Should Utility Companies Be More Like Broadband Providers?
Electricity is the ultimate commodity. Since gadgets and appliances work no matter where they plug in, it's nearly impossible for consumers to distinguish between different products.
But forward-looking executives say that utilities need to start marketing more personalized products and create different levels of reliability in order to stay relevant.
Instead of a one-size-fits-all service, utilities should offer a suite of products targeted at different customer segments, said executives at the Utility of the Future conference in Washington, D.C. last week. Much like telecom companies offer a variety of internet speeds, utilities could try to entice customers to pay more for higher reliability.
“Couldn’t you have a basic service that everyone gets and that’s priced the same? Then you could introduce additional services for additional price,” said Teri VanSumeren, executive manager of energy efficiency solutions at Consumers Energy. People already do this with their phone and cable pricing plans, she noted. "I don't think it be a huge leap for customers to go there. Culturally, it's a huge leap for utilities.”
A consumer might be willing to put up with 15 minutes, versus 10 minutes, of interrupted power service per year and get a slightly cheaper rate, said Hugo van Nispen, executive vice president at DNV GL. Conversely, a commercial customer could pay more for better reliability. Those sorts of contracts would allow a utility to prioritize its capital investments, but current regulations don't allow them to provide differentiated services, van Nispen said.
One challenge with offering different tiers of service is accurately estimating downtime, which can be caused by events beyond a utility’s control, such as storms. Also, the often-made analogy between today’s utility industry and telecom deregulation has its limits. Phone companies were able to add broadband internet and cellular phone to their offerings after deregulation, but consumers aren’t necessarily clamoring for a specific products and services from utilities.
Still, utilities can do more to learn customers’ priorities and map them to different pricing plan options, said VanSumeren. Talking about pricing plans that offer certain features, rather than using the traditional utility term “rates,” makes more sense to consumers. “They're not interested in kilowatt-hours. They're not interested in kilowatts. They're interested in pricing and what benefits they get for that payment,” she said.
Already, some utilities are trying to build customer profiles and introduce new services to them. Utility Pepco allows customers to create a monthly budget and will send them text messages mid-month to alert them when they are getting close to that limit. That’s proven to be effective in motivating consumers to conserve electricity, said Charles Dickerson, vice president for performance management and support services at Pepco Holdings.
Arizona-based Salt River Project totally revamped its customer support operation, which resulted in cutting the wait time on most customer calls from 10 minutes to less than 30 seconds. It’s also found consumers willing to try different rate plans: 30 percent voluntarily chose to go to time-of-use rates, and 17 percent of its residential customers are on prepaid electricity plans.
Users on prepay plans, which consumers can monitor with in-home displays, have reduced their consumption by about 12 percent, said Michael Lowe, associate general manager and chief customer executive for Salt River Project. Consumers can also get energy consumption information online, including weekly estimates delivered by text and reports on solar panel production.
"What we realized very early on when we deregulated is that we needed to appeal to the unique needs of each individual customer," said Lowe. That meant different rate plans and dedicated sales people for commercial accounts. "It's nothing that any other competitive business wouldn't do."
Email and text messages are becoming important channels to communicate notifications, such as demand response events. In the future, companies could tell consumers that there is a surplus of wind energy on the grid and that it's a good time to pre-cool their homes, said Dickerson. He also hopes to give call center professionals a different script depending on who's calling in. For instance, the utility is trying to get consumers to switch to paperless billing, but a customer who is interested in environmental protection would get a different pitch than someone who doesn't make that a priority, he said.
Meanwhile, if there's an outage, utilities could notify consumers and tell them when service will be restored, said James Steffes, Northeast retail regional president for NRG Energy. "We should all be more proactive," he said.
Many people in the utility industry believe consumers don’t really want anything different than what they already have, but consumer surveys show that’s not the case, said Patty Durand, Executive Director of the Smart Grid Consumer Collaborative.
“Consumers have not had choices when it comes to energy. We haven’t had the technology until just now to offer anything else,” she said. In a recent survey of 4,000 residential consumers, consumers said they want more renewable energy as part of the energy mix, and secondarily, time-of-use rates and home energy management systems.
Municipal utility Austin Energy makes customer profile information available to different divisions, which helps employees operate more like a for-profit business competing for customers.
“An upset customer costs you money, and when you’re able to quantify it to our customer care or field crews, then they can appreciate the need to understand what [the customers] want and how we need to provide them better service,” said Elizabeth Jambor, manager of data analytics and business intelligence at Austin Energy.
Photo Credit: Utility Co.'s and Broadband Co.'s/shutterstock
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