Serving the Customer of One: The Role of the Customer in the Utility of the Future

By: Paul Rice, Assistant Vice President

This article is the first entry of a three-part series

Key Points:

The retail energy market is at the early stage of a dramatic restructuring that is redefining the role of the utility. Substantial shifts in generation costs, along with improved viability in grid and distributed energy technologies, are opening new potential operational models. At the same time, the utility is seeing its role as an exclusive provider go away. Third-party renewable energy firms are directly competing for customers, accelerating the migration of traditional energy demand to localized sources (and away from the utility). The convergence of these regulatory, economic, technological, and competitive factors is creating a transformational impact on the traditional utility business.

The significance of these changes is largely driven by customers. For the first time in history, customers are moving from passive recipients of utility services to an active participant in the market. Customers today expect and have more choices than ever before. On-demand information, flexible services, greater control, more energy sources, and mobile-optimized channels of engagement are the norm, not the exception. Customers expect these things of the companies with which they choose to engage. Whether it’s a residential, small business, or large commercial customer, third-party providers are now offering them the option to go elsewhere for services that meet their energy and budgetary goals.

Customers want and ultimately will have choices that go far beyond traditional offerings. Whether its reducing demand, improving resiliency, migrating to more renewable sources, or even creating a surplus that may be sold back to the grid, customers have options and are pursuing them. In a competitive market, it is the customer that sets change in motion.

Utilities recognize that the customer is central to their strategy going forward, and they are fighting to maintain this relationship. The outward-facing utility response is often to focus the vision and mission on the customer, but what does this mean in practical terms? What do they want their relationship with the customer to be? What value can the utility offer customers, and why would these customers prefer to buy from them? How can utilities convert this value into earnings?

The need to understand the customer, and ultimately maintain a relationship with that customer, is paramount to the utility establishing itself as a preferred partner within this new energy economy. Utilities must invest in a “customer first” approach, creating and leveraging near term opportunities to reduce revenue erosion and strengthen the customer relationship, while positioning themselves to become a preferred energy partner.

What does it mean to become the preferred partner? It means:

It’s no longer about a customer group. It’s about the single customer – the customer of one.

Utilities will ultimately need to pursue solutions within both regulated and non-regulated business areas to ensure they are positioned to sustain growth in this changing market. However, they must approach these efforts holistically, ensuring not only that the right business models are in place, but that the regulatory and operational framework is established to ensure the organization’s readiness to execute when the time comes.

Getting on the right path means understanding the importance of the shift from a “rate base” model to a tailored and targeted approach that can be addressed through prescriptive programs and services which will meet the needs of the “Customer of One.”

All views expressed by the author are solely the author’s current views and do not reflect the views of Concentric Energy Advisors, Inc., its affiliates, subsidiaries, or related companies. The author’s views are based upon information the author considers reliable. However, neither Concentric Energy Advisors, Inc., nor its affiliates, subsidiaries, and related companies warrant the information’s completeness or accuracy, and it should not be relied upon as such.

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