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PA IN THE MEDIA

Three reasons the customer is king – even for utilities

This article first appeared in Energy Central.

After about a decade working in the utility sector and examining the state of the experience that utilities deliver to their customers, I often hear a key question from others who have been in the sector for a while: “Does customer satisfaction really matter?” After all, the utility sector still largely functions as a regulated monopoly, where most customers have limited options as to where and how to source their energy. The industry historically hasn’t had to worry about customer retention, or generating revenue through new products and services to satisfy customer needs. The fundamental business model has rewarded utilities through increased capital investment, which does not necessarily have a direct line to individual customer satisfaction.

Yet I believe that there are three key reasons why focusing on the customer does matter and will become increasingly important in the coming years:

1. Regulatory pressure:  Regulators serve as the voice of the consumer in a closed market. We are seeing with increasing frequency that regulators are looking out for the consumer like never before. One way we see this take shape is in the form of performance based regulation, whereby utilities are rewarded as they meet performance-based goals that include addressing the emerging needs of customers.

2. Customer choice is finally emerging: We all know that renewable technologies, distributed energy resources, and new business models are finally providing customers with real alternatives to the traditional utility model. And while residential consumer uptake of new opportunities can be considered a “slow burn”, commercial, industrial, and other institutional customers are often of scale to have a more immediate and profound impact on a utility. It all adds up to slowing electrical load growth for just about every utility in every jurisdiction in North America. Case in point: in 2017, almost 50% of Fortune 500 companies have adopted some sort of clean energy target, up from only 5% in 2014. These targets set ambitious goals for renewable energy that may or may not leverage the local utility to help achieve those goals.

3. Impact on the bottom line: Improving the customer experience can have a significant impact on the utility’s economics. Traditional sector thinking suggests that improving customer service will add cost to the business without a commensurate return on that investment. However, more and more utilities are finding that building capabilities that meet emerging customer needs and improve the experience – like the ability to manage energy and meet service needs through mobile, self service capabilities – can actually be delivered at significantly lower cost than traditional methods. Focusing on the customer will not only improve satisfaction, but it makes a lot of business sense.

So, to those traditionalists who think that improving customer service in a monopoly-dominated industry doesn’t make any sense, I say that the world is truly changing, with the traditional utility model starting to erode at the edges. Utilities would be wise to build – and fund – a world-class focus on the customer to remain relevant in the years to come.

Andy McKenna is an energy and utilities expert at PA Consulting

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