In May, MGM Resorts in Las Vegas told state regulators it plans to stop buying energy from NV Energy. Instead, the casino empire plans to purchase its own electricity on the wholesale market.
“After careful thought and analysis over many months, we have concluded our objectives are best met by purchasing the energy required to operate our resorts, and serve our customers and guests, from a source other than NV Energy,” John McManus, MGM executive vice president, wrote in a letter to regulators.
Utilities today are facing more existential threats than ever before. Third-party providers of clean energy now offer a credible alternative to the traditional power company -- eroding the relationships they have established with customers of all sizes. A new white paper from PA Consulting, "The Next Generation Utility Customer," outlines strategies for addressing those threats in a proactive manner.
Challenges at every level
For large commercial customers, there is an increased focus on procuring clean energy, as is the case with MGM. If utilities cannot meet these customers' growing needs, they will look to other providers or purchase directly on the wholesale market.
There is a similar trend underway in towns and cities served +by investor-owned utilities. Many have clean and local energy ambitions that are not always in line with the strategy of the regional utility.
In a notable and extreme example, Boulder, Colorado tried to form its own distribution utility and cut itself off from Xcel Energy. Although the two entered into settlement talks in June, Boulder has continued work on its application to the Colorado Public Utilities Commission to acquire certain Xcel assets and municipalize. Even community choice aggregation, in which communities procure energy elsewhere, can be a threat in regions where it erodes retail sales of electricity for vertically integrated utilities.
On the residential side, customers are increasingly looking for new options that mirror interactions they have in other sectors, such as banking, retail or air travel. Small businesses are also seeking more seamless interactions to manage energy costs.
A horizontal view to serve them all
The need to serve the increasingly complex needs of large power users -- while also bringing an easy and positive customer experience to individuals -- can actually be approached with one overarching strategy, PA Consulting argues.
The paper outlines a customer engagement path that works within the confines of any current regulatory framework, while also laying the groundwork for evolving regulation.
“There is a rich opportunity for utilities to proactively determine their long-term business and customer strategy by taking a horizontal view of customers,” writes PA.
A horizontal view starts with segmentation, which many utilities are already doing to varying degrees. But segmentation is not just about thinking of customers in a handful of buckets within each customer class, PA Consulting says. Rather, it’s an entirely new lens used to evaluate business opportunities.
“People know who their utility is,” said Craig Rintoul, technology leader with PA Consulting. “They typically have a good relationship, so the opportunity is now to move into further services by leveraging that existing brand.”
For large commercial clients, that may be helping them think through the potential revenue streams of a networked LED retrofit, or the potential to participate in a community microgrid. Some of these services may be offered through a deregulated arm, as Edison International is doing with its energy services firm Edison Energy. Or it may be about tailoring rates and programs to help the largest energy users achieve their energy goals.
Cities can also benefit from utility efforts to improve the customer experience. ComEd, for instance, is testing out different business cases for smart streetlights. In New York, Con Edison worked with the city to develop applications for its smart meter network in order to build future revenue streams for apps that sit on top of that network.
Customer engagement does not only have to be tailored to the big customers, the paper says. Instead, residential customers and small businesses also need deep segmentation, which can be done today with digital tools.
For some utilities, the idea of offering a host of new services in every home and small business sounds overwhelming. “But they don’t have to do it all themselves,” said Rintoul. “They can choose to partner with companies that have core competencies they don’t have.”
And utilities don’t have to reinvent the customer experience, said Rintoul. Other sectors have already led the way. “The customer experience has accelerated in other industries, and now it’s time for the utility to catch up.”
Check out the new white paper on the customer experience from PA Consulting, part of the Next Generation Utility series.