TEPCO adopts customer-centric approach to Japan’s competitive electricity market

Tokyo Electric Power Co is building its new business model around the needs of its customers.
Published: Wed 01 Jun 2016

We wrote recently about Japan’s electricity market deregulation and how it is opening doors to some much needed innovation especially when it comes to customer service. [Japan’s deregulation: When catastrophe leads to innovation in a stagnant energy market.]

Since the Fukushima accident, the country has been forced to import costly natural gas for electricity and these prices are being carried by customers. But, this could now change thanks to the liberalisation of the residential electricity market.  Increased competition between utilities and new entrants from other industries, keen to snap up new market opportunities, is set to boost innovation and bring down exorbitant rates.  

Hiro Yamaguchi, head of international strategy at Tokyo Electric Power Co (TEPCO), told Engerati in an exclusive interview ahead of Asian Utility Week that this competition already threatens their customer base. He explains: “The market  liberalisation poses a big challenge for utilities like ourselves. In the past, incumbent utilities had to ensure that they provided customers with a stable power supply. Now, it is more complex. The competitive nature of the market forces more conservative utilities to improve their marketing expertise especially in the residential sector.”

Creating new revenue streams and partnerships

TEPCO has recognised the need for more innovation and has, in response, started looking at other revenue streams. “We can’t rely on electricity alone for revenue so we realised that we had to branch out. We plan to offer  bundled services, in addition to electricity.”   

The company started looking for partnerships with mobile phone companies last year  in an attempt to reach out to existing and new customers. Mobile companies, with their large sales networks, will give TEPCO the ability to reach a broader customer base more efficiently. The strategy here was to offer discounts to customers who bundle their services. The partnership could see customers receiving discounts on their electricity tariffs if they sign up with their mobile phone partner and customers will be able to sign up for TEPCO services at  its partner’s storefront. Mobile carriers will benefit from these deals as well. For instance, telecommunications operators KDDI and Docomo have started offering discounts for bundled mobile and fiber-optic Internet services. By adding electricity to the mix, its customers would be able to lump their bills into one convenient monthly payment.

In the UK, which started liberalizing electricity sales in 1999, companies offer various options for combining power, mobile, landline and gas bills into one plan. 

TEPCO is also putting into place a rewards system to encourage new customers to join and to retain existing ones.

Says Yamaguchi: “TEPCO Group will provide a variety of services and plans to their customers. Customers will be able to select an option suited to their lifestyle needs.”

According to Yamaguchi, TEPCO views the deregulation as a great opportunity to transform from a ‘utility expert’ to a ‘general energy provider’. “ TEPCO needs to continuously gain trust from its customers and always needs to be the company which pursues the creation of new value. To achieve this, TEPCO will provide a stable supply of electricity and strengthen pricing power by purchasing in a moderate power procurement. Moreover, TEPCO will provide high value-added services not only in the Kanto-region but also further afield and pursue further potential alliance with other companies and industries. And last but not least, TEPCO will take the advantage of the know-how of energy saving proposal and become not only a company that provides electricity but a general energy provider and consultant.”

Enhancing customer value

In order to harness the many opportunities in the new market, Yamaguchi believes that TEPCO must enhance value for its customers. He says that while this is a new skill for TEPCO to develop and it is currently a challenge for them, the company is already devising a strategy to move forward with its aim to improve customer satisfaction.   

He says: “We plan to improve our customer service levels through digital technology. For instance, we aim to use smart meter data from our residential customers to offer more compelling services. Through the analysis of smart meter data, we aim to gain a better understanding of what our customers’ needs are and create services that will be beneficial.”

The company has been gathering email addresses in order to improve the level of communication between TEPCO and its residential customers. Added to this, TEPCO customers can view their consumption levels and accounts on the company’s website. The site also aims to give customers insightful information about energy saving as well as other services and advice.

TEPCO has been working to create value out of its consumer data for a while now. Two years ago, we wrote about TEPCO’s decision to partner with Opower, a cloud-based software company, to improve customer satisfaction and reduce consumption levels through the use of an analytics platform. [Opower goes East]

Necessary culture change

Yamaguchi  says that TEPCO will continue to expand their service offerings and rate plans in response to their customers’ needs, focusing on safety, security, and convenience.

In conclusion he says: “We have had to change our mindset as a company. This will be a challenge as TEPCO is traditionally conservative when it comes to residential sector marketing. The change will take time and there will be a lot of trial and error. But, we have to shift to a more customer-orientated and competitive nature if we are to prosper in the future.”

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