Revitializing The Utility Customer Relationship
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This document discusses strategies for utilities to revitalize their relationships with customers and engage them in demand response programs. As the energy market rapidly changes, utilities need new communication strategies to help customers understand technologies like smart grids and time-based pricing programs. Effective strategies include segmenting customers based on behaviors rather than demographics, communicating benefits simply without jargon, collaborating with trusted third parties, and embracing new media to spread information among social networks.
Revitializing The Utility Customer Relationship
- 1. Technology + Strategies Energy Markets n e w s l e t t e r Published by Makovsky + Company Volume 25/Number 1 For more information on Makovsky + Company’s Technology + Energy Markets practice, please visit www.makovskytech.com. Follow us on Twitter: twitter.com/Makovsky the power of specialized thinking Revitalizing the Utility-Customer Relationship Rapid Industry Changes Call for New Communications Strategies For utility customers, the energy marketplace promise to alleviate transmission constraints, Communication, therefore, is a crucial priority. has a dizzying array of new buzzwords and peak period generation costs and play an Many studies suggest that consumers, while acronyms. Smart grid, RPS, ADR, AMI, EV, important role in the ongoing challenge to wary about utilities’motives, are generally open HAN, IHD, TOU, CPP and self-healing grid to balance the grid. To maximize its potential, to a changed relationship with their power name but a few. And for utilities, keeping utilities need new communication strategies. company — provided they are approached up with growing energy demand has never correctly. Therein lies the challenge. Below been harder — whether through building Knowledge is Power are a few strategic reflections on how to new transmission lines, upgrading and Study after study confirms that, for the most effectively engage with customers. automating distribution or implementing part, Americans are not energy literate. Long smart meter replacements in the face of viewing electricity as their flick-of-the-switch • Suiting the Message to the Market: When rising generation costs. Today’s environment inalienable right, few understand what goes most utilities dissect their markets, they speaks to a changing dynamic between on behind the switch. According to a 2010 do so based on traditional criteria — age, utilities and customers, with the latter being survey by GE Energy, more than three- education, income or sector (e.g., residential, called upon to adopt new programs and quarters of consumers in the U.S. (79%) are commercial or industrial). Utilities are just change the way they interact with energy. not familiar with the term “smart grid;” only beginning to adopt more productive four percent have heard of a smart grid and market segmenting techniques, which As if this isn’t enough, the Federal Energy have a good understanding of what it is. define consumer groups based on shared Regulatory Commission just issued Order And, 69 percent of those familiar with the behaviors, beliefs and motivations. While 745, which essentially enables customers smart grid aren’t even sure if they’re already some customers are savvy communicating to receive market prices during demand connected to one. Indeed, it is tempting to via Droids and Twitter, others prefer response events — in other words, customers see this lack of energy awareness, which has more traditional channels. Many of the aren’t just customers anymore; they may also fed misperception and fostered mistrust, as authorities referenced in the Smart Grid be your new supplier and receive payment the root of the utility industry’s customer Consumer Collaborative’s 2011 State of from utilities. Demand response holds great relationship challenge today. the Consumer Report confirm market
- 2. segmentation is key to reaching consumers based on their interests Public Utilities Fortnightly calls demand response a “disruptive and needs, and thus is ideally suited to engaging their interest in technology” that demands “disruptive change.” Not the least of these demand response activities. changes involves the communication patterns most utilities employ with external audiences today. Addressing this issue could be a • The Forest and the Trees: When it comes to demand response, it is key factor in determining who the winners, losers, innovators and vital that customers understand the big picture — the larger context laggards are, as we move forward. of and justification for smart grid deployments. This is especially important because most of the long-term economic benefit of demand response could come not from reduced utility bills but from mitigated rate increases due to the inevitable, long-term rise in the Translation, Please? costs of generation. Smart grid is a nickname for an ever widening palette of utility • Keep It Simple: A study of