by Betsy Loeff, contributing writer
Utilities may be in the business of selling gas, water and electrons, but many experts think environmental concerns and capacity constraints are prompting utilities to push “sales” in a different direction. It’s time to strongly boost conservation, which means utilities must increase sales efforts around resource-management services. And, since conservation can’t succeed without the help of consumers, utilities have a huge educational job ahead.
The dry, power-hungry future
Conservation is important for all commodity types, but it’s especially vital to electric and water utilities. Scientists working with the Intergovernmental Panel on Climate Change recently published a report stating, “Climate projections provide abundant evidence that freshwater resources are vulnerable.” Declining rainfall, decreases in snow pack — a winter storage reservoir for fresh water — and contaminated runoff are the reasons behind water shortages, the scientists note. “Globally, the area of land classified as “very dry” has more than doubled since the 1970s,” they add.
On the energy front, the U.S. Energy Information Administration expects a 30 percent surge in demand for electricity by 2030. That growth in demand would be even higher without implementation of anticipated building codes, appliance standards and market-driven consumer incentives, according to a report produced this year by the Edison Electric Institute and the Electric Power Research Institute.
And, while demand is growing, so are carbon concerns. Both presumptive candidates for the U.S. presidency favor cap-and-trade carbon regulation. That, too, puts pressure on utilities to cut consumption or, at least, help customers do it.
Smart utilities will get in front of this trend and “consider it a great opportunity to become a commodity advisor,” says Richard Charles, vice president of client development at Alliance Data, an outsourcing firm. He sees electric utilities positioning themselves as organizations that can help people “use energy smartly” and lessen carbon footprints.
At your service
Such positioning means utilities shift from being commodity sellers to being service providers. According to Mary Jo Bitner, professor of marketing at Arizona State University’s W. P. Carey School of Business, moving in that direction is going to require changes in behavior on the part of both the utility and its customers.
Bitner, who is a nationally recognized expert on service marketing, says customers will have to become “co-producers” of energy-management services. “Co-production is a huge concept,” she says. “It can extend all the way from conceptualization and design of a service through delivery and consumption of that service.”
As its name implies, co-production means that consumers take some responsibility in the creation of value that a service delivers. Bitner points to education as an example: “Students won’t get any value out of education unless they get involved,” she says. It’s up to them to learn what the teacher presents.
Education will come into play when utilities ask customers to co-produce energy- or water-management services. According to Bitner, utilities will need to teach customers what to do, how to do it and what the benefit will be. “There has to be benefit to the customer” in co-produced services, she adds. “You’re asking the customer to take on additional work.”
In a recently published textbook Bitner co-authored, she and her colleagues mention several utility examples of the new information — and effort — consumers face. For instance, they note, San Francisco-based Pacific Gas & Electric now has “an online tool that shows customers how their personal energy consumption is tied to greenhouse gas emissions.” In the Carolinas, they continue, Progress Energy is employing devices that monitor the energy consumed by individual appliances, as well as the energy costs. This allows consumers to immediately see how much they’ll save once they shut the appliances off.
Alliance Data’s Charles notes that such technology could raise the number of calls to customer-contact centers, and it will bring in a different type of call than representatives now handle. He sees customers, “wondering what a ‘cooling degree day’ means, or asking how they can affect their usage.”
He adds that utility workers who staff the phones are “relatively savvy users of energy” who “know the difference between a kilowatt hour and a kilowatt.” But, he says, those in the know are the minority.
Bitner believes that once utilities start asking customers to take a more active role in managing consumption, they’ll need to shift focus from sales to coaching. “A lot of the innovative programs utilities can offer require investments in customer education and incentives to get customers to change their behavior,” she concludes.
Betsy Loeff has been freelancing for the past 15 years from her home in Golden, Colo. She has been covering utilities for almost four years as a contributor to Utilimetrics News, the monthly publication of Utilimetrics (formerly the Automatic Meter Reading Association).