The recent Smart Grid Roadshow in Vancouver covered interesting ground in terms of how electric utilities must transform to meet expectations of stakeholders – be they consumers, regulators, or shareholders. BCHydro resources discussed the unprecedented scope of ambitious grid modernization projects that their utility had underway to achieve two objectives: become more efficient and consumer-centric in their operations.
These are excellent objectives for any utility to thrive as Smart Grid technologies and services transform electricity ecosystems and create new market opportunities. BCHydro’s operational efficiency projects range from substation and distribution automation technologies to distributed storage pilots and smart meter deployments. All of these projects require re-engineering business processes and oftentimes re-skilling of existing resources to fully leverage all potential technology benefits. And while all of these transmission and distribution (T&D) deployments present unique tests for utilities, the biggest challenge for every utility will be building consumer-centricity in their customer service operations. Greg Reimer, EVP of T&D at BCHydro, noted that the utility expects that its delivery of customer services will be compared to telcos and cable companies. That’s a significant paradigm shift for utilities, which historically haven’t dealt with customer service expectations gauged against highly competitive businesses like wireless communications service providers.
This paradigm shift presents nearly equal challenges for regulators or other entities that oversee budgets for electric utilities as for utilities themselves. Imagine being on the regulatory receiving end of a utility request for a rate increase to improve customer services, when the historical metrics for quality of customer service have been based on the number of customer complaints. It’s sadly reminiscent of the reliability metrics for allowable downtime (SAIDI, SAIFI, CAIDI, etc.) instead of expected uptime. Regulators of investor-owned utilities (IOUs) have to consider a very different landscape that includes new, nimble competitors to slow-moving monopolies, courtesy of Smart Grid-enabled technologies and services. And that means changing expectations about utility investments in customer service technologies and processes.
For instance, competitive businesses can justify investments in customer service operations (ie contact center hardware/software upgrades or acquisition of tools to manage social media interactions) through quantification of customer acquisition versus retention costs. As the old marketing saying goes – it is cheaper (and easier) to keep a customer than get a new one. Utilities, being accustomed to monopoly environments, aren’t operationally or culturally structured to compete to acquire or retain customers.
So how can utilities change expectations? Adoption of the lifetime consumer value metric can help utilities and regulators transform existing operations into consumer-centric operations. Lifetime consumer value provides an industry-standard measure of consumer participation as prosumers – producers of negawatts and/or kilowatts. (A negawatt is a reduction in electricity use – usually through deliberate time-shifting of electricity usage as structured in a demand response program. Kilowatt contributions come in the form of local renewable electricity generation or energy storage sold back to the utility.) Establishing lifetime consumer value helps set expectations of topline and bottom line impacts to business cases for wise investment decisions that build consumer-centricity as well as operational efficiencies in utilities.
The Smart Grid has the capacity to dramatically change our expectations of what services electric utilities deliver, and how these services are delivered. Building consumer-centric operations based on lifetime consumer value can be a potent motivator for utility transformations that go well beyond customer services and exceed our expectations.