Electric utilities are going through a transition in their relationships with customers. Once seen as the only players in town when it came to supplying electricity, they are now facing new challengers in the form of solar and energy storage companies. Many are also under pressure from state regulators to reimagine their business models away from capital investments and toward improving efficiency. This pivot has made engaging with customers critical to meeting new metrics for rate-case success. As a result, more utilities are starting to see energy consumers as partners, not just customers, and are placing customer engagement front and center in their business plans for the future.
Historically, as regulated monopolies, electric utilities have not had to worry much about business competition. They built power plants, maintained distribution systems and earned a guaranteed rate of return on their capital investments. “Customer engagement” in this environment was primarily related to newsletters included with monthly bills. A decade or so ago, home energy reports started showing up separately in customer mailboxes as a way to reduce demand and address regulators’ interest in improving efficiency. Today, you’ll likely find your utility on every social media platform and in your mobile device’s app store as these companies seek to make customer communications seamless, whether they’re covering storm-related outage reports or presenting new time-of-use rate options.
“I’d say, 20 years ago, almost the entire industry was run by engineers. They were very singular in their goal of just keeping the power on,” said Carl Lepper, consultant for product management and development at J.D. Power, Troy, Mich. His company regularly surveys utility customers for annual satisfaction reports to identify best practices in customer relationships.
“There wasn’t such a thing as customer engagement. Now, they understand the better they work with their communications, the better it is for them.”
Paul McDonald is senior director of product strategy and marketing with the Oracle subsidiary Opower, Arlington, Va., a pioneer in the development of home energy reports. Those reports help consumers compare their own electricity use against their neighbors’. Utilities are able to then track how that information affects future energy consumption. He says it’s that measurability that differentiates customer engagement from simple marketing.
“It means getting customers’ attention and measurably influencing customer action,” he said. “To me, marketing is like throwing a ball as far as you can into a canyon—you don’t know if something is happening. Engagement is more like playing catch—you know it’s your engagement that’s making them act.”
More data, increased demands
For Lepper, smart meters were the foundational technology in moving from simple energy reports to engagement efforts more directly targeted to individual customer concerns.
“Smart meters open a big can of amazing capabilities,” he said, describing the power of the cloud-based data newer meters generate to personalize utility outreach efforts. That data also helped utilities document the impact energy reports and other communications had on customer behavior. Those metrics have become a valuable tool for utilities in interactions with their regulators, helping to prove the worth of customer engagement investments.
“Rate cases were another big catalyst,” Lepper said. The data “helped prove they were doing a good job being a great corporate citizen and working with their customers.”
The regulatory benefits of strong customer engagement are only growing as many states have dramatically shifted the goals they are setting for the utilities under their jurisdiction. For well over a century, utilities were primarily tasked with providing safe, reliable electricity at the lowest possible price. Today, though, many regulators are adding targets for reducing greenhouse gas emissions related to electricity production and distribution.
Regulators also are taking customer satisfaction ratings more seriously in the rate cases they are hearing, and today’s customer expectations are changing as well, said Dan Whigham, advisory leader for U.S. power and utilities practice at PwC, New York.
“What’s prevailing is the carbon-free future. They realize the generation of energy in a carbon-free way is essential,” he said, noting that customer engagement is also a matter of providing more choices in how we manage our energy use and where that energy comes from.
“We consume energy very differently than we did 20 years ago. We’ve become more strategic consumers of energy, and we care about it more than we did in the past.”
As the aims of customer engagement programs have shifted, so have the means utilities and their program developers use to get their messages out to the public.
“We got started with paper home energy reports, but that’s, by no means, the primary way anymore,” McDonald said, describing how the programs Opower now designs have evolved. While customers might still get a monthly mailing on their energy use, they will also likely receive emails and texts to match the communication efforts they have come to expect from online retailers.
“These features are now being embedded in utility portals,” he said. “The interactions are primarily digital now, where they used to be primarily analog.
