Utilities: View Your Customer as a Valuable Asset

Utilities are beginning to realize the importance of developing a stronger customer engagement in order to thrive in the sector.
Published: Tue 05 Aug 2014

The greatest untapped energy resource is people. This is according to Salvador Núñez, Product Marketing & Strategy at Opower, who will be presenting at the Latin American Utility Week on how to “Transform the customer into an active energy asset and earn a return on engagement.”

In an exclusive interview with Engerati, Núñez explains that if utilities engage and motivate behaviour that saves energy, this could translate into significant cost savings for generation. Customers can effectively be an energy asset because reducing electricity use is two to three times cheaper than producing electricity. This is magnified during peak hours where electricity generation is at its most expensive.

“But the value of customer engagement goes beyond demand-side management (DSM)”, explains Núñez. He says that Opower proves that by increasing proactive, personalized advice to customers, the utility will see an improvement to its bottom line. Opower’s presentation, Transforme a sus clientes en activos para el sector eléctrico, expands on this.

Going beyond demand side management

By delivering proactive, personalized, and actionable energy advice across multiple channels, utilities can increase customer satisfaction, reduce call volume to their customer service centers, increase on-time payment, ensure customers are receiving fair and equal service, and effectively promote new products and services.

Instead of earning a return on traditional utility assets, utilities that become Energy Advisors have the ability to earn Return on Engagement with their customers. Furthermore, this enhanced level of communication with the customer helps the regulated electric utility evolve from simply distributing electrons to providing energy services.

Says Núñez, “The whole transformation in the utility industry over the next decade will center on customer-focused innovation. When it comes to communicating with their customer, utilities need to be in the driver’s seat. Many utilities have recognized this and have centered their strategy on the customer. If utilities continue following the traditional business model, doubling down on traditional utility assets, without strengthening the relationship with their customer--they’re making a risky bet. Utilities who do invest in this strategy are likely to cut costs and develop new revenue streams. Ultimately, customers are looking for new and better products and services. If they don’t get them for their utility, they may get them elsewhere.”

Recognizing the need to change

Utilities around the world have realized that they need to alter their current business models and place more focus on their customers in order to survive and even prosper. [Engerati-Consumer Engagement Could Help Utilities Overcome Challenges.]

Núñez says that utilities across the globe have partnered with Opower to innovate in this space and are seeing incredible results:

  • Utilities like PG&E and E.ON UK are seeing huge improvements in customer satisfaction and program participation by delivering triggered, data-rich digital communications and a better online experience.

  • Baltimore Gas and Electric (BGE) is curbing peak demand simply through influencing behavior or by giving peak time rebates to the customer.

  • TEPCO is preparing for deregulation and new retailers in the Japanese market by regaining trust after the tragedy in Fukushima and delivering personalized feedback, actionable smart meter insights, and customized savings tips for consumers.

Latin America onboard

Núñez points out that utilities in Latin America have the benefit of being able to adopt best practices which have already been proven globally. This gives them the ability to jump ahead of the curve.

According to Núñez, many utilities in Latin America are already moving in the right direction. Chilectra sends bill updates through SMS and Comisión Federal de Electricidad (CFE), Mexico's state-owned electric utility, offers flexible, self-service meter reading and payment programs.

Endesa Brasil has comprehensive social-outreach programs to educate customers in low-income communities on the value of energy conservation.

Managing Latin America’s energy theft

However, if people are not paying for their energy usage, they are not incentivized to save energy, says Núñez.

Many utilities in Latin America struggle to manage non-technical losses or theft. Detecting where theft is occurring can be difficult. Furthermore, knowing how to change theft behavior is equally challenging. Solving this issue requires specialized solutions on each side.

Núñez explains that Opower and Oracle Utilities are “best-in-class” solutions on each side. He explains that as the leader in operational analytics, Oracle Utilities has identified thousands of energy theft situations. However, acting on these insights through measures like installing armored AMR meters, can be expensive.

