Utilities Must Become Many Things or the Customers Could Become Few

Contrary to widely held opinions, the power utilities of the future will not need to adopt a new business model. They will need to embrace many to survive.

A recent report by accounting and consulting firm PricewaterhouseCoopers (PwC) forecasts that the transformational forces facing the utility industry–from storage to self-generation to advanced metering capabilities–are giving a power to customers comparable to what they already have in retail, media and travel. If utilities adopt a wider, more responsive stance in customer service, PwC argues, they can add value and new business streams.

“The utility industry will need to become agile at living within multiple business models as the current traditional model is not being wholly displaced; rather, it is being complemented by new positioning and pricing models that reflect the future shape of the market, realities of competition and the preference of customers.

“Successful companies will frame their “Ëœgo-to-market’ strategies based on market foresight rather than simple backward-facing insight,” the report predicts. “They will be adept at converting market knowledge and intuition into strategies that signal a differentiable customer experience, as well as produce enhanced revenue streams and an expanded customer relationship.”

The minefields of this new competitive battlefield are many. For instance, utilities could see their retail component “subsumed” by data service and telecommunication providers as well as third-party brokers. Tech giants such as Apple, Google and Samsung surely will launch offensives into commanding the “connected home.”

One viewpoint from the PwC report comes from Stephen Mikkelsen, executive general manager of energy markets for Australian utility AGL Energy. His experiences in the Australian and New Zealand electricity markets were not unlike what is seen in North America, where the focus 20 years ago was primarily on maintenance of a reliable system.

The customer experience was largely ignored, Mikkelsen admitted. Utilities now should shift from processes that just solve internal problems to ones that, to quote an AGL mantra, “make it easy.”

“To be truly customer-centric you must start by obsessing over customer experience,” he said. “If there was only one change you were allowed to make it should be to relentlessly design your systems, policies, procedures and processes from a customer’s perspective.”

Many customers in the commercial and industrial segments already are highly engaged, PwC noted, so residential markets surely will be moving in that direction.

Power utilities also can learn from the transformation of telecom companies which morphed from fixed-line providers to offering mobile, Internet and entertainment services over the past two decades, the report detailed. Traditional players in that sector widened their offerings but also “played to the strength” of their fixed-line infrastructure.

“Power utility companies are able to play to similar strengths,” PwC writes. “Being the incumbent provider of the grid connection with the security that brings to customers gives them a strong central position in the new energy ecosystem on which to develop relevant new and wider customer propositions.”

Joseph Nigro, CEO of Exelon unit Constellation Energy, concluded that a “wait and see” approach is not an option. The “path forward,” he said, is a “balance of grid power, centralized generation, smart solutions and distributed technologies” that evolve with customer demand.

“We envision a future where new customer-sited technologies co-exist with the centralized generation and delivery systems,” Nigro said.

To read the entire report, go to http://www.pwc.com/gx/en/oil-gas-energy/pdf/pwc-customer-engagement.pdf.

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