Customer expectations require a leap to the digital utility

Digital advances are enhancing the customer experience across a range of industries, and raising customers’ expectations of their service providers. Utilities that are able to evolve accordingly and enhance their digital presence will meet customers’ expectations and reduce costs.

Those that cannot could fall out of favor with their increasingly active customers; they could also lose an opportunity to gain credibility with public utility commissions, which are already skeptical about utilities’ ability to change with the rapidly evolving electricity paradigm.

Change is already here in many respects. Consider that in the first week of November 2012, days after the landfall of Hurricane Sandy, the Twitter following of major Tri-State utilities such as PSEG increased by more than 200 percent. In January, Google purchased Nest, the maker of digital thermostats and smoke detectors, for $3.2 billion – 10 times its annual revenue.

Embracing digital and its benefits will transform the way utilities interact with their customers. The rise of several emerging trends will be a major contributor: customer-sited distributed generation, plug-in electric vehicles and new energy efficiency applications. Customers will require enhanced two-way communications and more data, there will be a greater desire to “get off the grid,” and utilities will need to respond to these needs by engaging more effectively and efficiently.

Using technology more effectively will of course result in opportunities to reduce cost and improve service. The function historically performed by a call center during an outage, for example, has changed considerably and will continue to do so. Live calls from customers might cost $3-$4 per call, but using interactive voice recognition (IVR), as the majority of utilities now do, can reduce that per call cost by a factor of 10.

By effectively harnessing a combination of social media and new technology platforms, the efficient digital utility could reduce the cost of interacting with its customers by an additional order of magnitude. With each technology upgrade, the utility not only reduces its operations and maintenance spending, it improves its level of service.

A fully functioning digital utility can pinpoint the cause and location of an outage faster and keep the customer better informed and less inconvenienced. Assuring such seamless interaction may be essential to long-term customer retention. As customers play an increasingly active role in the system – through self-generation, demand response, and energy efficiency – they will also be increasingly dissatisfied with mediocre experiences, especially given the massive improvements seen in other industries.

Likewise, impatient and cost-conscious public utility commissions will want to see that any rate increases are in the interest of aligning utility performance with the new paradigm, and not in any way the result of a utility seeking to perpetuate the “old way” of doing things.

To establish an engaging digital communication strategy or otherwise enhance its customer service experience, a utility will benefit from understanding its current state from both a cost and performance perspective. Identifying performance gaps is the first step towards best practice.

The utility industry is facing a host of challenges, and keeping pace with evolving customer demands is certainly front and center. The opportunity exists to make significant leaps by benchmarking current performance and leveraging existing technology to improve it; those that move quickly will gain an edge as the next generation utility is defined.

Author: Arun Mani is an energy and plug-in electric vehicles expert at PA Consulting Group. He is member of PA Consulting’s management group and an expert on business strategy and investment decisions. He specializes in assisting clients with complex “big bet” capital decisions regarding electric vehicles, new generation development and large infrastructure decisions. Over the past 17 years, Arun has advised utilities, regulatory bodies, investment banks and law firms regarding the risks and uncertainties associated with the technology, regulatory, financing, development or construction, and operations risks and uncertainties facing each decision.

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