Addressing pandemic concerns
The COVID-19 pandemic has put many utilities into customer engagement overdrive. As customers might have been furloughed or lost their jobs entirely, they, of course, became concerned about possible payment options for their monthly electric bills. These worries were amplified as more time spent at home, for working and remote learning, meant many saw those bills rise substantially. Suddenly, home energy reports took on new significance for consumers wanting early indicators of their usage patterns and ways to save. Utilities with active reporting programs were able to piggyback needed information onto those monthly mailings.
“Those utilities have learned that program is a valuable way to communicate with customers,” helping them target customers whose bills might be getting out hand, McDonald said.
Customers have appreciated these outreach efforts, along with commitments not to cut off service during the crisis due to overdue payments.
“In our studies, we had a big spike in satisfaction with all utility companies the first half of COVID. Utilities started communicating so much and people started listening so much more,” Lepper said. “They’re also considered a trusted source of information about COVID.”
Many utilities also have gotten creative about how they approach formerly in-person services during this time of social distancing, so customers aren’t cut off from benefits already baked into their rates. McDonald said one Midwest utility moved their home energy auditing program entirely online, mailing a kit and following up with video chats. This step had the unexpected result of dramatically increasing participation. The utility had been reaching 7,000 customers per year previously, while the digital rollout ended up reaching six times that number.
“Every single one of those customers provided information—they might not have even needed a blower-door test,” McDonald said, referring to what is often seen as a basic means for scoping out the need for improved insulation or other upgrades. “Others might have had a Zoom call with a remote technician.”
Who’s doing it right
As McDonald’s example illustrates, today’s utility customers have gotten used to having multiple options for engaging with the companies with which they do business. That’s also showing up in the kinds of utilities earning the highest satisfaction ratings from organizations such as J.D. Powers, Lepper said. He cited aspects of apps from New Jersey-based PSE&G and New York’s PSEG Long Island as models.
“One, it’s very easy to use. They do a very good value proposition for why you’d want to sign up,” Lepper said. “It can also be a portal to pay your bill. If the apps are well-designed, it really makes a difference.”
McDonald considers Exelon, a holding company for Chicago’s ComEd, Baltimore’s BGE and several other utilities in the Mid-
Atlantic, a leader in today’s digital engagement efforts.
“They’re running a massive customer engagement program across all their utilities,” he said, noting that several of these companies are using their outreach to help support customers who’ve opted for time-of-use or peak-day rates.
Participants have the opportunity to earn cash rebates. While utilities in some regions have actively discouraged residential customers interested in installing rooftop solar, McDonald said Exelon takes the opposite tack.
“They have been individually engaging their solar customers. Their leading indicator of satisfaction is whether customers are receiving the financial benefits they expected,” he said. “Exelon has been cutting through by reaching out and helping them understand how the solar systems are saving them money.”
National Grid, which operates gas and electric utilities in New York, Rhode Island and Massachusetts, also has earned kudos from McDonald.
“They have been doing incredible work over the past few years to experiment with new means and to influence their customers to take a broad variety of actions,” he said.
In upstate New York, the company worked with Opower to run a pilot effort that rolled out 33,000 personalized videos to its gas customers through email, with information similar to a paper-based home energy report.
“It drove a five-times increase in daily traffic,” McDonald said.
Moving forward, PwC’s Whigham sees home technologies such as smart thermostats and water heaters as new opportunities for customer engagement. This will become more important as time-of-use rates become more prevalent. He also sees such changes happening first with owners of larger homes.
“I think bigger residential will create more of a pull” because those customers are more likely to be in the market for the solar panels and generators for which utilities might want to become a resource, he said. “They’re going to be more likely to ask the question if they are going to go to the utility or to a third-party player.”
Lepper agrees that the growing move toward more customercentric outreach will be essential if utilities are going to maintain their relevance in today’s rapidly evolving energy environment, in which competition can come from unexpected directions.
“They need to be more flexible,” he said. “Look at Kmart and Sears, they didn’t make the right changes at the right time and Target and Walmart blew right past them.”