Distribution efficiencies 'versus' customer engagement
Focus on utility side or customer side?
Today let's consider another tack based on last week's much-discussed column, "Change the Grid, Not the Customer?"
Obviously, that headline as well as today's offers a false dichotomy. But if it seduced you to read this far, then join me as we discuss the often complementary benefits that engaging the customer offers. In today's column, "customer" refers to residential customers, not commercial/industrial customers.
Historically speaking, I'd agree that taking care of what's under the hood first might have been smoother. Lurching into widespread metering via the stimulus funded initiatives should have been accompanied by greater utility sophistication on accompanying meters with value propositions for customers. And a better sense of where utility and customer interests intersect.
Widespread metering without a solid value proposition such as dynamic pricing has raised questions in the minds of both customers and regulators. After all, the social compact that resulted in regulated monopolies now has to change and keeping end-users ignorant won't work. Energy in general and electricity in particular is too important to the economy to remain a black hole for consumers. They don't need to be pricing experts to understand the 24-hour cost of electricity and make slight adjustments to work with its implications.
Further, the notion that American greatness rests on endless consumption of natural resources with no concern for waste and harmful byproducts is a 19th century illusion at best. Let's get real. And it's true that if constraints on new generation and caps on emissions are societally driven, then customers should cooperate with the conditions they impose on utilities.
Let's also vanquish the straw man that involving the customer equates to "rationing." That's a canard, pure and simple. Direct load control programs rarely if ever are mandatory; the customer chooses to join them. Same with dynamic pricing and demand response. Rotating brownouts, due to capacity constraints in peak periods, obviously are involuntary at the customer end. That's sudden, emergency rationing that these other programs are designed to preclude.
So, why engage the customer? Why "bother" them? First, customers who wish to be engaged are a valuable resource and self-selecting. Two motivations appear to drive their interest: managing use and, therefore, costs, and contributing to the greater good by being more environmentally responsible. Through their elected officials they've asked for cleaner air and more sustainable energy sources. Many would like to participate in achieving those objectives. Second, metering can serve utility-side efficiencies such as voltage optimization while they also serve outage management, dynamic pricing and customer-side energy efficiency options.
In last week's column, "Change the Grid, Not the Customer?" we spoke to Steve Collier, who aside from being an IEEE smart grid expert also toils as vice president for business development for Milsoft Utility Solutions, which offers utility side systems. Afterwards I spoke with Joel Gamoran, director of regulatory affairs for C3 Energy, which offers customer-side energy efficiency applications.
Gamoran suggested that the customer side offers many benefits that go beyond his company's commercial interests. C3 offers utility clients a white-labeled service by which utilities' end-users can receive efficiency options based on the level of detail about their home and energy use that they decide to share.
(C3 can segment the customer base and offer tailored suggestions based on the customer's motivation, location, factors about their home, etc. We all know several companies that compete in this space. In C3's case, they offer a utility-branded, online portal for individual customer accounts that compares current actions against historical use, plus savings are rewarded by points redeemable at local and national retail outlets.)
Gamoran pointed out that perhaps 30 states mandate energy efficiency (EE) programs that direct utilities under their jurisdiction to cut perhaps 1 to 2 percent of annual electricity consumption as the least-cost path to deferring expensive capital investment in new generation. But he argued that traditional EE programs tend to be costly for both utility and customer and don't scale well.
In contrast, the software-based customer engagement approach can achieve as much as a 6 percent drop in individual usage, meaning that only 25 percent of a utility's customer base would be needed to achieve, say, a 1.5 percent overall drop in electricity use.
But the bigger picture is far more important to utilities. J.D. Power and Associates has documented increased customer satisfaction from utility engagement practices. And that firm found the vast majority of utility customers were interested at some level in managing their electricity use and costs, some for the money, some for the environmental benefits.
So, why "bother" the customer? On one level, the proliferation of smart meters had best be followed by a solid value proposition. On another level, last week's column touched on "disintermediation," the notion that if utilities don't establish a relationship with their customers, someone else will. By the time utilities come knocking, those customers may well be long gone.
Intelligent Utility Daily