“At Opower, we start first by influencing customer behavior, which can be much more cost-effective and reduces the need for more expensive installed measures,” he explains. “Opower was founded as a behavioral science experiment. We have spent the last year developing a cutting-edge segmentation and targeting platform that allows utilities to quickly run their own experiments, like A/B tests, on customers with a specific behavioural profile. Integrating data on identified theft locations opens the door to develop communications for customers with a high propensity for theft and run closed-loop analytics to modify this kind of behaviour.”

Núñez explains that Opower is discovering how to use behavioral science tactics, such as social norming, to increase the social cost of theft. This can inoculate the spread of theft to other areas or mitigate it in areas where it is already occurring.

“Opower’s mission is to motivate everyone on earth to save energy. Helping everyone save on their bill, but pay their share, improves fair and equal service to the entire customer base,” says Núñez.

What’s in it for the consumer?

Customers want to save on their bill, better control their budget, have convenient and comfortable experiences, have the opportunity to be green, get fair and equal service, and gain control over their energy use, explains Núñez.

To do so, customers may want to go through an audit to better understand where they can save or learn about smart investments into energy efficient appliances. Affluent “green customers” may even want to get solar panels installed on their roof.

As customers obtain these new products and services, they prefer to have a convenient, unified experience from a single provider. Utilities are uniquely positioned to be this provider and own these new value streams, explains Núñez.

Customers can also benefit from understanding what to expect from new technology and how to adjust their behavior in response to rate structure changes they may yet not understand.

“Most people don’t know what a smart-meter is or how it can help them save money. Smart meter deployments that aren’t properly communicated with customers can be catastrophic”, explains Núñez.

Similarly, price signals of new rate structures like “tarifa branca” and “bandeiras tarifárias” are complicated. “Customers don’t want complicated. Customers want simple, clear, personalized advice on what it means to them and what actions they need to take,” points out Núñez.

Creating a better customer-utility relationship

One of the biggest challenges is getting utilities comfortable with the idea of sharing control with the customer and embracing what Chilean Energy Minister, Maximo Pacheco, likes to call “Asociatividad”, says Núñez.

During his keynote address at the Institute of the Americas’ Chile Energy Roundtable on June 24, Minister Pacheco highlighted that transforming crises, like resource scarcity, into business opportunities is done by empowering communities at large. A policy of “associativity” (La Política de Asociatividad) recognizes the need to promote social inclusion, share control with individuals, and relate to them at a personal level to fully unlock the shared benefits of new business models.

In order to reach Latin America’s rural markets that experience a high level of energy poverty, Opower has a multi-channel communication approach. “Our paper reports already have the ability to reach the entire customer base. However, we think there is a huge untapped potential in improving SMS communications with customers who don’t have as much access to digital channels. Another huge opportunity that Opower is exploring is using prepay models to improve engagement with these communities.”

Núñez suggests to utilities, “Capture and consolidate data about your customers. Focus on capturing data on customer behavior. Segment your customers based on behavioral profiles and offer unique customer experiences to each segment. Run tests, iterate quickly, and scale on winning recipes. Provide proactive energy advice and focus on communicating during the moments that matter most. For example, when their rate changes, when they had a recent call center inquiry, when there is an upcoming seasonal change, or they are headed towards a high bill.”

In conclusion

At Latin American Utility Week, Núñez looks forward to showing how utilities can engage with their customers to have a winning strategy for decades to come. Furthermore, as the leader in customer engagement, Opower can also work with leading platforms on the operational side, like Oracle Utilities, to provide comprehensive solutions to utility problems on both sides. [Opower-The Smart Meter (R)Evolution: Maximizing the Technology Dividend & Transforming Your Utility.]

Núñez concludes, “I’m most excited about attending Latin American Utility Week to better understand the challenges that utilities across the region are currently facing. We want utilities to tell us about their problems, particularly on the customer side. As we continue to develop our product roadmap at Opower, I want to ensure that we are developing solutions that solve the specific problems utilities in the region are facing.”