Utilities race to reach the customer

Customers also consider alternatives, third parties

Phil Carson | Apr 09, 2012


The "customer experience" is a two-way street in more ways than one. And creating a compelling customer experience has become a horse race of sorts. I'll explain.

Enlightened utilities often engage in listening to understand their customers, their level of knowledge and interest in knowing more, participating more, managing more—all in order to make the utility-customer, supply-load relationship more dynamic  and responsive. The results reflect that utilities can be adept at meeting the expectations of a savvy customer base that increasingly demands more from an industry that has done its job so well that few understand what's behind flicking a light switch.

That said, and American ingenuity being what it is, the amount of energy and money being expended on alternatives to centralized power also means that utilities increasingly will deal with customers who seek new terms for that utility-customer relationship. From rooftop solar power generation with net metering to military bases, hospitals and universities seeking microgrids to commercial and industrial efforts at distributed generation to communities pursuing municipalization, many customers increasingly seek independence from the centralized power model.

In that sense, the "customer experience" might also be viewed as the utility experiencing the customer—and not just those customers seeking to improve the relationship, but those seeking to leverage it to their own advantage.

We've run a number of columns that treat both concepts. So as various parties in the centralized power industry meet in Fort Worth this week at the AGA/IEE Customer Service Conference, it's good to see a few new-ish ideas front and center on the agenda, in addition to the nuts-and-bolts issues. (Full disclosure: Energy Central is a co-sponsor of the event.)

"The business landscape for utilities is shifting rapidly," according to a teaser for today's opening general session. "Whether it's price pressure, the need to develop new revenue sources, managing growing customer expectations or threats of disintermediation, now is the time to create customer relationships that are partnership-focused."

Another general session is devoted to the notion of customers as "co-creators of value" in a relationship that is "proactive, mutually beneficial and collaborative."

A third general session captures some of the urgency around this new utility pursuit in its title, "The Customer is Already Smart—And Getting Smarter!" The abstract notes that digital communications in general and industry rumblings about "smart grid" in particular have raised expectations, lofty ones that need to be met.

The notion that "click to chat" might more flexibly respond to customer queries, reduce customer effort in obtaining answers and reduce call volumes to the utility is explored in another session with Reliant. A session titled "Customers Are In Charge of the Relationship" promises to offer insights into Duke Energy's "Youtility" customer engagement program. Outage communication that leverages the mobile Web is on offer from Northeast Utilities.

In summary, the stodgy old power industry appears to be making some adroit moves to catch up with its customer base after a century of extending electricity to all corners of the country and doing such a good job of delivering it at low cost that no one cared about the relationship until now. Sure, utility customer service folks will say that these efforts have been ongoing for some time and there's some truth to that perspective. But the topics at this week's AGA/IEE customer service conference certainly reflect an urgency that only a couple years ago seemed to be missing. In the urgency category, it appears that a horse race of sorts is on, with utilities racing to embrace their customers just as those customers and third parties are busy two-timing with alternatives. What a fascinating picture.

Below I've simply appended links to several of our most recent customer-related columns for your convenience.

If engaging and informing your customers is important to you, you might profit from reading "Ameren Missouri: From CSR to 'Energy Advisor.'" Another column in this vein—"Biggest Energy Saver: Lessons in Consumer Engagement"—documented that giving away large, expensive things such as electric vehicles and smart appliances has a way of capturing customers' imaginations.

If you're looking to expand your knowledge of one of the avenues leading to "disintermediation," then you might enjoy "Connecticut: In Search of Microgrids."

Two utilities with experience in aligning their businesses and organizations with customer interests told their story at last month's EnergyBiz Leadership Forum and in the column, "SMUD, CenterPoint: From Data to Customer Interests."

Lastly, for today, the Smart Grid Consumer Collaborative has been providing a steady stream of insights into that rare breed, the customer, as discussed in "Fact: Utility Customers Care About More Than Cost."

Phil Carson
Intelligent Utility Daily





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It is all about customers

Great post.  The horse has left the barn for some but not all.  The industry really must grapple with the notion that it is all about the customer.  Regulators and shareholders are influential and important, but the rubber hits the road with customers.  If utilities do not produce a relevant product that creates value for customers, they will go elsewhere.  Moreover, those customers with options now or in the near future will be large commercial and industrial customers whose departure will have significant impacts on the allocation of system costs across the customer classes.