successful demand response pilots in applications that enhance and automate the monitoring and Illinois showed that one major problem was the utilities’ inability control of electrical distribution. to communicate about demand response in simple and clear RPS = Renewable Portfolio Standards establish requirements language. Jargon and unnecessary acronyms are rampant in the for electric utilities and other retail electric providers industry, and ultimately breed confusion, suspicion and mistrust. It to serve a specified minimum percentage (or absolute amount) of customer load with eligible sources of is important to remove these barriers. Ontario-based Hydro One, renewable electricity. for example, has done a strong job in using digital animation and Internet-based graphics to clearly illustrate how demand response ADR = Automatic Demand Response is a way for buildings and homes to temporarily lower electricity use — without works and what its benefits are. Finally, the industry may need to human intervention — when the electricity grid is explore simplifying how it presents its own program offerings and nearing capacity. branding to the retail marketplace. AMI = Advanced Metering Infrastructure are systems that measure, collect and analyze energy usage, and • The Power of Collaboration: According to a study by Accenture, communicate with metering devices such as electricity consumers trust third-parties more than utilities for information on meters either on request or on a schedule. optimizing electricity consumption by a margin of 49 percent to E V = Electric Vehicle uses one or more electric motors 29 percent. Although often outflanked by pro-consumer advocacy for propulsion. groups, some power companies are reaching out to friendly third parties. This has proven an effective educational strategy. For example, HAN = Home Area Networks and Demand Response (DR) are an extension of the smart grid and smart metering into the the Natural Resources Council of Maine lent its support to Central home, providing utilities and their customers with the Maine Power’s smart meter roll-out. Schneider Electric partnered information and control to make intelligent energy and with the Lawrence Berkeley National Laboratory, Skipping Stone water consumption decisions. and the US Green Building Council to refine its demand response IHD = In-Home Displays enable utilities and energy consumers program. As the State of the Consumer Report notes: “maintaining to receive the information they need to make better an authentic tone and delivering realistic messages through credible decisions on energy consumption. spokespeople will be the key to successful consumer engagement.” TOU = Time of Use rate is pricing of electricity based on several time blocks per 24-hour period (e.g., on-peak, mid-peak, • Embracing New Media: Ultimately, endorsements from friends off-peak, etc.) and on seasons of the year (e.g., summer and peers are the most effective way to spur adaptation of radical and winter). technological change posed by demand response. And there is no CPP = Critical Peak Pricing: time-of-use prices are in effect better way to encourage this today than through social networks except for certain peak days, when prices may reflect the such as Facebook and Twitter. Virginia-based OPower has noted that, costs of generating and/or purchasing electricity at the through its use of online communities, engaged and enthusiastic wholesale level. demand response users, who make up just five percent of its customer Self-Healing Grid refers to a design concept that enables base, are spurring adaptation from the other 95 percent. Innovative problematic elements of an electrical system to be identified, utilities understand that since social networks represent a powerful isolated, and restored, with little or no manual intervention, so channel for in-depth engagement with many residential users; they as to minimize interruptions of service. should play a prominent role in the industry’s educational outreach. About Makovsky + Company Founded in 1979, Makovsky + Company (www.makovsky.com) is today one of the nation’s leading independent global public relations and investor relations consultancies. The firm attributes its success to its original vision: that the Power of Specialized Thinking™ is the best way to build reputation, sales and fair valuation for a client. Based in New York City, the firm has agency partners in more than 25 countries and in 37 U.S. cities through IPREX, the second largest worldwide public relations agency partnership, of which Makovsky is a founder. Makovsky is also co-founder of Interraction, a consortium of experts working together to address the risks and opportunities presented by climate change. 1 6 E A S T 3 4 T H S T R E E T, N E W Y O R K , N Y 1 0 0 1 6 Contact: Matt Wolfrom, EVP T: 212.508.9600 F: 212.751.9710 Technology + Energy Markets W W W . M A K O V S K Y. C O M 212.508.9621 • @wolfrom 2010 Midsize PR Agency of the Year (Silver Bulldog) mwolfrom@makovsky.com 2010 Inc. 5000 Fastest-Growing Companies in America