matrix as billed receivables. See the IFRS 9 provision matrix.

What about estimated bills and prepaid meters?

When a utility sends an estimated bill because it could not read the meter, revenue is still based on its best estimate of energy actually delivered, not on the amount billed; the difference is adjusted in the receivable. Customers on prepaid meters pay in advance, so their unused credit is a contract liability, recognised as revenue as they consume energy. Smart meters that read consumption remotely reduce the estimate, though they do not remove it for customers not yet connected to them.

How does US GAAP compare?

ASC 606 has the same requirement to recognise revenue as energy is delivered, and US utilities make the same estimates, often disclosing unbilled revenue separately. See power and utilities accounting and IFRS 15 revenue.

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Questions people ask

What is unbilled revenue at a utility?

Revenue for energy delivered to customers but not yet billed at the period end, because meters are read in cycles.

How do utilities estimate unbilled revenue?

From each customer's consumption since the last reading, or by an energy balance: energy put into the network, less losses and amounts already billed.

Is unbilled revenue a contract asset or a receivable?

Usually an unbilled receivable, because the right to payment needs only the passage of time to bill.

How do network losses affect unbilled revenue?

Higher estimated losses mean less energy delivered to customers and less unbilled revenue; lost or stolen energy is not revenue.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: IFRS 15 Revenue from Contracts with Customers
  2. IFRS Foundation: IFRS 9 Financial Instruments

Rules and fees change. If you are reading this long after October 8, 2026, confirm the figures with the source before you rely on them.

Power and renewablesPower and utilities accounting: the key issuesIFRS 15IFRS 15 revenue from contracts with customers explainedIFRS 9The simplified approach: a provision matrix for receivables

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