The Riches and Rewards of Consumer Engagement
By Vern Dosch
More than one large utility has learned the hard way that introducing smarter power technologies without properly involving customers in the process can boomerang badly. But if the process is handled with foresight and skill, consumers will be easily won over with a plethora of appealing devices and services. Having been properly introduced to what's new and exciting, they will take to them as fast as they have discontinued landlines in favor of smart phones.
I am proud to call North Dakota my home. But few would pick the state as a poster child for technology deployment. So why, then, have 41 percent of North Dakota homes given up landline telephone service for the cell phone? The answer is simple—because they can.
Digital disruption and digital technology first hit the comfortable telephone business in the early 1990s. It made anything analogue, regardless of capital costs or depreciation schedules, obsolete. The telecom industry’s digital transition is now entering its third decade. Yet while the utility industry has taken many actions to go digital and get smarter, the digital age’s full effect is mostly still to come.
Smart hardware, software and broadband connectivity are at the center of the power grid’s future. Intelligent devices, like smart meters, have matured and are increasingly reliable. Greater access to broadband gives utilities rich and affordable connections to fixed and mobile assets. The Federal government’s policy push for a smart grid, combined with stimulus dollars, has spurred investments in “smarter.” And finally, there’s the outside world’s new, and some might say invasive, role. A new brew of smart consumer devices, energy business start-ups, changing consumer perspectives, global trends, major energy issues and media attention are raising the utility industry’s profile.
How all this will play out is hard to predict, but one thing is certain: Our capital-intensive industry will change dramatically over the next decade. If we address the change, eyes wide open, the news is good. We have the talent, the time and the technology to do what we’ve always done—innovate, adapt and adopt new ways of managing the future.
At the heart of change will be information gleaned from a new breed of robust data sources. Smart meters, sensors, machine-to-machine processes and analytical software will give the utilities system control and actionable intelligence never before delivered grid-wide. This fact alone is revolutionary. But in times of great change, new rules will emerge.
In early 2010, the nation’s largest utility, California’s Pacific Gas & Electric (PG&E), kicked off its smart meter program. Though its evaluation of the meters suggested they would yield a satisfactory return on investment, PG&E did not factor in the consumer reaction to a new two-way, intelligent device in their homes.
It didn’t take long before a backlash against smart meters hit PG&E, then the state as a whole and finally the industry at large. Regulators weighed in. There were claims of meter inaccuracy, radiation dangers and big brother spying. A surprised utility went into damage control, apologized publicly for “unacceptable” customer service, released a 700-page smart meter report, and vowed to bring consumers and their point-of-view into the process of utility innovation.
One industry columnist, Jesse Berst of Smart Grid News, observed that most utilities are ill-prepared to handle customer anger and concerns: “Because they have never had to fight to get and keep customers, they literally don't know how to engage and persuade consumers.”
The utility industry is headed into unchartered, and some would say perilous, waters. But I am optimistic, primarily because every utility company has an abiding public service obligation. Without abundant, safe and reliable electric service, our nation, our economy, our innovation, our lifestyle and our rate payers slide backwards in time. The anger and anguish of victims from last year’s Hurricane Sandy is testimony to the centrality of electric power in our lives.
As we face uncertainty, so to do consumers. Like North Dakota telephone customers, electricity users are looking at their options, from distributed generation power sources to third-party energy management companies. They are considering smart thermostats, electric cars, energy saving appliances and home area networks. And they’re looking for companies—their utility or someone else—to help them make their smart phones a personal energy management tool.
In North Carolina, one electric co-op recently rolled out a pre-paid program, bringing together smart meters, a wireless network, a detailed daily energy use web site and a companion app for smart phones and tablets. The entire system is automated, which saves the co-op time, money and trouble. But before their plan hit the street, they also factored consumers’ needs into their business strategy.
One of the co-op’s fixed income consumers said the pre-paid program tools gives her easy access to her hourly energy use. On her computer, she has the information she needs to learn how and when she uses electricity. She no longer worries about a big end-of-month power bill. “Now, I am in control,” she says. And her peace of mind is translating into positive neighborhood word-of-mouth.
While not every one of her neighbors will become pre-paid customers, they will have heard the message that the co-op is innovative; the co-op gives consumers options; and the co-op cares.
Every utility in the nation has access to the new customer-facing tools technology has to offer. The growing list includes outage reporting systems, pre-paid programs, online and app account management software, remote disconnection capability, multiple physical and electronic payment technologies, and time-of-use and peak alert tools.
Supporting the additions to the utility tool chest are free and low-cost Internet communications technologies like e-mail, Twitter, Facebook, LinkedIn, YouTube, text messages, web sites, apps and interactive voice systems. These technologies offer diversity and options in how and when a utility starts a meaningful conversation with consumers. For example, a printed bill fits a 75 year-old retiree. The 25-year old professional wants an app.
A critical conversation must start when the utility is outfitted with proven and integrated data collection and analytical tools. There is too much data, too much information, to simply use these tools and systems solely for the utility’s benefit. It’s time all utilities use their data to seriously engage consumers where and how they live.
Consumers, like the North Carolinian, can work with you or they can work against you, as PG&E has learned. The costs of consumer anger, suspicion and dissatisfaction are high and have a long shelf-life.
The financial cost of embracing consumer needs and interests in a way that adds benefit to their lives is low. And in a world of more options and more competition, the lessons learned from customer engagement and the rewards gained from high customer satisfaction scores are real, achievable and critical to the future of the utility industry.
Vern Dosch is President & CEO, National Information Solutions Cooperative (NISC). NISC provides billing, accounting and engineering software systems to more than 650 rural utilities and telephone companies and 7,200,000 end customers in 47 states, American Samoa, Palau and Canada. NISC has offices in North Dakota, Missouri, Wisconsin and Iowa, and employs more than 920 highly-skilled employees. A life-long resident of Bismarck-Mandan, Dosch holds a B.S. degree and a management master’s degree from the University of Mary, Bismarck, N.D.