The difficult part for utilities or any organization facing these type of market shifts is internal culture.  It takes vision, leadership, and many years to change an organization's trajectory.  Moving from hard asset knowledge and expertise to the softer side of the people equation is no small feat, particularly for the 30 year exec who is a T&D expert. 


Unintended consequences

The upshot to your thought on C/I customers bolting the IOU is that as system costs rise due to upgrades, modernization, etc. and large C/I customers seek alternatives, that big cost increases will fall on the dwindling customer base (read: residential users).

That means that utility failure to solve these issues pronto will fragment and chip off the customer base, leaving homeowners with much higher bills. (Read: discontent.)

That's why I think utilities have no choice but to seek regulatory reform for a new business model that isn't predicated on sales of kWh and would accommodate many forms of self-sufficiency as potential assets.

That's four cents now.

Regards, Phil Carson  

Need To Regain the TRUST Good Will Card

I’m afraid that the horse has already left the barn. Utilities that are yelling at customers to come back as they are running away does not seem to be working very well. So now the question becomes how do you get them to return? This is the same situation which happened when industrial customers had to be attracted back to the utility barn after gaining deregulated freedom in the 80’s. For a short time, they enjoyed their newly won freedom but they soon got hungry or tired of the wind in their face which was causing chaffing. Not all will return because some will cherish their freedom to choose more than finding an easier ways of do things. The bottom line for utilities is to learn from the past as to why customers left and then figuring out how to get as many as possible to return. You need to understand what took them away and then figure out what will win them back. The utility industry’s “GOOD WILL CARD” has played out or is very tarnished if non-existent. The once widely held believe that the utility was the energy expert is no longer commonly held. Thus, the gate is open and the horse is running away. The industry must now figure out where the hockey puck is headed and devise new products to regain respect as the undisputed expert who knows and understands the customer’s needs as well as being the one who will act on the customer’s behalf for their benefit. Utilities must rebuild the “GOOD WILL CARD” of “TRUST” and that is a long term project. He who gets there first and holds that regained “TRUST” stands to change the market dynamics. Holding and using energy information is very personal and moves you from an outsider to an intimate partner. You become intertwined in people’s lives which they will allow if they “TRUST” you. That is the only way to reach the customer on their terms. Richard G. Pate Pate & Associates, Principle rgpate@pateassociates.com www.pateassociates.com Follow us on Twitter: @pateassociates Connect with Us on LinkedIn: Richard G. Pate Check out our blog for all the latest news: pateassociates.wordpress.com

Thanks for the comments

A good start to the day, thanks to our correspondents.

I see a multi-pronged strategy built on segmentation. As John Cooper suggested, prioritizing your customers is important, as is segmenting them and immediately offering those willing to engage a few value propositions beyond generic electrons at reasonable cost. Frequent flier miles? Tradeable for a smart thermostat? Plus opt-in dynamic pricing? A large swath of the disengaged will remain passive customers who may not like rate increases, but won't do anything about it.

The other side, as Richard Pate described, is that regulated monopolies —perhaps due to their structure as such or because they became arrogant—have a long history of resentment building up to mistrust. Happy talk about "partnerships" isn't going to win friends and influence neighbors. You've got to offer value to attract attention, let alone gain trust.

Co-ops and municipal utilities have the business model advantage of customers who are owners. IOUs are on the hot seat as innovation and micro-power becomes more widely available, along with the energy efficiency projects and behaviors that cut consumption. Yes, the guzzlers will always be with us, happy to pay massive peak costs, but that ethic already is old and dying. A generational shift will make over-consumption and waste a socially repugnant value.

I think I've spent my two cents now.

Regards, Phil Carson  

Act Today Like Your Customers Could Fly Away

Utility managers would do well to set aside the notion of monopolies and "captive customers," even drop "ratepayers" from their vocabularies, for those days are fading into memory. The fact is that new technologies are offering compelling substitutes to grid power, and the quantity and quality of those substitutes will only increase in time.

Under such an imminent threat to revenue, it makes sense to prioritize customers, creating a list of must-keep-at-all-costs customers, understand them better than they understand themselves, identify solutions to their problems, and offer services that anticipate their needs. In the face of such compelling value and attention, some customers may still choose to take on more indepedence from the grid, but they are far more likely to see their utility as an important part of their energy future.

I believe acquistion of competitive market skills is a critical strategic imperative for utilities, and I hope you continue to write good articles like this - they are very valuable to your readership!

John Cooper, Partner, NextWatt Solutions